A report about Universal Credit, published last week, highlights how an employer’s choice of pay dates can still have unintended consequences for the staff. The report, from the Child Poverty Action Group (CPAG), states that, “The strict system of monthly assessment of earnings can cause a host of problems as months do not all include the same number of paydays”.
These problems for Universal Credit claimants are not new. They were raised by CPAG last August and I’ve drawn attention to them in previous blog posts (1, 2) and in a magazine article. I was also invited to talk about these issues at a meeting of over a hundred payroll professionals which took place last week.
The new report includes some of the same case studies as the August CPAG report. These are the stories of real people, with their names changed.
- Nancy received her wages on the last working day of each month and, as a result of this timing problem, her Universal Credit was erratic and she received far less than would otherwise have been the case.
- Sarah loses money to the benefit cap in 11 months out of every 12, just because her wages are paid every four weeks, instead of monthly.
- When Kelly lost her job, she had to wait over two months for Universal Credit, just because her employer delayed paying her final wages until after her leaving date.
Nancy’s problem could be solved if the employer were to change the way the payment date was reported to HMRC, but there are many other common pay cycles which can’t be resolved so easily. For example, if you pay your staff on the last Friday of the month, this will trigger problems for about a quarter of your employees who claim Universal Credit.
The pay practices which trigger these problems are not exactly rare. Sarah’s problem would also have been triggered if she had been paid weekly, although it would only have affected her in 8 months out of every 12.
Kelly’s situation is also common. When I asked an audience of payroll professionals which of them pays employees their final wages after their leaving dates, nearly everyone put their hand up. Some of their ex-employees would probably have been in the same predicament as Kelly, who, incidentally, turned to a food bank in order to survive.
These problems don’t affect everyone, and they seem to strike at random. Two employees in identical circumstances can have very different experiences depending on the day of the month when they first claimed Universal Credit.
Each of these problems is caused by the way earnings information is used by the Department for Work and Pensions (DWP). The employer is an innocent party who merely supplies the data that DWP uses to trigger these problems. And, when they do occur, it is the employee who suffers. CPAG’s new report is called “Universal credit: What needs to change to reduce child poverty and make it fit for families?” and was written by Josephine Tucker (no relation). You can read it here and the part which is relevant to employers is Section 3b: “Treatment of earnings”.