Universal credit and extra hours

thelawnet

Does anyone know how this works?

My ex has a term-time-only contract and works a limited number of hours per week which means she earns just below the income tax and national insurance threshold.

She said she had worked overtime routinely and there was no change in her UC payment. Is this correct? I thought it was calculated each month.

She has been offered longer hours but I said 'well they will definitely cut your UC in that case'. But I'm not sure exactly how this works.

Alice_Holt

https://www.gov.uk/government/publications/universal-credit-different-earning-patterns-and-your-payments/universal-credit-different-earning-patterns-and-your-payments-payment-cycles

thelawnet

Alice_Holt said:

https://www.gov.uk/government/publications/universal-credit-different-earning-patterns-and-your-payments/universal-credit-different-earning-patterns-and-your-payments-payment-cycles

that just seems to say 'your UC will be calculate monthly based on actual earnings', however she says it has never changed?!

calcotti

Although she has done the overtime has she been paid for it yet? UC only takes earnings into account when they are received.

thelawnet

calcotti said:

Although she has done the overtime has she been paid for it yet? UC only takes earnings into account when they are received.

what she said is she got the exact same UC payment over a year, despite frequent overtime

tomtom256

She may be below the earnings disregard even doing overtime, hard to say without all the information, it would just be guess work.

Spoonie_Turtle

tomtom256 said:

She may be below the earnings disregard even doing overtime, hard to say without all the information, it would just be guess work.

Certainly could be if she's doing a job like cleaner or midday supervisor (assuming she has the Work Allowance of course - like you say, more info needed).

@thelawnet best thing for her to do would be a series of benefit calculations putting in the various different earnings (including if she were to take the extra hours) and see what the results are.
https://www.entitledto.co.uk/
https://benefits-calculator.turn2us.org.uk/

calcotti

Each month she gets a statement on her UC journal. She should check whether the earnings figures used by UC match her actual earnings.

As TomTom says, some of earnings will be disregarded if she has children of limited capability for work, if she only does a little work she may never earn enough for it to count.

Alice_Holt

thelawnet said:

She has been offered longer hours but I said 'well they will definitely cut your UC in that case'. But I'm not sure exactly how this works.

        If you don't know how UC works, then how do you know if you are giving your ex incorrect and misleading advice.

     Your ex needs to check her UC statements, and put her potential new earnings into a benefit calculator.  

In any case by increasing her earnings, she is most likely be better off financially (read about the taper rate in the link I provided for you).

"Your Universal Credit payment will reduce gradually as you earn more. For every £1 you earn, your Universal Credit payment will reduce by 55 pence.

You may be able to earn a certain amount of money before it affects your Universal Credit, depending on your circumstances. This is called a work allowance.

For example, if you’re earning above your work allowance, for every additional £100 of net earnings you are £45 better off."

thelawnet

Alice_Holt said:

thelawnet said:

She has been offered longer hours but I said 'well they will definitely cut your UC in that case'. But I'm not sure exactly how this works.

        If you don't know how UC works, then how do you know if you are giving your ex incorrect and misleading advice.

 Your ex needs to check her UC statements, and put her potential new earnings into a benefit calculator.  

In any case by increasing her earnings, she is most likely be better off financially (read about the taper rate in the link I provided for you).

I do (as far as I know) understand how Universal Credit works, I actually sent the people at entitledto a correction to their calculator, because they were not calculating things correctly (it was a couple of years ago, I don't remember precisely, but they were using months rather than weeks or something like that resulting in things being off by a few pence, and therefore wrong according to the law).

She has a basic pay of £11,800 or something like that (based on her hours, term time working pattern - it is below £12,000).

What she told me was that she had worked quite a lot of overtime but her UC never changed.

I said 'as far as I know it should be calculated monthly based on your actual income each month', but she was adamant her UC payment had never changed.

Since she is very close to the income tax and NI thresholds (although she has been paying a little of both, due to overtime), this should result in:

32% income tax/NI
5.5% pension

.625 * (1-55%) UC deduction = 28.125p in the pound
plus the 5.5p pension contribution

The pension contribution is a complicating factor since she is in the LGPS, which is obviously not your standard rubbish pension, so I guess a reasonable valuation of the worth of the pension contribution is not 5.5p but more like 20p. (Although she would end up paying 5.8% next year, as her income would increase to £15,600, increasing her contribution rate.)

The above is rather a digression but honestly I was just trying to find a reason why her UC had not changed, e.g., 'that rule got suspended during covid', or perhaps as suggested above UC have somehow not got her overtime information? (I don't really see how, as it's all PAYE, but again)

She is far above the income disregard threshold, which as she has a child, and receives housing support is only £344/month

calcotti

The earnings used for UC calculations are net after NI, Tax and pension contributions. Obviously the tax and NI is significantly less than 32% due to the tax free allowance.

As advised, she needs to check her UC statements every month to check that they are using her correct earnings.