ADVICE ON BACKPAY AND UNIVERSAL CREDIT
Dear Branch Secretary
UNIVERSAL CREDIT AND BACKPAY
We have received a number of queries about the impact of the backdated pay award on members in receipt of Universal Credit.
UNISON’s position is that all backpay from 1 April 2022 is money owed to local authority and other employees covered by the NJC, and should be paid to them as soon as possible. However, where requested, we ask employers to engage sympathetically with employees who are in receipt of Universal Credit if they need to arrange for back-pay to be staggered. This should only be done if requested by the employee and will be to minimise any future reduction of Universal Credit payments. Such arrangements may vary from individual to individual and paying the back-pay over a couple of months should only be implemented at the request of an employee.
This guidance covers two key areas:
- What should members do if their Universal Credit payments fall or stop as a result of the backpay? This guidance gives initial advice and signposts helpful links.
- Does the size of the backpay mean some members would be better off asking for their backpay to be staggered? Our advice is that this is generally not the case and that branches should ensure all backpay is paid as soon as possible. In circumstances where two members of the same household are in receipt of Universal Credit and EACH receive full back pay, the individuals concerned should use the online benefits calculator at https://unison.entitledto.co.uk to check how they are affected. They may wish to consider whether they need to request that the employer staggers back pay for one or both employees.
Universal Credit and backpay
Some UNISON members covered by the 2022 NJC pay settlement for England, Wales and Northern Ireland will also be in receipt of Universal Credit.
The 2022 NJC pay award will result in a reduction in the amount of Universal Credit received as earnings will rise. This is because Universal Credit is reduced by 55p for every extra £1 someone earns (after income tax and national insurance).
The 2022/23 pay award is for a consolidated pay increase of £1,925 on all NJC pay points. The pay rise will not be paid as a one-off lump sum, as it is consolidated into basic pay it will be spread across twelve months. Please remember that pay is pro-rata for part-time/term time only employees.
The 2022 NJC pay settlement is backdated to April 2022 which means that employers will also be making a one-off payment of back pay. It is expected that the backpay is likely to be be paid in either November or December, depending on the arrangements made by each employer.
This means that the amount of take-home pay will be significantly higher in the month in which back-pay is paid.
As Universal Credit is based on individual members’ own personal circumstances, UNISON does not know exactly how individual members may be affected.
The backpay will be included in the Universal Credit award calculation made by the Department for Work and Pensions (DWP) in the relevant assessment period for that individual and it will reduce the amount of UC received in the following month. For example, if backpay is included in the November calculation, the UC payment in December will be affected. (The assessment period begins on one day in the month and ends a month later – for example 27th of the month to 26th of the following month.)
All members on Universal Credit will see a reduction in their UC in the month following the period that includes their one-off back pay because their earnings have increased. If members see their payment stop altogether then those members need to renew their UC claims immediately.
How do members renew their UC claims?
Universal Credit payments do not start again automatically. If members’ UC payments stop, they must start up their claim again. They should do this as soon as they can, to be sure they do not miss out. Branches should advise members to look out for any changes to their UC payment, and if it falls to zero, they should advise them as follows:
- If your claim does close because of the increased and backdated award you will see a message on your Universal Credit Journal telling you about this.
- If your Universal Credit payments stop because you have had additional pay, the UC payments will not automatically start again. You must start up your claim again. You should do this as soon as you can to make sure you do not miss out.
- To reclaim, log into your Universal Credit Journal and follow the advice about how to ‘Reclaim’. You will have to answer a few simple questions.
- If you have problems re-starting your claim, you should contact your Work Coach in the first instance.
- Further help can be obtained from Jobcentre Plus staff.
- An overview of Universal Credit can be found at www.gov.uk/universal-credit or you can call the Universal Credit helpline on 0800 328 5644.
Staggered payment and the ‘surplus earnings rule’
The Universal Credit rules state:
‘If you earn more than £2,500 over the amount you can earn before you receive no Universal Credit payment, you are said to have surplus earnings. These surplus earnings will be taken into account in the next monthly assessment period. This may reduce the amount of Universal Credit you receive, or perhaps mean that you don’t get any Universal Credit payment that month.’
We have been asked whether members can avoid or minimize the reductions in their Universal Credit payments, by asking their employer to spread the backpay owed to them over several months.
Universal Credit is calculated using household income so it is possible that two members of the same household will each receive back pay in the same month.
UNISON’s advice is that if only one member of the household will get the NJC back pay then members should not need to make this request. At an individual level, the amount of backpay will not be so large that payment of it in one month will make things worse than they would be if the backpay were staggered.
If, however two members of the same household who are in receipt of Universal Credit are going to receive the backdated pay award, the member/s should be advised to check how they might be affected by completing UNISON’s online benefits calculator at https://unison.entitledto.co.uk/
To find out what the impact might be they can change their monthly income amount on the calculator to reflect the month in which they will receive the backdated payment to see what impact this will have on their Universal Credit in the following month.
For reference: The 2022 NJC pay settlement gives members £1,925 (based on full time hours) over the year. So, the extra pay for an individual, including backpay, will definitely be less than £2,500 over the amount that would reduce Universal Credit to Zero.
If backpay is included in the November pay packet, a member will receive 8 months’ worth of pay – a maximum £1,284 if working full-time hours. This amounts to £2,568 if there are two members of the same household who both work full-time.
If backpay is included in the December pay packet, a member will receive 9 months’ worth of pay – maximum £1,443.75 if working full-time hours. This amounts to £2,887.50 if there are two members of the same household who both work full-time.
Please remember that these amounts will be subject to the normal deductions (tax, National Insurance, pensions so the net increase will be lower).
In many cases the backpayment of the NJC pay rise will not bring employees over the earnings limit that would reduce Universal Credit payments to zero. Households where two earners will both get back pay and who currently receive LESS than £300 per month in Universal Credit should particularly be advised to check. Remember you can use UNISON’s online benefits calculator at https://unison.entitledto.co.uk/. (If you have any queries about the results please email firstname.lastname@example.org)
If it seems that having the backpayment staggered over a couple of months would prevent the Universal Credit threshold being passed, then please ask your employer to stagger backpay.
Please remember: As Universal Credit is based on a number of variables it is worth seeking advice if you are concerned about the impact of the pay rise on your Universal Credit payment and entitlement.
With kind regards
Helen Reynolds Sean Fox
Regional Head of Local Government Chair of Regional Local Government Committee