PAYROLL INSIGHT
UC and patterns of earnings
Earnings and timings affect entitlement to UC. Gareth Morgan, of Ferret Information Systems , provides details of how claimants will be impacted
A ccording to the government, benefits that it replaces. It is understood more easily because it matches the way in which most people in work get paid – monthly. Of course, not everyone who is actually in work does get paid monthly, so those people who are paid weekly, or fortnightly, or four-weekly, get UC paid on a different schedule to their actual earnings. UC will be paid monthly, twelve times a year, and normally on the same day of the month. Notice the word ‘normally’; more on that later. An employee who is paid weekly, would expect to have 52 paydays in the year, but sometimes there will be 53 depending upon which day of the week s/he is paid and how many of those there are in the year. Spread evenly, that would mean 4.3333 paydays per period for a 52-payday year and 4.3333 weeks’ pay in each period. However, UC doesn’t believe in averaging, unlike most of the previous, slowly phasing out, ‘legacy’ benefits; instead, it only counts income received during the ‘assessment period’ – the month (normally) ending seven days before UC makes its payment. The consequence is that in some assessment periods, people paid every week will have five paydays taken into account when assessing their entitlement to UC. The Department for Work and Pensions (DWP) do make this clear on the GOV.UK website (https://bit.ly/2S9yn6Z); see Extract from DWP guidance on opposite page. Even if the employee is paid the same amount of money on every payday, s/he will find that s/he gets different amounts universal credit (UC) is a simpler benefit than the complicated six
of UC sometimes, if being paid weekly, fortnightly or four-weekly. The employee may very well find that s/he is not getting any UC at all, which the DWP does also point out. If a claimant is paid: ● weekly – they will find themselves with an extra week’s earnings, or 25% more, used in the UC calculation. If their UC is less than one week’s net earnings, then it’s likely that it will be stopped ● fortnightly – they will find themselves with an extra fortnight’s pay, or 50% more, used in the assessment. If their UC is less than a fortnight’s net earnings, then it’s likely that it will be stopped ● four-weekly – they will find themselves with an extra four weeks’ pay, or 100% more, used in the calculation. If their UC is less is less than your four weeks’ net pay, then it is likely that it will be stopped. ...employees would have the right to ask for funds whenever they chose... For those with children or who are disabled some of the money they earn each month isn’t taken into account when calculating their UC in that month. It’s called a ‘work allowance’ and it’s the equivalent of what are the ‘earnings disregards’ in legacy benefits. The work allowance is applied at two rates: one for those who get help with their housing costs within UC; and a higher allowance for those who don’t. The first group get a monthly work allowance of £198 and those without housing costs get an allowance of £409, at 2018/19 rates. However, the real value of the allowance
is different. After the UC taper at 63% is taken into account, the values are £124.74 and £257.67. People in these groups get this amount extra, every month, compared to someone earning the same amount but without children or disabilities. Those with one payday in the UC payment period get one work allowance applied – and if they have five paydays in the period one work allowance is applied. Those with an extra payday in the month, whether that’s weekly, fortnightly or four- weekly, won’t get an extra work allowance. All of the extra net pay will be taken into account, increasing the amount by which UC is reduced making it more likely to stop entirely. The pattern of these extra payment periods depends upon the date of claim and the date of payment. Table A on opposite page (produced by Ferret’s Pay Period Reckoner) shows a pattern of paydays on Fridays. You might be thinking that in the case of a person paid monthly, UC will fit in with their pattern of earnings and there’ll just be one payday taken into account each month? Think again. The UC regulations (https://bit.ly/2E2Sn8i) provide that each assessment period begins on the same day of each month except as follows: ● if the first date of entitlement falls on the 31st day of a month, each assessment period begins on the last day of the month, and ● if the first date of entitlement falls on the 29th or 30th day of a month, each assessment period begins on the 29th or 30th day of the month (as above) except in February when it begins on the 27th day or, in a leap year, the 28th day. For people paid on a weekly based
| Professional in Payroll, Pensions and Reward | December 2018 / January 2019 | Issue 46 28
Made with FlippingBook - Online magazine maker