Hello

I have a case of someone who is on long-term sickness absence (8 months). They were paid a combination of SSP and company sick pay for the first 6 months, and this included their monthly car allowance in full. Their employer has now decided to stop paying the car allowance and is saying that the cash benefit is provided for the performance of work duties and thus is not required to be paid.

The employee is unable to drive and has been paid this annual cash allowance since the beginning of his employment there over 10 years ago. He is arguing that the cash allowance is regarded as a ‘permanent cash allowance’ that was awarded to him as un uplift to salary (given he made it clear during the recruitment process that he could not/would not be driving). The HMRC treats the allowance as remuneration but what is the view from an employment law perspective? For the last 3 months of his sick pay, he was on half basic salary pay, although a full car allowance was paid.

There is no mention in the employee’s contract that car allowance is withdrawn during sickness or any mention of how to handle car allowance due to absence. The employee is likely to be off work for at least a few more months so the loss of this income has a significant impact on his day to day expenses whilst he is ill.

It should be noted also that the other employees receiving the car allowance are not obliged to buy a car with it, and if they choose to do so, it can be used for personal use, i.e. it is not a purely ‘business’ benefit as the employer is claiming.

Who is correct, and is he advised to make a claim against them?

Many thanks.