Universal credit and employee pay

Overview

Universal credit is a monthly payment and the amount of your award is based on your personal circumstances and also your 'net pay' in an assessment period. The assessment period generally begins on the day you make your universal credit claim and ends one calendar month later. The next assessment period begins on the following day. 

For most employees 'net pay' is the same as 'take home' pay (so pay after deductions for tax and national insurance, and certain pension contributions).

Employee pay information

The Department for Work and Pensions (DWP) obtain details from HM Revenue and Customs (HMRC) of your net pay in an assessment period where possible. The information is taken from the RTI (Real Time Information) return that your employer must submit to HMRC each time you are paid. This contains information about your pay and how it is made up.

If your employer is not a ‘Real Time Information Employer’ – which means they are not required to send information about your pay to HMRC - then DWP will require you to provide information about your pay to them directly. This will usually be via your universal credit online account or by phoning the universal credit helpline.

Allocation of pay into assessment periods

If your employer sends information about your pay to HMRC, then the general rule is that DWP use the date they receive the pay information from HMRC to determine which assessment period the pay falls into.

In practice, this is likely to be determined by a combination of the date and time the employer submits the RTI information to HMRC and the date they enter in the payment date box on their RTI submission. If no information is received from HMRC in any assessment period, the amount of employed earnings is treated as nil.

DWP will usually receive the details of the net pay from HMRC on the actual date of payment provided the employer sends the RTI submission to HMRC before 9pm on that day and enters the actual date of payment in the payment date box (box 43) in the RTI submission. DWP will then use that information to calculate the award for the assessment period.

Adjustments can sometimes be made to the net pay figure reported by the employer to arrive at the ‘employed earnings’ figure required for universal credit purposes. There is more information about this on our website for advisers, Revenuebenefits.

If you are paid weekly, you should be aware that some assessment periods are likely to have four weeks net pay in them and some will have five weeks net pay in them. This means that your monthly universal credit payment will vary from time to time according to whether there are four or five wage payments in the assessment period. You may need to take care to budget for these peaks and troughs in the payment cycle, so you know what to expect each time your universal credit is due. The same thing may happen if you are paid fortnightly, in some assessment periods you will have three payments taken into account. Similarly, if you are paid four-weekly, there will occasionally be an assessment period into which two wage payments fall.

There is further information about this on the GOV.UK website.

If you are paid monthly, then one month’s net pay should fall into each assessment period and your universal credit payments should not vary significantly from month to month if your net pay remains broadly the same. However, there are some situations where this might not be the case which are explained below.

In certain situations, DWP do not use the RTI information reported by an employer. Broadly, this can happen where:

• DWP think that the employer is unlikely to report accurate or timely information to HMRC
• DWP think that the payment reported to HMRC is incorrect, or doesn’t include the information needed for universal credit purposes
• DWP don’t receive any information about the claimant’s pay in an assessment period and they think that is because of a failure to report information (for example failure of a computer system run by HMRC or your employer)

In these cases, DWP must decide the amount of earnings to take into account in the assessment period. They can ask you for information or evidence to help them decide. We explain more detail about these three exceptions on our website for advisers Revenuebenefits.

There are also rules that allow DWP to re-allocate payments reported from HMRC to a different assessment period. We explain more about this below.

Getting paid on a different day to the usual payday

Sometimes there might be unavoidable changes to your usual pay date, for example, if you work for a small company and there is no-one to process the payroll on time due to sickness (in which case you may get paid late) or if the payroll department decides to process the workforce pay earlier than usual just in case they have to be away from work on the normal pay day and so on.

These ‘double payments’ often do not come to light until a universal credit award has been substantially reduced as a consequence of two wage payments falling into one assessment period, and so are not so easy to plan for.

They can also happen where an employer pays early because the usual pay date falls on a weekend or bank holiday, or where there may be an extended break such as Christmas or Easter.

There is guidance from HMRC for employers who need to pay either early or late which advises the employer to enter the normal contractual pay day in their RTI submission to HMRC, irrespective of whether that was actually the date they made the payment to you. If employers follow this guidance, then this should ensure that two sets of pay do not fall into the same assessment period when your pay is paid early. Unfortunately, this guidance does not seem to be very well known among some employers and so often the actual date you are paid is sometimes used by the employer in their RTI submission, potentially giving rise to the ‘two pay in one assessment period’ issue.

However, the HMRC guidance does not resolve the problem if you are paid late, unless the RTI submission is made before the normal payday by your employer. So, this means that unfortunately, if your employer pays you late AND doesn’t file the RTI submission until you are actually paid, the allocation of two wage payments to one assessment period cannot initially be avoided, even if HMRC’s guidance is followed. However, see below for information about how to ask for payments to be re-allocated.

Therefore, if you receive pay earlier or later than your normal pay date and it is near to the end of your universal credit assessment period, you need to be aware that this might impact on your next universal credit payment. If this does happen, it is worth bearing in mind that although it looks to DWP that you have had two sets of pay in one assessment period, it may well also be the case that it will look as though you have had none in the next assessment period (if you are paid on your normal contractual pay day in the following month) and you should then get a higher universal credit award as no pay will be taken into account in that assessment period. Depending on your individual circumstances, you may be better or worse off overall where this happens.

Challenging a decision to include two (or more) pay payments in one assessment period

If two (or more) wage payments have been taken into account in one assessment period, the options to do anything about it depend on the reason why it has happened. We give a brief summary of the different situations on this page but the rules are complex and our website for advisers Revenuebenefits has more detail about the rules and how to challenge DWP decisions.

Pay frequency

Some people will always have uneven universal credit payments because of their pay frequency. If you are paid weekly, fortnightly or four-weekly, you may see fluctuations to your universal credit award. For example, if paid four-weekly, there will be one assessment period each year where two payments of earnings will be taken into account. You will need to try and budget for this potential change. The GOV.UK website has some information which explains when this might happen.

Employer has reported pay information late to HMRC

If your employer reports your pay information late to HMRC, it will be passed over to DWP late and may mean it is taken into account in a later assessment period than the one you actually received it in. Where this happens, you can contact DWP to ask them to re-allocate the payment to the assessment period in which you actually received it. You should contact DWP via your online universal credit account or by phoning the universal credit helpline as soon as you realise there is an issue.

Earnings reported in the wrong assessment period

If DWP think that your earnings have been reported in the wrong assessment period for any reason then they can re-allocate the payment to the assessment period in which you actually received it. Where this happens, you can contact DWP to ask them to re-allocate the payment to the assessment period in which you actually received it. You should contact DWP via your online universal credit account or by phoning the universal credit helpline as soon as you realise there is an issue.

Other situations

To challenge the decision on a universal credit award it is usually necessary to ask for a Mandatory Reconsideration which is the first step in the appeals process.

Changing the assessment period

You cannot change your assessment periods.

Other pay problems

It could be the case that you have been paid on time as usual but you still think the wrong amount of earnings has been taken into account for your universal credit award. This could be because either:

• the employer sent in their RTI return late (or after 9pm on that date) or
• there is a discrepancy between the figures reported and what was actually paid.

To start with, you should contact the universal credit helpline or write a note on your online journal to ask about your award and dispute your universal credit calculation. This should then establish which of the options above the situation falls under.

If the RTI return was sent late, you can ask for the payment to be re-allocated to a different assessment period.

If instead, there is a discrepancy in the figures, if possible you should provide proof to DWP of when and what you were actually paid for example payslips or bank statements. If necessary, you can ask for your case to be escalated. This should hopefully result in someone from DWP or HMRC looking in detail at the situation and the specific RTI pay and tax records and potentially contacting your employer to clarify issues on the earnings reported, if necessary.

Our understanding is that this escalation route is outside the formal appeal process so if you are in this situation you may want to ask for a formal decision to be issued with appeal rights and request a mandatory reconsideration at the same time to ensure you are within the relevant time limits to challenge the universal credit decision officially. If the outcome of the mandatory reconsideration is not satisfactory, you can then an appeal to an independent tribunal. We recommend contacting a welfare rights adviser, such as Citizens Advice, for help with this.