Universal Credit based on income not hours

13 January 2016

A Universal Credit guidance leaflet has been published aimed at advising HR and payroll staff of the implications.

For those new to Universal Credit, it is a system which supports people on a low income or out of work and makes work pay by helping to ensure they are better off in work than on benefits.

Universal Credit helps people on a low wage by topping up their earnings, it’s based on income and not hours – so unlike Jobseekers Allowance, there is no limit to the number of hours a person can work.

Universal Credit is being introduced in stages, and is being rolled out to single claimants nationally from February 2015. See where Universal Credit is already available and the current roll out plans.

The section for payroll highlights that Universal Credit may mean a change for payroll staff, who will need to:

  • send HMRC PAYE information at the time the payment is made – this is forwarded on to DWP who will take it into account in the claimant’s next Universal Credit assessment. You only need to provide the information once, which is a more efficient process and it’s used by both HMRC and DWP
  • understand the impact of paying a bonus – this additional income is assessed alongside their salary. This could temporarily reduce or stop their monthly Universal Credit payment for a period, but it’s easy for them to get Universal Credit again and they will always be better off earning more.
  • be aware that employees can be flexible about taking more hours – their Universal Credit payment will be adjusted to take this into account, if this extra payment from work is enough to stop the Universal Credit payment, when their circumstances change it’s easy for them to get Universal Credit again.

Read the full guidance leaflet here.