Impact of two wage payments in one AP on UC payable.

calcotti

This is an information post for regular contributors to this forum.

You will be aware that when a claimant gets paid early due to weekends or bank holidays this can result in two wage payments being received in one AP even when the wages are paid on a monthly basis. This happens when the AP start/end date is just before the ‘normal’ pay date. The two payments are then both taken into account in the one AP with the result that no UC is payable that month. Although full UC is payable the following month claimants can lose out because of th3 wayth3 Work Allowance works. (Some claimants can end up better off.)

This was challenged and the government lost the case but decided to take it to appeal. The appeal decision has now been made and the government have lost. More detail here
https://www.leighday.co.uk/News/Press-releases-2020/June-2020/Four-single-mums-win-Court-of-Appeal-universal-cre
https://cpag.org.uk/news-blogs/news-listings/court-appeal-finds-dwps-treatment-earnings-under-universal-credit

The government now have to find a way of implementing the decision (assuming they don’t try an rewrite the law).

Icequeen1

I wonder if the Government will appeal to the Supreme Court?

NedS

I cannot see it being that difficult to move the AP forward one week, and make a one-off manual calculation and payment to cover the one week period. Or move it backward one week and manually issue an adjusted "3 week" payment for that AP. This is going to be a one-off thing for a very small number of claims.

calcotti

NedS said:

I cannot see it being that difficult to move the AP forward one week, and make a one-off manual calculation and payment to cover the one week period. Or move it backward one week and manually issue an adjusted "3 week" payment for that AP. This is going to be a one-off thing for a very small number of claims.

On the face of it allowing people to adjust their AP may the simplest thing to do (just as businesses are allowed to revise their tax year). Will be interesting though whether a different approach could be found that would also address the problem of weekly and four weekly pay cycles

NedS

calcotti said:

NedS said:

I cannot see it being that difficult to move the AP forward one week, and make a one-off manual calculation and payment to cover the one week period. Or move it backward one week and manually issue an adjusted "3 week" payment for that AP. This is going to be a one-off thing for a very small number of claims.

On the face of it allowing people to adjust their AP may the simplest thing to do (just as businesses are allowed to revise their tax year). Will be interesting though whether a different approach could be found that would also address the problem of weekly and four weekly pay cycles

I very much doubt DWP will seek to address that under this ruling as this ruling only applies to those who are paid monthly and their pay date happens to fall around the end of their AP.

DWP have so far been stubbornly ridged on this case so I doubt we will be seeing movement elsewhere unless directed by the courts. Further, weekly and 4 weekly pay cycles do not tend to lead to the all or nothing earnings pattern that we see in this case, so whilst they may lead to fluctuating UC awards, they do not necessarily leave people financially worse off as there should never be an AP where the claimant is unable to take advantage of their work allowance.

calcotti

NedS said:

calcotti said:

NedS said:

I cannot see it being that difficult to move the AP forward one week, and make a one-off manual calculation and payment to cover the one week period. Or move it backward one week and manually issue an adjusted "3 week" payment for that AP. This is going to be a one-off thing for a very small number of claims.

On the face of it allowing people to adjust their AP may the simplest thing to do (just as businesses are allowed to revise their tax year). Will be interesting though whether a different approach could be found that would also address the problem of weekly and four weekly pay cycles

I very much doubt DWP will seek to address that under this ruling as this ruling only applies to those who are paid monthly and their pay date happens to fall around the end of their AP.

DWP have so far been stubbornly ridged on this case so I doubt we will be seeing movement elsewhere unless directed by the courts. Further, weekly and 4 weekly pay cycles do not tend to lead to the all or nothing earnings pattern that we see in this case, so whilst they may lead to fluctuating UC awards, they do not necessarily leave people financially worse off as there should never be an AP where the claimant is unable to take advantage of their work allowance.

I am not really expecting them to. I agree that the consequences of weekly payments are management but the 4 weekly cycle can lead to no entitlement in one month. DWP's own guide to different earning cycles acknowledges this possibility https://www.gov.uk/government/publications/universal-credit-different-earning-patterns-and-your-payments/universal-credit-different-earning-patterns-and-your-payments-payment-cycles#if-youre-paid-every-4-weeks

When you get 2 earnings payments within an assessment period, your income may be too high to qualify for Universal Credit in that month.
If this happens, you will be notified that your income is too high and you will no longer get Universal Credit.
You can re-apply the following month as you should only get one earnings payment in your assessment period then.
You will need to be prepared for a month when you get 2 earnings payments in one assessment period and budget for a potential change in your monthly Universal Credit payments.

What the guide doesn't acknowledge is that this results in the loss of the work allowance and can result in less benefit overall.

NedS

calcotti said:

NedS said:

calcotti said:

NedS said:

I cannot see it being that difficult to move the AP forward one week, and make a one-off manual calculation and payment to cover the one week period. Or move it backward one week and manually issue an adjusted "3 week" payment for that AP. This is going to be a one-off thing for a very small number of claims.

On the face of it allowing people to adjust their AP may the simplest thing to do (just as businesses are allowed to revise their tax year). Will be interesting though whether a different approach could be found that would also address the problem of weekly and four weekly pay cycles

I very much doubt DWP will seek to address that under this ruling as this ruling only applies to those who are paid monthly and their pay date happens to fall around the end of their AP.

DWP have so far been stubbornly ridged on this case so I doubt we will be seeing movement elsewhere unless directed by the courts. Further, weekly and 4 weekly pay cycles do not tend to lead to the all or nothing earnings pattern that we see in this case, so whilst they may lead to fluctuating UC awards, they do not necessarily leave people financially worse off as there should never be an AP where the claimant is unable to take advantage of their work allowance.

I am not really expecting them to. I agree that the consequences of weekly payments are management but the 4 weekly cycle can lead to no entitlement in one month. DWP's own guide to different earning cycles acknowledges this possibility https://www.gov.uk/government/publications/universal-credit-different-earning-patterns-and-your-payments/universal-credit-different-earning-patterns-and-your-payments-payment-cycles#if-youre-paid-every-4-weeks

When you get 2 earnings payments within an assessment period, your income may be too high to qualify for Universal Credit in that month.
If this happens, you will be notified that your income is too high and you will no longer get Universal Credit.
You can re-apply the following month as you should only get one earnings payment in your assessment period then.
You will need to be prepared for a month when you get 2 earnings payments in one assessment period and budget for a potential change in your monthly Universal Credit payments.

What the guide doesn't acknowledge is that this results in the loss of the work allowance and can result in less benefit overall.

Actually this works in the customers favour, not against them.

Lets look at a simplified example, based on last years allowances because I still haven't memorised this years numbers fully. Take a single claimant over 25 (£317) with one child (£277) having a total allowance of £594 UC and have the higher work allowance of £503. Say they earn £1000 net paid every 4 weeks.

For 11 months per year, their UC is £1000-503 =£497 x 0.63 = 313 deductions for earnings. £594 UC - £313 for earnings = £281/month, x 11months = £3090 per year UC. On the 12th month they have 2 pay packets (£2000) and consequently receive no UC that month.

If they were paid monthly, their net earnings would be £1000 x 13 / 12 = £1083.33/month

Using the same calculation, £1083-503=580*0.63=£365.61 deductions for earnings. £594 UC - 365.61 = £228.39/month UC, or (x12) £2740 per year UC, so they are worse off being paid monthly by £350pa.

The reason they are better off overall being paid 4 weekly is that in the 12th month they have excess earnings which do not attract a work taper. Where their earnings are spread evenly over the year they would lose 63% of those excess earnings due to the earnings taper. Of course the "downside" is one month per year, those paid 4 weekly receive no UC having received £2000 in earnings, but ironically are still better off in that month overall that if they'd only received £1000 earnings and £281 UC. They just need to understand they are better off overall and budget for this, but most will refuse budgeting help and support.

The important thing is to earn enough in each AP to fully utilise your work allowance. Teh if you earn sufficient in any given AP to get a NIL award, that is a good thing and will maximise the amount of UC you receive over the year compared to evenly distributed earnings that always give rise to an award.

calcotti

Change the numbers for the same scenario.
Say they earn £450 net paid every 4 weeks. For 11 months per year they get £594/month, in the 12 th month when they are paid £900 they get £343.89. Total UC is £6877.89.

If they were paid monthly, their net earnings would be £487.50/month and they would get £594 UC every month coming to £7,128 for the year, a gain of £250.11.

Those paid 4 weekly on low incomes who do not fully utilise the work allowance will lose out whereas as those on higher incomes will win as you rightly point out. For a 'safety net' welfare benefit that is counter intuitive and in case it is irrational that two people with the same income paid regularly should get different levels of support simply because of the frequency at which they are paid. The problem arises because earnings are being allocated to a period which does not match the period for which they are actually earned.
However I'm not expecting to see any change.

calcotti

Icequeen1 said:

I wonder if the Government will appeal to the Supreme Court?

Today https://hansard.parliament.uk/Commons/2020-06-25/debates/9D5B55BA-F1F2-4A95-856A-565303FE04B5/UniversalCreditCourtOfAppealJudgment

The Parliamentary Under-Secretary of State for Work and Pensions (Will Quince)
I can today confirm my Department’s intention not to appeal against the judgment of the Court of Appeal of 22 June 2020 in the case of Johnson, Woods, Barrett and Stewart v. the Secretary of State for Work and Pensions. The judgment relates to an appeal made in January 2019 by the Department against the High Court decision.
As we told the court, identifying claimants is hard; it is a difficult issue. To date, we are aware of around 1,000 claimants who have disputed their earnings and fall within the relevant cohort. We are looking at how we can further identify people in this group. I stress that many people affected by two salary payments will not suffer a financial loss, as their universal credit award will increase in the following month to balance the reduction. However, we do recognise the budgeting issues that may have been caused, and we are now assessing the remedial options. That is not straightforward—it is not the simple click of a switch—particularly at a time when the Department is focused on meeting the challenges of unprecedented demand for its services.
I hope Members will appreciate that as the judgment was passed down on Monday, it would be remiss not to afford more consideration before we press on, particularly when the Court has not called for immediate action. We will now begin the process of carefully considering possible solutions, and we will keep the House updated as progress is made. There are, however, immediate actions that can be taken. We are already working closely with Her Majesty’s Revenue and Customs to work with employers on how to report their employees’ earnings correctly. HMRC has issued updated guidance for employers which, if followed correctly, will further reduce the small numbers affected.

it will be interesting to see what is eventually proposed to address the problem.