Universal credits affected by Pay Dates

When Universal Credits were introduced, replacing means-tested social security benefits and tax credits, we were told it would streamline the benefits system, tackle poverty amongst low income families, and reduce the scope for error and fraud. This benefit requires the use of employment earnings obtained from employers in real time via the RTI submissions sent to HMRC by the employers each pay period. Receiving information through RTI means a claimants’ universal credit can be amended based on changes to earnings rather than the claimant providing details of their income. However, we are finding that many employees’ universal credits can be affected by different pay dates submitted in the RTI submissions.

In a recent judicial review case heard at High Court brought on behalf of four single mothers, it was ruled that the DWP had been wrongly interpreting the UC regulations. The case challenged the rigid, automated assessment system in UC which meant the mothers lost hundreds of pounds each year and were subject to large variations in the UC awards because of the pay dates on which their paydays and UC ‘assessment periods’ happened to fall. The mothers all had monthly paydays that clashed with the dates of their monthly UC assessment periods, with the result that if they were paid early some months, because for example their pay day fell on a weekend or bank holiday, they were treated as receiving two monthly wages in one assessment period, which in turn dramatically reduced their UC award. This is a problem which has affected many working claimants. The rulings from this hearing means the DWP should adjust its calculation of UC awards when it is clear amounts received in an assessment period do not, in fact, reflect the earned income payable in respect of that period. In other words, wages are to be allocated to the month in which they were earned rather than to the assessment period in which they were received.

HMRC has recently issued guidance about the dates employers should report in FPS returns when the regular payment day falls on a non-banking day. With a nod to the impact of payroll on UC, HMRC state it is essential to use the correct payment date as it could impact on your employees’ financial situation, including benefits such as Universal Credit. Acknowledging the occasions when employees are paid on a different day to that agreed, such as when the regular pay date falls on a Saturday, Sunday or bank holiday, HMRC advises that a payment reporting easement applies. When payments are paid early for this reason then the date entered in the FPS submission should be the regular payment date.

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Tania

Tania has over 30 years payroll experience, 21 with a UK Top 10 accountancy firm.
Tania

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