Salary sacrifice arrangements and non-cash benefits during maternity leave

Produced by Tolley in association with Robert Woodward
Salary sacrifice arrangements and non-cash benefits during maternity leave

The following Employment Tax guidance note Produced by Tolley in association with Robert Woodward provides comprehensive and up to date tax information covering:

  • Salary sacrifice arrangements and non-cash benefits during maternity leave
  • Outline of the regulations
  • Consequences for employers
  • Tax / NIC consequences
  • Payment for the benefits
  • PAYE / NIC

The Maternity and Parental Leave Regulations are designed to ensure that a woman on additional maternity leave is entitled to the same level of benefits she would have received whilst on ordinary maternity leave.

Outline of the regulations

The main impact of the regulations is that when an employee who has been provided with non-cash benefits, such as a company car, goes on maternity leave, her employer could be considered to be sexually discriminating against that employee if those benefits are withdrawn or postponed.

Following the Employment Appeal Tribunal ruling in the Peninsula Business Services Ltd case, the position for childcare vouchers (CCV) offered under salary sacrifice differs from that relating to other non-cash benefits to the extent that the vouchers are to be considered as cash benefits rather than benefits in kind. This brings CCV in line with pension contributions.

This distinction is important because the requirement to provide pension contributions during maternity leave is restricted to periods of paid maternity leave, ie when the employee is in receipt of maternity pay. Where the employee receives Statutory Maternity Pay (SMP) only, pension contributions will only be payable for the first 39 weeks of maternity leave even if the employee takes the full 52 weeks leave available.

This guidance note concentrates on cycle to work (CTW) arrangements as it is this type of arrangement that is likely to be impacted the most (being the most common salary sacrifice arrangement after pensions and CCVs), but the regulations also apply to any non-cash benefit provided by salary sacrifice.

The regulations apply no matter how those benefits are provided, ie whether as a contractual term or via a salary sacrifice agreement. As such, employ

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