Our new briefing looks at the problem caused by universal credit’s assessment periods and how to fix it.
Universal credit (UC) is paid monthly in arrears. This means UC recipients have their earned income assessed at the end of every monthly ‘assessment period’ to calculate their UC payment. Monthly assessment periods create challenges for working UC claimants who are not paid on exactly the same date each month. Two in five jobs paying less than £200 a week (£10,400 a year) are not paid on a monthly basis.
UC claimants paid weekly, two-weekly or four-weekly sometimes receive an additional pay cheque in a single UC assessment period. This causes the claimant’s UC award to drop significantly even when there is no change in their circumstances. CPAG frequently hears from working claimants struggling to manage financially because their UC income is so volatile.
One way the Department for Work and Pensions (DWP) could address this problem is by converting the earnings of claimants paid weekly, two-weekly or four-weekly into a monthly equivalent before calculating their UC award. Besides the upfront costs of improving UC’s automated system, long-term costs would be minimal as the change would not result in higher UC payments. Instead, it would create parity in the way the DWP treats people whose jobs pay monthly and those whose jobs do not.
Families who earn enough over a month to be exempt from the benefit cap can nonetheless be affected by the cap if they are paid four-weekly. This is because the earnings threshold to be exempt from the cap assumes claimants are paid monthly. A minor change to UC regulations would resolve this problem.
We are calling on the DWP to work with welfare rights experts and other key stakeholders to develop solutions to these problems, so that UC can better achieve its goals to simplify the benefit system and to make it easier for people to work.