Employees who are paid early at Christmas may be affected by a flaw in the Universal Credit (UC) system whereby claimants may be treated as receiving two monthly wages in one assessment period, resulting in a dramatically reduced or even nil Universal Credit award.
Advice NI states that this is a fundamental flaw which could inflict hardship on claimants and cause further damage in terms of public confidence in the Universal Credit system.
Bob Stronge, Advice NI Chief Executive said:
“Government says that it’s all about work, making work pay and that Universal Credit will help make sure people are better off in work. However we are highlighting a fundamental flaw which could inflict hardship on claimants and undermine public confidence in Universal Credit.
For example if someone receives their monthly wage on the last Friday of each month then they will have been paid on Friday 29th November and ought to be paid on Friday 27th December. However many people will be paid early for Christmas, some as early as Friday 20th December.
Universal Credit assessment periods run for a calendar month, so for example if a UC claimant has an assessment period which runs from 25th to the 24th, they will in fact find that they have received 2 monthly wages in this assessment period (29th November & 20th December) and so may receive little or no Universal Credit at Christmas.
Whilst there may be months with no wage packet and other months with one wage packet which will lead to an increased Universal Credit award, Advice NI believes this issue will undoubtedly lead to claimants having a lack of certainty about finances and will undoubtedly cause distress and hardship for some at Christmas.”
Advice NI believes that it is irrational that income for a period other than the monthly Universal Credit assessment period is taken into account and this flaw actually undermines the purpose of Universal Credit. A Judicial Review on this issue has found that Government:
“wrongly assumed that where salaries for two different months were received during the same assessment period, the combined salaries from the two months were to be treated as earned income in respect of that assessment period.”
Advice NI is aware that HMRC provide the monthly salary information to Universal Credit and that there is now an easement on employers reporting PAYE information in real time. However Advice NI is concerned that neither employers nor employees are fully aware of this easement in terms of HMRC reporting requirements.
If you are worried about Universal Credit or any other aspect of welfare reform, please contact the independent welfare changes Helpline on Freephone 0808 802 0020.
- For claimants: The strict application of the assessment period dates means that some people are treated as receiving two monthly wages in one assessment period.
A Judicial Review Judgment [11 January 2019] found in favour of the claimants. It stated that the Secretary of State for Work and Pensions had been incorrectly interpreting her own regulations regarding “earned income”, and “wrongly assumed that where salaries for two different months were received during the same assessment period, the combined salaries from the two months were to be treated as earned income in respect of that assessment period.” This is being challenged by Government to the Court of Appeal.
- For employers: In December 2018, HMRC wrote to employers to advise a temporary easement on reporting PAYE information in real time, as some employers pay their employees earlier than usual over the Christmas period. Following feedback, HMRC have received approval to make this easement permanent.
For example: if you pay on Friday 20 December 2019 but the normal/contractual payment date is Tuesday 31 December 2019, please report the payment date on the Full Payment Submission (FPS) as 31 December and ensure the submission is sent on or before 31 December.
Doing this will help to protect your employees’ eligibility for Universal Credit, as reporting the payday as the payment date may affect current and future entitlements.
- Please click here to read our latest Universal Credit Briefing Paper – Advice NI Briefing Paper Backdating Universal Credit Claims
- Advice NI is the umbrella body for the Independent Advice Network in Northern Ireland and its members dealt with 404,594 enquiries in 2018/19, 82% being Welfare benefits related.
- For further information contact Kevin Higgins, Head of Policy, Advice NI on 028 9064 5919 / 07743496957
- To find out more about the work of the Independent Advice Network or to obtain copies of the various publications produced by Advice NI, please contact us on 028 90 645919, email –firstname.lastname@example.org or visit our http://www.adviceni.net/