legislation there are Permitted Work rules which allow ESA claimants to try some paid work as a stepping stone back into full-time employment, whilst still receiving ESA. They are allowed to do certain types of work, and to do so within certain limits. The rules allow claimants to find out whether they are capable of doing specific jobs without risking their benefit entitlement and maybe even to gain new skills.
However under Universal Credit there are no 'permitted earnings' rules as such.
Instead the UC rules allow some working UC claimants to have (or retain) a Limited Capability for Work/Work Related Activities Element when their maximum Universal Credit is assessed- click here.
And those in work who have a Limited Capability for Work have a higher work allowance (ie more of their earnings are disregarded).
What about those claimants who are doing permitted work when they make a claim for Universal Credit?
There is no 'protection' for these claimants in terms of their permitted work. If their earnings from permitted work fall below the work allowance that applies to them (for a claimant living in rented accommodation this will be £198 a month), then all their earnings will be disregarded and they should see no difference in their benefit entitlement as a result of their earnings.
But, if their earnings are above the work allowance, then those earnings will reduce their entitlement to Universal Credit - see example below.
It’s June 2018, and Sammy is 26. She has been receiving Income Related Employment and Support Allowance for 18 months and is in the Work Related Activity Group.
She also receives Housing Benefit for her one bedroom flat (£95 a week) and Council Tax Support. She is doing permitted work - she works 10 hours a week and gets paid £90. Because her wages are classed as ‘permitted earnings’ they are paid on top of her ESA and HB.
She lives in a ‘Full’/Digital UC area but has not yet needed to claim UC.
Her income is £102.15 ESA plus £90 per week Permitted Earnings, plus £95 a week HB.
Sammy finds that she is pregnant and in late October 2018 she has her first child.
This triggers a claim for Universal Credit, because she is living in a ‘Full/Digital UC service area so she is not able to make a new claim for Child Tax Credit.
When her maximum UC is assessed it will be made up of:
- A Standard Allowance (£317.82),
- A Limited Capability for Work Element* (£126.11),
- A Child Element (£231.67), and
- A Housing Costs Element (£411.67)
ie £1087.27 a month.
*Because her period of limited capability for work started before 3rd April 2017 and she was found to have a limited capability for work under the ESA Regulations the LCW Element should be included in her UC award from day one of her claim.
However, under Universal Credit, ‘Permitted Earnings’ do not exist and therefore her wages of £90 a week will be taken into account as earnings and for every £1 she has in earnings above her work allowance~ her maximum UC will be reduced by 63p.
~ Her applicable work allowance is £198 a month (this is the rate for those found to have a limited capability for work and also for those with dependent children).
Note that because she is paid weekly there will be some months when she will receive 4 wage payments within her Monthly Assessment Period, and some when she will receive 5.
In MAPs where she receives 4 wage payments her total earnings will be £360 and therefore her maximum UC award will be reduced by £102.06 ((£360 - £198) x 0.63) giving her a UC entitlement of £985.21.
Making a total income of £1345.21 a month ie £310.43 a week – plus Child Benefit and any Council Tax Support/Rebate.
In MAPs where she receives 5 wage payments her total earnings will be £450 and therefore her maximum UC award will be reduced by £158.76 ((£450 - £198) x 0.63) giving her a UC entitlement of £928.51.
Making a total income of £1378.51 a month ie £318.12 a week – plus Child Benefit and any Council Tax Support/Rebate.
This leaves her worse off than had she been able to remain on the legacy benefits system:
Had she been living in a ‘Live’/Gateway UC service area she would have been able to make a new claim for Child Tax Credit.
Her income would have been:
£102.15 ESA plus £90 per week Permitted Earnings, plus £95 a week HB and £53.46 per week Child Tax Credit ie a total of £340.61 a week – plus Child Benefit and any Council Tax Support/Rebate.