EAT: Childcare Vouchers Can Be Withdrawn by an Employer During Maternity Leave

Facts of the case

Ms Donaldson was employed by Peninsula, which offered its employees a childcare voucher scheme by way of salary sacrifice. A condition of entry to the scheme was that, in the event of the employee being on maternity leave, childcare vouchers would be withdrawn and the employee’s salary would be paid as normal. Ms Donaldson was pregnant at the time she wanted to join the childcare voucher scheme. However, she was refused admission to the scheme as she would not agree to sign an agreement in which a clause stating that she would cease to receive childcare vouchers whilst on maternity leave. Ms Donaldson believed the condition of entry was discriminatory and so brought a claim in the Employment Tribunal on the basis that she was treated less favourably and/or subjected to a detriment for asserting a right to maternity leave and that she had indirectly been discriminated against on the grounds of gender.

Employment Tribunal Decision

It was considered whether childcare vouchers constitute ‘remuneration’ or a ‘non-cash benefit’ – this analysis was vital as it impacted on whether the vouchers would be payable during maternity leave. The Tribunal found in favour of Ms Donaldson’s claims and it was held that childcare vouchers were not remuneration, but instead a non-cash benefit which the employer had an obligation to maintain during maternity leave.

Peninsula were held to have subjected Ms Donaldson to unfavourable treatment under the Equality Act 2010 and a detriment under the Employment Rights Act 1996 by imposing a clause that she could not be a member of the scheme during maternity leave. The Tribunal also held that Peninsula’s policy on childcare voucher schemes was indirectly discriminatory and could not be justified.

Employment Appeal Tribunal (EAT) Decision 

Peninsula appealed against the decision and argued that the HMRC guidance on childcare vouchers was wrong. The EAT outlined a distinction between childcare vouchers provided in addition to an employee’s salary and childcare vouchers provided in return for the equivalent salary sacrifice. The Tribunal had based its decision on incorrect guidance from HMRC, there was no legislative basis for the assertion in the guidance that non-cash benefits provided under a salary sacrifice scheme must continue to be provided during maternity leave. The fact that vouchers were regarded as a ‘non-cash benefit’ for the purposes of tax legislation was not determinative.  It was held that childcare vouchers were in fact ’remuneration’ and could therefore be lawfully suspended during maternity leave and therefore Ms Donaldson had not suffered any detriment or less favourable treatment.


It should be noted that the EAT remained cautious that it may not have identified all the relevant legal provisions that may be relevant and its conclusions are therefore tentative.

Employers should be aware that the EAT’s decision may be overturned in the future and therefore may opt to wait and see how further case law develops, before deciding whether to change their practices in relation to childcare vouchers. Legal advice should be sought on this subject and employers should take care in preparing or amending any maternity policy or benefit schemes going forward.

It should also be noted that in the Budget released by Chancellor George Osbourne on 16 March 2016, it was stated that childcare voucher schemes will be closed to new entrants from April 2018.  Existing members at that date will be able to continue for so long as the employer chooses to continue operating the scheme.

If you have any questions arising from this article or would like further information on the issue of childcare vouchers during maternity leave, please get in touch with a member of our Employment team.