This is one of three case studies that looks at wider policy issues and includes a short discussion of an equality issue in welfare benefits that can affect individual clients. It also illustrates how wider equality social policy issues can be identified in welfare benefits work.

Case Study 9: What is the impact of Universal Credit (UC) and assessment periods and payments on disabled people and women?

Download Case Study 9 (Word doc.)

Summary

The interaction of the date that wages are paid and the dates of the UC assessment period means that some claimants can lose money in a particular month. The way a payday falls within a UC assessment period can cause a person’s income to vary month to month. This can make it difficult to budget and cause financial problems. The date that someone first makes a claim for UC determines the ongoing dates of the Assessment Period in each month

Discussion

Some claimants are paid wages at regular monthly intervals. If their actual payday varies when their payroll date falls at a weekend – then they would receive two months earnings within one UC Assessment Period (AP). This would be followed by no earnings within the next UC Assessment Period. When a claimant’s monthly payday falls on a weekend, it can mean they will be paid twice within in one UC assessment period (AP) but have no earnings in the next AP.

This impacts the amounts of UC they are paid in each of these months and also the total UC they receive over the combined periods. The inflexible way that earnings are treated in this situation disproportionally affects disabled people and women (who are more likely to be single parents). They are likely to lose money as a result whereas non-disabled people and those without children are likely to gain.

Some UC claimant’s will have an Assessment Period which runs so that they are usually paid their wage on the first day of the assessment period. However, when the payroll day is at a weekend, many employers pay monthly earnings a day or so early. When this happens, claimants who are normally paid on the first day of their assessment period will receive two lots of wages.  One will be at the beginning of the assessment period. Then the next month’s wage, because it is ‘early’ will slip into the end of the assessment period.

This can cause budgeting problems as both month’s wages will be taken into account when working out their UC for that month. So the money they have to manage with during the coming month will be significantly less. They will of course get maximum UC the next month as they will be seen as having no wage that month. This clearly makes budgeting very difficult.

However, this is much more than a budgeting problem for those entitled to work allowances – disabled people and parents – as they potentially can lose significant amounts of UC. Those who are paid monthly and sometimes paid twice in one month will have months when they will be seen by UC to receive no earnings. In a month with no earnings taken into account the work allowance can’t be used. Those entitled to a work allowance who rent will receive £192 a month. This means that £192 of earnings will be kept without reducing their UC by 63%. So it is worth 63% of £192 – about £120 a month.

In months where no earnings are taken into account these claimants will lose £120. This is likely to happen three to four times a year. Someone in this position will lose on average around £420 a year.  This is just because the date that they first made a claim which determined the ongoing date in each month their assessment period would run from). The position is even worse for those entitled to a work allowance who have a mortgage or have no housing costs. They have a work allowance of £397 a month and so will lose £250 each month or on average £875 each year.

However, some people will actually benefit.  When two months wages are paid in one assessment period, the total amount takes them out of entitlement. They will then gain 63% of the excess income, as that income is then taken out of the taper.

• Single people and couples, who are not disabled and don’t have children, cannot lose from this issue because they don’t have a work allowance. They are very likely to gain as they are much more likely than single parents and disabled people and therefore to have at least one full-time wage coming into the household and therefore come out of UC entitlement when two months wages are taken into account
• Couples with children are also more likely to gain from the excess earnings but will lose from the loss of the WA so overall won’t gain or lose out.
• However disabled people and single parents are more likely to only work part-time and therefore will lose from the loss of the work allowance and are less likely to gain by coming out of entitlement to UC when two wages are paid in a month. Single parents are more likely to be female.

This policy therefore disproportionally impacts negatively on disabled people and women (who are more likely to be single parents).

More information about the policy impacts of Universal Credit assessment periods and payments

Citizens Advice policy report April 2018: Universal Credit and Modern Employment: Non-traditional work

Equality and Human Rights Commission (EHRC) final research report March 2018: The Cumulative Impact of Tax and Welfare Reforms

EHRC, March 2018: Effect of tax and welfare reforms: infographic and evidence review