Monday 23 March 2020
Work and Pensions
Universal Credit bonus payments
The petition of residents of Glasgow East,
Declares that current rules surrounding bonus salary payments to universal credit claimants are profoundly unfair and lead to unintended reductions in subsequent universal credit payments which perversely disincentivises work.
The petitioners therefore request that the House of Commons urges the Government to revise universal credit rules which would see one off bonus payments treated as capital rather than salary payments.
And the petitioners remain, etc.—[Presented by David Linden, Official Report, 20 January 2020; Vol. 670, c. 141.]
A petition in the same terms was presented by the hon. Member for Linlithgow and East Falkirk (Martyn Day) [P002558].
Observations from the Secretary of State for Work and Pensions (Dr Thérèse Coffey):
Bonuses paid by employers are considered a useful part of the contract between employers and employee. Bonuses are considered to be earnings and are treated in the same way as any other earnings. This is true for tax and other purposes and bonuses are rightfully considered to be earnings in the welfare system, regardless of whether or not an individual is claiming a benefit. As such, all earnings are subject to the principles of the work allowance (where eligible) and the taper rate. This results in a predictable and consistent method for calculating awards of universal credit.
Universal credit has been specifically designed to strike a balance between support for vulnerable claimants whilst being fair to other taxpayers. It incentivises work for those who are able, whilst delivering previously poorly targeted benefits to those who need it most.
Universal credit was introduced to replace six legacy benefits and become the main working age benefit. Since its rollout completed in December 2018, increasing numbers of households are benefiting from the flexible way it supports them whilst in and out of work. Previously, claimants had to navigate different rules across varying benefits, meaning uncertainty surrounding how much could be gained by being in work. It was time consuming too; as it. meant engaging with different Government organisations to close down, update, or open up new claims.
The amount of universal credit paid to claimants reflects, as closely as possible, the actual circumstances of a household, which can rise and fall every month. The single, simple taper means that payments reduce in a transparent and predictable way as earnings increase. Work allowances were increased by £1,000 per year from April 2019, allowing 2.4 million households to keep an extra £630 of income each year. Currently claimants with children and/or disabilities benefit from a work allowance which means they can keep either £287 per month if they have support for housing costs included in their universal credit, or £503 per month if they do not have support for housing costs included.
Since 2013 the Department for Work and Pensions (DWP) and HM Revenue and Customs (HMRC) have been working collaboratively to support and inform employers who report earnings to emphasise the importance of timely reporting via the real time information (RTI) system.
Universal credit has transformed the welfare system by making work pay. It has simplified processes for claimants through the convenience of a single online account and can continue to be paid even when a claimant’s circumstances have changed. This means it is easier for claimants to predict how universal credit will respond to changes, and ensures they are better off working and better off working more.