Consumer Rights Bill to impact salary sacrifice benefits


(Article UPDATED on 24 June 2014: see additional information below)

The Consumer Rights Bill (CRB) could impact the provision of flexible benefits schemes and salary sacrifice arrangements.

The CRB, which has passed through the House of Commons and has had its first reading in the House of Lords, with a second reading scheduled for 1 July, sets out a modern framework of consumer rights, which will include:

  • A right to get what you pay for.
  • A right that goods and digital content are fit for purpose and services are provided with reasonable care and skill.
  • A right to have faults in what you buy put right free of charge, or to be provided with a refund or replacement.

Martha How (pictured), principal at Aon Hewitt, added: “There is a stage when amendments required through the readings in either House are made and Royal Assent follows that. My guess is it will receive Royal Assent July/August.”

The Consumer Contracts Regulations which, are allied to the CRB, were in law by 13 June 2014.

These CRB rights will apply to employees in relation to the benefits provided to them in the workplace.

An employer that offers employee benefits to staff will now effectively become a supplier of goods and services to employees who pay for the benefits via a salary sacrifice arrangement.

Organisations will have to provide the same rights under the CRB to their employees, such as offering a cooling-off period of between 14 to 30 days during which an employee can cancel a benefit they have selected

Employers will also need to make sure the terms and conditions of the benefits contracts are compliant with the legislation in order to avoid any legal action against them.

How said: “The Consumer Rights Bill will change the relationship between employers and staff.

“There is no doubt when looking at the Bill that employees come under the definition of consumers and employers come under the definition of traders or intermediaries to traders.

“The consumer rights apply to employees when employers give them the chance to buy a benefit via flexible benefits or salary sacrifice.

“Employees will now have the same rights as consumers when they buy something, for example, on Amazon. They will have the right to cancel the benefit.”


Does the CRB apply to financial services and insured products?

“It’s true that the piece of law which is allied to the CRB, The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, do not apply to financial services and insured products.

“But the CRB explicitly includes ”goods, services and digital content”.

“The two pieces of law work hand in hand in that the information requirements as specified in the Contracts Regulations will, we have been told, apply to the CRB,” said How.


Is it an oversight that financial Services are not covered under the exclusions?

“In the CRB under the chapter for ‘services’ there are some listed exclusions and financial services are not covered under the exclusions.

“I queried this point with a civil servant and government lawyer in a telephone conversation and asked if this was an oversight.

“Their response was that this was not, so I can only conclude that FS products are covered by the CRB and not by the Contracts Regulations.

“Interestingly the requirements of the CRB are similar to those already in law in respect of distance marketing financial services products so compliance should not be too onerous for financial services providers,” said How.


The contract of employment is exempt, so what does this mean for employee benefits?

“In the list of exclusions the CRB states it does not apply to “a contract of employment”.

“On first reading I thought that meant it did not apply to flexible benefits.

This was another point I discussed with the government representatives during the consultation process.

“It is a difficult piece of legislation drafting and I did not get a very clear answer but my understanding is that the contract of employment itself is exempt so those services which are provided to employees and funded by their employer are not subject to the CRB.That is, core employer-funded benefits.

“However where the employee funds the benefit they are acting as a consumer and the CRB applies.

“So if an employee voluntarily takes travel insurance through flexible benefits the requirements are the same as if they bought that insurance privately over the web.

“That is my understanding from reading the CRB and my discussions with government representatives.

“The final draft CRB is no clearer in respect of employers/employees than the early drafts and so these points about applicability will only be tested in Court.

“My view is that interpretation of the CRB is difficult but there is enough in the Bill as written to suggest that all flexible benefits which are employee funded are covered and so it is best practice for employers to ensure their flex plans are compliant,” said How.


Employee Benefits will continue to monitor this piece of legislation and update readers as we gain clarity.

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