Salary Review and Universal Credit

WYSPECIAL

Hi, 
could anyone explain the affect, if any, a delayed pay rise would have on UC when it is paid as a lump sum?

Situation is annual pay award is not agreed by union members in time for it to start being paid at the review date.

After negotiation an agreement is reached and the award backdated so eligible people get a lump sum payment to make up for the amount not paid during the negotiation process.

Could this affect a UC claim as there is a spike in earnings for one month meaning that the claimant loses out overall compared to if the pay award had been paid each month from the review date?

poppy12345

UC entitlement is based on earnings received each month. Therefore, the lump sum will affect your UC in the assessment period in which you receive it. Depending on how much it is, this may reduce your UC to zero that month. 

Sorry but can't advise whether you would lose out overall. 

WYSPECIAL

poppy12345 said:

UC entitlement is based on earnings received each month. Therefore, the lump sum will affect your UC in the assessment period in which you receive it. Depending on how much it is, this may reduce your UC to zero that month. 

Sorry but can't advise whether you would lose out overall. 

Thanks, it’s not for me which is why I have no knowledge of it.

Is the assessment period 12 months like with tax credits or I should it essentially a new assessment each month?

Say for example someone’s salary is £12000 per year so they get £1000 per month. They get a pay award of £1200 pa so salary is now £1100 per month.

If this went through at the start of the new financial year their UC would be based on £1100 per month and be smooth throughout the year.

If the pay award is delayed so, for example, for the first five months they still only get £1000, then in month six it Is backdated so they get £1600 then for the remaining six months of the year £1100 their total for the year will be £13200. Will the total amount of UC received for the year be the same as if they had received it as £1100 per month?

There is a vote on whether or not to accept the pay award offered and the person in question is concerned that they could lose out if it is rejected causing them to get a backdated payment later in the year rather than smooth income throughout the year and this may influence how they choose to vote.

kaMelo

There is no annual 'smoothing' for something like the scenario you describe, any UC payment you qualify for is based upon circumstances in each individual assessment period. 

In the scenario of a pay rise with an additional lump sum for backdating, their total earnings including the backdated lump sum would be used to calculate UC in that assessment period. This may result in a zero entitlement or, if if their earnings are large enough, surplus earnings carried over and used in the next assessment period too.
https://www.entitledto.co.uk/help/Universal_Credit_Surplus_Earnings

Whether this means they would be better off, worse off, or no different when compared to having received the pay rise on time and throughout the year is impossible to say as it depends on the exact circumstances.

NedS

WYSPECIAL said:

Is the assessment period 12 months like with tax credits or I should it essentially a new assessment each month?

An assessment period on UC is one month.

As others have stated, the earnings will be taken into account in the month in which they are received, which will affect the amount of UC payable in that month.

It's a far better system than the annualised Tax Credits system, as it ensures the claimant receives more assistance in a month where they receive less pay, and less assistance in a month where they have received more pay, acting like a top up on a month by month basis, which works better for people on fluctuating incomes (maybe those dependant on overtime, tips or bonuses).

peteuk

As others have pointed out the assessment period for UC is monthly and dependant on the date you started to claim UC (so therefor is not automatically 01 Apr - 30 Apr). For each pound earnedUC is reduced by 55p, so a back pay may lead to a nil payment for a month.  Thsis does not stop the UC claim.  However most pay rises are given in a pay rate eg increase per hour but back pay given if the increase is late eg starts in Junes payment but is back dated to April, so Junes wage will include the per hour pay rise and the back dated pay since 01 April for example. 

As for loosing out youd need to do a lot of maths. In my example above (paid June, back dated to April) you would have to first work out how much more they would have recieved in April, May and June and then look at how much UC they received and work out how much they would have got if the pay rise was implemented.

eg extra for April is £2 per hour and they worked 7.4 hours a day = £14.8
£14.8 x 30 = £444
Removed from UC of £400 is 55p per pound = an extra reduction of £244.2

UC Payment would be £155.80

(note figures are made up for example only and is post tax and NI)