UC and ‘double payment’ of wages: new rules

The change in overview

New rules in effect from 16 November mean that a ‘double payment’ of monthly earnings to a UC claimant can, where it produces a more accurate result, be allocated to two different assessment periods, rather than just one.

The change is intended to deal with the effect of the decision of Court of Appeal in R (Johnson and others) v Secretary of State for Work and Pensions [2020] EWCA Civ 778 (22 June 2020). There, the court held that where a UC claimant who was paid monthly received a ‘double payment’ of wages in the same UC monthly assessment period (for example, because of early payment of a month’s wages due to the normal payday falling on a weekend or bank holiday, referred to as a ‘non-banking day salary shift’), rules meaning that both payments had to be taken into account in the one assessment period was so irrational as to be unlawful. But it was for the Secretary of State to come up with a remedy.

Amendment regulations (the Universal Credit (Earned Income) Amendment Regulations 2020, SI No.1138) represent the Secretary of State’s remedy. They allow a double payment of wages to result in one payment to be taken into account for one assessment period, and the other to be taken into account in a different assessment period – ie, the one in which they would have been paid were it not for the ‘non-banking day salary shift’.

The change in detail

The change is in the form of an amendment to regulation 61 of the Universal Credit Regulations 2013. That regulation is the one that provides the general rule that under the ‘real time information’ system, earnings are treated as paid on the date they are reported as paid. In ‘double payment’ cases, this has meant that two lots of wages are regarded as received in the same, single assessment period – even though they are really about wages for two months. Applied with the general rule at regulation 54 that earned income must count in the assessment period in which it is received, the result has been that claimants are assessed as having two lots of wages in the one month.

The amended version of regulation 61 provides an alternative in ‘double payment’ cases, by inserting from 16 November the following new sub-paragraph:

‘(6) Where a person is engaged in an employment where they are paid on a regular monthly basis and more than one payment in relation to that employment is reported in the same assessment period, the Secretary of State may, for the purposes of maintaining a regular pattern, determine that one of those payments is to be treated as employed earnings in respect of a different assessment period.’

So, where (1) the claimant is usually paid on a monthly basis and (2) gets more than one payment of those wages in the same assessment period, it is possible to treat one of those payments as paid in a different assessment period. It should be noted that the wording restricts this new provision to monthly paid cases only. Also, the power to treat one payment as receive in a different assessment period is quite wide: this ‘may’ be done, ‘for the purposes of maintaining a regular pattern’. The individual facts of the case may therefore be very important.

The amendments also include a new sub-paragraph (5) to regulation 61, which is not directly about double payment cases, and is not restricted to the monthly paid:

‘(5) Where it appears to the Secretary of State that a payment of employed earnings has been reported late, or otherwise reported in the wrong assessment period, the Secretary of State may determine that the payment is to be treated as employed earnings in the assessment period in which it was received.’

The change in practice

The Explanatory Memorandum to the regulations gives the official view of the effect of the change:

‘The policy intent is to ensure that ordinarily no more than one set of calendar monthly salary payments from a single employer are taken into account in each assessment period….This change in regulations will allow DWP to reallocate a payment reported via real time information (RTI) to a different assessment period, either because it was reported in the wrong assessment period, or (in the case of monthly paid employee) it is necessary to maintain a regular payment cycle.’

Subsequently, official guidance has been issued to decision makers, in the form of ADM Memo 27/20. That includes a few basic examples (not exhaustive) of the new approach in practice, as in the following:

‘Ranjeet has an AP [assessment period] that runs from the 28th day of each month to the 27th day of the following month. Ranjeet’s employer regularly pays him on the 28th day of each month. Ranjeet was paid his usual salary on 28.11.20. Because 28.12.20 is a public holiday his salary for December is paid on 24.12.20. The following payment is paid as usual on 28.1.21. The DM determines that the payment received on 24.12.20 is to be treated as paid in the AP that ran from 28.12.20 to 27.1.21.’

But it is already clear that although the regulations are intended to prevent double-counting in relevant cases, the Department is relying on manual intervention rather than automatic adjustments, and that claimants will need to alert the Department in advance where possible.

Correspondence from the DWP to CPAG indicates that the Department intends to implement the regulations by manual intervention in relevant cases, and will rely to a considerable extent on claimants informing it of a problem in advance. The Department told CPAG that this approach:

‘ …will involve the claimant letting us know when they first identify the problem from their UC award notification, prior to payment of their UC award. We are also gathering more information at the new claims stage about the frequency of earnings payments in order to improve identification of potentially affected claimants.’1

The changes came into effect on 16 November. What about before 16 November? That remains to be seen. The court held in Johnson that the pre-rule change situation was unlawful. Challenges can be therefore made and existing challenges about that continued, but complications involving the court in Johnson leaving the remedy to the Secretary of State may arise. For more detail on these and related points, see the legal test cases pages of CPAG’s website.