PAYROLL INSIGHT
There are also problems for the 24% paid on the 25th of each month and for the 20.5% paid on the 28th, caused by weekends and bank holidays such as Christmas and the new year, especially if they fall on a weekend and the days following are then the bank holidays. Add to that the effects of the different bank holidays in the different parts of the UK and it is possible the results may be unclear to some people. We should recognise that it is likely that a disproportionately large number of benefit claims are made towards the end of a month, as that is likely to be when people leave jobs, receive final pay or contracts come to an end. There is also a lack of certainty, amongst some employers, about the date of payment to be submitted to HM Revenue & Customs (HMRC) when actual pay is made earlier than the due date because of bank holidays. HMRC’s guidance says “the date you paid them,
not the date you run your payroll. Use the normal payday if it falls on a non-banking day”. Good Friday can cause particular problems where it falls at the end of the tax year and a different payment date, in a different tax year, is used. The most extreme results are seen by those who are paid on the last banking day of the month and whose UC assessment period starts on the 30th of 31st of the month. Example A single person, working 35 hours at the national living wage of £7.83 an hour and paying £150 a week in rent. Her net earnings will be £1,089.27 and her normal entitlement to UC will be £281.57 a month. She is paid on the last banking day of the month and she claimed UC with an assessment period which starts on the 30th of each month. Looking at her situation from October 2018 forwards (see Figure 1), we see that
the variations above apply to her and the effects on her UC entitlement. As may be expected, because of the way in which the number of paydays in each month is assessed, Figure 1 shows there are some months with two paydays and some months with none. In the months with two paydays there is no entitlement to UC because of the much higher earnings figure used. In the months where no payday falls within the assessment period, the UC figure increases very substantially because there is no earned income in the calculation. There is, of course, no work allowance in a month when there is no pay and only one in a month when there are two pay days, adding a further loss. The work allowance issue does not arise in the example as there is no disability and there are no dependent children or young people. It might be thought therefore that although there are clear budgeting problems the situation would broadly even out over the course of a year or even be better for her because of the high rate of UC in months where she is treated as having no earnings. Unfortunately, it may not work like that. After each of the periods when she has no entitlement to UC, she will have to re- claim the benefit. Not only does that mean having to go through the reclaim process but it brings her into a new set of rules. The Universal Credit (Surpluses and Self-employed Losses) (Digital Service) Amendment Regulations 2015 (https:// bit.ly/2E2Sn8i), which came into force in April 2018, provide that pay earned when there is no entitlement to UC, because the pay is too high, can be taken into account for a later UC claim, if UC had been in payment at all during the six months before the new claim. The description for this is: Where a UC award ends due to excess income, these amendments allow for past earnings (employment, self-employment or a combination of both) to be taken into account on a further claim to UC within six months of the previous award…These changes ensure that those claimants with fluctuating earnings patterns, which may bring them in and out of entitlement to UC, are not unduly penalised or unfairly rewarded over those claimants who receive the same amount but are paid monthly and retain UC entitlement throughout.
Figure 1.
2 year pay day forecast Monthly - last banking pay day UC Period No of
pay days in period
Effect on UC
From: To : 30/09/2018 29/10/2018 30/10/2018 29/11/2018 30/11/2018 29/12/2018 30/12/2018 29/01/2019 30/01/2019 29/02/2019 30/02/2019 29/03/2019 30/03/2019 29/04/2019 30/04/2019 29/05/2019 30/05/2019 29/06/2019 30/06/2019 29/07/2019 30/07/2019 29/08/2019 30/08/2019 29/09/2019 30/09/2019 29/10/2019 30/10/2019 29/11/2019 30/11/2019 29/12/2019 30/12/2019 29/01/2020 30/01/2020 29/03/2020 30/02/2020 29/04/2020 30/03/2020 29/05/2020 30/04/2020 29/06/2020 30/05/2020 29/07/2020 30/06/2020 29/08/2020 30/07/2020 29/09/2020 30/08/2020 29/10/2020
0 UC increases to £967.82
1 No effect 1 No effect 1 No effect 1 No effect
2 No entitlements to UC 0 UC increases to £967.82
1 No effect
2 No entitlements to UC 0 UC increases to £967.82
1 No effect 1 No effect 1 No effect
2 No entitlements to UC 0 UC increases to £967.82
1 No effect 1 No effect 1 No effect 1 No effect
2 No entitlements to UC 0 UC increases to £967.82
1 No effect 1 No effect 1 No effect
| Professional in Payroll, Pensions and Reward | December 2018 / January 2019 | Issue 46 30
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