Back in August, the Child Poverty Action Group flagged up a problem caused by the interaction between an employer’s choice of pay dates and their employee’s entitlement to universal credit. Although the recent budget did include some changes to universal credit, this particular problem wasn’t addressed. So, what can employers do about it?
Universal credit is a single payment that is replacing six benefits, including Working Tax Credit and Child Tax Credit. Its roll out is due to cover the whole of the UK by the end of 2018, affecting new benefit claimants and existing claimants whose circumstances change. Starting in 2019, people who claim the existing benefits will be moved across onto universal credit.
There have been many criticisms and concerns about universal credit but, as an employer myself, I am focussing on the one problem that is triggered by the way employers pay their staff. In a previous post, I explained how the monthly assessment periods used by universal credit don’t always include a month’s pay. Sometimes they include more pay (up to double), while, on other occasions, they include less, or even no pay at all. As a consequence, employees struck by this anomaly can receive erratic payments of universal credit. They, and their families, can also suffer other adverse consequences, including a benefit cap and the loss of free health entitlements.
Employers are not responsible for the way universal credit was designed and have no obligation to help. However, if they choose to help, there is a way for employers to prevent these problems from affecting their staff by changing their pay practices to suit universal credit.
If, as an employer, you want a payroll that avoids all of the problems with universal credit assessment periods, you need to make a few choices. It must be a monthly pay cycle and you need to choose your pay date with care. It is also important how you deal with months when your pay date falls at a weekend. Having made these choices, you should never deviate from them, even around Christmas, when it is common to pay staff early. I have explained the options in more detail in an article I wrote for the magazine of the Chartered Institute of Payroll Professionals (CIPP). If you would like to know more, you can read the article online, under the title ‘Working around universal credit’.