Employment tribunal payout while claiming Universal Credit 3 November 2022 at 5:57PM in Benefits & tax credits 6 replies 222 views

nohassles

I have just received a settlement from an ET claim from an employment that ended August 2021. Despite the instructions of the ET, my former employer processed this through PAYE (and presumably reported it to HMRC), rather than paying me gross. I'm currently claiming UC and I fear that if the settlement is treated as income then my UC for the month will be completely wiped out, leaving me no better off. What can I do about this? Is it possible to get my employer to produce a new payslip and report a negative income to offset the income?

huckster

Provide the ET decision document to UC via your local Job Centre. If the employers have reported via HMRC, the earnings will be used to calculate the UC payment for the month.  

By providing the ET decision document which hopefully provides information on the payment being made to you, then at least UC can raise a dispute about these earnings and if necessary, ask a DWP decision maker to consider a Mandatory Reconsideration

Within the UC Decision Making guidance linked below you will see details of what earnings are used by UC.

ADM Chapter H3: Earned income - employed earnings (publishing.service.gov.uk)

If the ET award was purely compensatory or related to termination of employment (redundancy) then the employer should not have reported to HMRC as earnings.  Although such payments will not be treated as earnings, you would need to report as capital savings and investment, if you have savings/investments of £6000 or more.

nohassles

Thanks for your reply...

huckster said:

If the ET award was purely compensatory or related to termination of employment (redundancy) then the employer should not have reported to HMRC as earnings...

The award was related to holiday which I'd accrued but not taken and was not paid to me in my final pay. Not sure if that fits in either of those categories...

calcotti

If this is payment of arrears to holiday pay it seems to me that it falls to be treated as earnings which will be taken into account.

nohassles

calcotti said:

If this is payment of arrears to holiday pay it seems to me that it falls to be treated as earnings which will be taken into account.

So my UC will be reduced?

liz_bartun

 I don't know much about tribunals but if the ET said to pay you outside of payroll, does that mean it wasn't to be a taxable payment? How did your employer deal with the payment. If it was processed as non-taxable it wouldn't be taken into account by UC.

calcotti

nohassles said:

calcotti said:

If this is payment of arrears to holiday pay it seems to me that it falls to be treated as earnings which will be taken into account.

So my UC will be reduced?

If it’s treated as earnings then a 55% is deducted from UC (subject to any Work Allowance not already used).