Employers need to digest the recent Universal Credit (UC) ruling by the High Court as reported by the BBC. The fact that the case was in respect of single mothers is irrelevant as the “flaws” identified in the system relate to all claimants.
The Global Payroll Association suggests that this detailed ruling (Johnson & Ors, R (On the Application Of) v Secretary of State for Work And Pensions) can be simplified in an attempt to show how employers can prevent the same thing happening to other claimants who may be their employees.
UC is paid depending on a claimant’s actual earned income in an assessment period. This is the monthly period between two dates decided by the date that the person first becomes entitled to the welfare payment. Therefore, assessment periods are individual to each person. All of the employees in the 11th of January ruling were paid monthly by their employers at the end of the month. Danielle Johnson had an assessment period that ran from the last day of the month to the penultimate day of the next month (e.g. from the 30th of November to the 29th of December). So the Universal Credit she was paid in January 2018 looked at all earnings paid in the period from the 30th of November 2017 to the 29th of December 2017. Usually she would be paid just once but she actually received the following payments:
- November salary (paid on the 30th of November) and
- December salary (paid on the 29th of December because the 30th was a Saturday)
In the following assessment period running the 30th of December 2017 to the 29th of January 2018 she did not receive any payments as her January salary was paid after the 29th. Her Universal Credit payments in January and February 2018 were incorrect as it looked to the DWP as if she had received high payments in one assessment period and no payments in the next. This was the basis of hers and the others claims, saying that it was unfair for their UC claim to be adjusted according to an inflexible assessment period when her employer paid at different times of the month because of things like weekends and bank holidays.
Yet the Global Payroll Association suggests employers can help this issue by using the payment date field correctly on the RTI full payment submission (FPS). The payment date is not the date of payment but is the date that the employee should have contractually been paid. If the employer had have declared the 30th of December 2017 as the payment date then the issue would not have been there for Ms Johnson.
Unfortunately HMRC have issued poor guidance about this payment date field with the result that employers and are confused about what to use for this RTI field. For example:
- In the August employer bulletin 73, they said that the field was “vital to the success of Universal Credit (UC)” and then said it is “the earlier of the date an employee is paid or the date they were entitled to that payment”. This is not correct
- HMRC did try and correct this statement in the October bulletin 74 when they said the payment date should be declared as the “regular payday” if the actual payday falls on a non-banking day
- In the December employer bulletin 75 they said employers should “Submit your payroll on or before your employees’ pay day” giving the impression there was no difference between the payday and the payment date
- On the 17th of December 2018 they issued an announcement about paying early because of Christmas and said “ if you do pay early, please report your normal payment date”
The Global Payroll Association would like to add to the many voices that say:
Payday is not the same as the payment date that is declared via RTI
Undoubtedly we will hear more about this and hope to receive definitive guidance once and for all from HMRC. UC and RTI are supposed to work together but this case has highlighted they don’t. Whilst we do not comment on UC generally, employers can help their employees by getting the payment date correct yet this is very much dependent on whether software has the capability of declaring a date on the RTI file that is different from the actual payday.
Employers need to digest the recent Universal Credit (UC) ruling by the High Court as reported by the BBC. The fact that the case was in respect of single mothers is irrelevant as the “flaws” identified in the system relate to all claimants.
The Global Payroll Association suggests that this detailed ruling (Johnson & Ors, R (On the Application Of) v Secretary of State for Work And Pensions) can be simplified in an attempt to show how employers can prevent the same thing happening to other claimants who may be their employees.
UC is paid depending on a claimant’s actual earned income in an assessment period. This is the monthly period between two dates decided by the date that the person first becomes entitled to the welfare payment. Therefore, assessment periods are individual to each person. All of the employees in the 11th of January ruling were paid monthly by their employers at the end of the month. Danielle Johnson had an assessment period that ran from the last day of the month to the penultimate day of the next month (e.g. from the 30th of November to the 29th of December). So the Universal Credit she was paid in January 2018 looked at all earnings paid in the period from the 30th of November 2017 to the 29th of December 2017. Usually she would be paid just once but she actually received the following payments:
- November salary (paid on the 30th of November) and
- December salary (paid on the 29th of December because the 30th was a Saturday)
In the following assessment period running the 30th of December 2017 to the 29th of January 2018 she did not receive any payments as her January salary was paid after the 29th. Her Universal Credit payments in January and February 2018 were incorrect as it looked to the DWP as if she had received high payments in one assessment period and no payments in the next. This was the basis of hers and the others claims, saying that it was unfair for their UC claim to be adjusted according to an inflexible assessment period when her employer paid at different times of the month because of things like weekends and bank holidays.
Yet the Global Payroll Association suggests employers can help this issue by using the payment date field correctly on the RTI full payment submission (FPS). The payment date is not the date of payment but is the date that the employee should have contractually been paid. If the employer had have declared the 30th of December 2017 as the payment date then the issue would not have been there for Ms Johnson.
Unfortunately HMRC have issued poor guidance about this payment date field with the result that employers and are confused about what to use for this RTI field. For example:
- In the August employer bulletin 73, they said that the field was “vital to the success of Universal Credit (UC)” and then said it is “the earlier of the date an employee is paid or the date they were entitled to that payment”. This is not correct
- HMRC did try and correct this statement in the October bulletin 74 when they said the payment date should be declared as the “regular payday” if the actual payday falls on a non-banking day
- In the December employer bulletin 75 they said employers should “Submit your payroll on or before your employees’ pay day” giving the impression there was no difference between the payday and the payment date
- On the 17th of December 2018 they issued an announcement about paying early because of Christmas and said “ if you do pay early, please report your normal payment date”
The Global Payroll Association would like to add to the many voices that say:
Payday is not the same as the payment date that is declared via RTI
Undoubtedly we will hear more about this and hope to receive definitive guidance once and for all from HMRC. UC and RTI are supposed to work together but this case has highlighted they don’t. Whilst we do not comment on UC generally, employers can help their employees by getting the payment date correct yet this is very much dependent on whether software has the capability of declaring a date on the RTI file that is different from the actual payday.