Whether or not an employee is entitled to a car allowance during maternity leave is unclear. During both ordinary and additional maternity leave an employee is entitled to continue to benefit from all the terms and conditions of employment – except for those regarding remuneration – that would have applied had they been at work. Whether or not a car allowance is “remuneration” for these purposes is unclear. Only sums payable to an employee by way of wages or salary are treated as remuneration (reg.9 of the Maternity and Parental Leave etc Regulations 1999 (SI 1999/3312)). It is arguable that a car allowance is a benefit and does not comprise wages or salary for work done, and therefore that the employee should continue to benefit from their car allowance while on maternity leave.

However, it could also be argued that, because a car allowance is a cash benefit and regarded as an uplift on salary attracting national insurance contributions, it is wages or salary and is therefore not payable during maternity leave. Further, where an employee qualifies for statutory maternity pay (SMP), the car allowance will be included within the SMP payment for the first six weeks, potentially resulting in a double payment if it is also paid during maternity leave. Until the matter is clarified by case law employers may choose to err on the side of caution and continue to pay car allowances during maternity leave.