Whilst an employee is on maternity leave, she is entitled to the benefits of her terms and conditions of employment (section 71 Employment Rights Act 1996) other than remuneration (section 71(5) Employment Rights Act 1996).
Maternity and Parental Leave
Regulation 9 of the Maternity and Parental Leave etc Regulations 1999 (SI 1999/3312) goes on to state that “…. only sums payable to an employee by way of wages or salary are to be treated as remuneration”.
Car Allowance
With a car allowance, the employer is providing funding for the employee to normally purchase a car for employment purposes and the payment of the car allowance is usually spread out over the employees monthly /weekly pay cycle.
An employee would normally be responsible for maintaining and insuring the car at their own expense, but this is subject to any different policy arrangements between the employer and employee.
Unless there is any contrary intention between the parties, a standard car allowance arrangement is normally perceived as a cash benefit acting as additional salary pay beyond basic pay and thus the employee would be accountable to pay income tax and national insurance contributions on the amount, a view shared by HMRC.
The equality act 2010
Further beyond reg 9 as above, by way of analogy the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (SI 2017/172) require employers to calculate their gender pay gap based on an hourly rate of pay for each employee. These Regulations state that the definition of "ordinary pay" for these purposes does not include "remuneration provided otherwise than in money" and that car allowances are to be included in the calculation, as allowances fall within the definition of "ordinary pay" – 3(b) 2017 Regulations.
Although rulings by employment tribunals do not set any formal legal precedent, in the case Kerry Hughes v Network Rail Infrastructure Ltd the findings of the Employment Tribunal would seem to suggest that car allowance falls within equal pay matters as pay (remuneration).
The trend from the above would suggest that car allowance is perceived as remuneration but at present there is no definitive case law on car allowance and maternity leave rights. If say the payment was intended to reimburse the employee for the expense of running a private car for the employer's business purposes and the car could also be used for private purposes then there is a case argument that the allowance is a benefit under the employment contract. This helps the employee provide a car which they can use for private and business purposes and then in these circumstances, the allowance could be interpreted as a payment towards the costs of maintaining a car and that these costs should continue during maternity leave.
Employment Rights Act 1996
The above is reinforced by what section 27(2) of Employment Rights Act 1996 (ERA) highlights on what is specifically excluded from the definition of wages under (ERA) namely, amongst other things, payments in respect of expenses incurred by the worker in carrying out their employment.
The article is intended for general information purposes only and thus is not legal authority on the issues explained but should you have any queries on the matter, please contact our HR/Legal advisors.
