Our Money Advice Officer is always on the lookout for solutions to problems caused by the benefits system, and has some hints and tips to share for Universal Credit claimants who lose out if their wages are paid early over Christmas.
Universal Credit is calculated each month based on income paid in the last monthly period. This rolling period is known as the ‘Assessment Period’. The assessment period is different for each claimant and is based on when they originally claimed Universal Credit. For example, if someone originally claimed on 23rd of the month, their assessment period would be 23rd of one month to 22nd of the next, and so forth.
If the claimant is working and being paid their wages on a calendar-monthly basis, there should only be one wage taken into account each month. However, if the wage is paid early due Christmas, this can mean they are paid twice in a single assessment period and double the wages will be taken into account. In the example above, if the claimant is normally paid their wages on 25th of the month but at Christmas their employer instead pays on 22nd, their Universal Credit for December would be calculated including wages from 25th November and 22nd December, and their entitlement would be reduced because of this.
Universal Credit takes wage information directly from the Real Time Information System operated by HM Revenue & Customs. DWP staff have suggested that when completing payroll, employers should list the contractual payment date on this system rather than the actual payment date. HM Revenue & Customs have issued the following guidance:
In December 2018, we wrote to employers to advise a temporary easement on reporting PAYE information in real time, as we know some employers pay their employees earlier than usual over the Christmas period. This can be for a number of reasons, for example during the Christmas period the business may close, meaning workers need to be paid earlier than normal.
Following feedback from employers and the Department for Work and Pensions (DWP) we have received approval to make this easement permanent. HMRC’s employer guidance will be updated shortly.
If you do pay early over the Christmas period, please report your normal (or contractual) payday as the payment date on your Full Payment Submission (FPS) and ensure that the FPS is submitted on or before this date.
Doing this will help to protect your employees’ eligibility for Universal Credit, as reporting the payday as the payment date may affect current and future entitlements.
If you are a working Universal Credit claimant, it is worth checking whether this will happen to you this Christmas. If so, you should show this guidance to your employer and ask them to report your earnings at the appropriate time. As always, if you need any further advice regarding this, please get in touch with our Money Advice Officer.