UC, wages and monthly assessment periods now

Introduction

The monthly assessment period has been a core concept of UC since its introduction. The automated monthly calculation which, for employed claimants, relies on information about earned income received via the real-time information feed, has meant that challenges to particularly problematic aspects of the calculation for certain groups of working claimants have been strongly resisted by the Secretary of State in the courts.

Commentators have recognised that ‘greater compliance to the technical constraints of automation…continues to hold sway within the government and among DWP policymakers’1 and that the inflexibility of the monthly assessment period limits policy options available to decision makers.2 Following the decision of the Court of Appeal in SSWP v Pantellersico and others [2021] EWCA Civ 1454, now is an opportune moment to consider where this leaves problems arising from the interaction of wage payment patterns and the monthly assessment period.

A ‘fundamental feature’

The Pantellerisco case sought to challenge the application of the benefit cap to claimants working 16 hours a week earning an hourly rate at the national living wage or above and who are paid four-weekly. While on first glance, this sounds like an objection to the benefit cap itself, the case in essence turned on the ‘fundamental feature’ of the UC system that means that benefit is assessed by reference to the claimants’ actual receipts of income in each of their monthly assessment periods.3

Reliance on this central principle by the Secretary of State meant that the Court of Appeal was not willing to find the legislation which causes the calculation of this group of claimants’ income to fall short of the required level of earnings to escape the benefit cap – purely because of the fact they are paid four-weekly – irrational. The Court of Appeal considered that the claimant being paid on a different pay pattern from the monthly assessment period represented a ‘real and fundamental mismatch’ and was concerned that attempting to resolve the issue faced by this group would threaten the monthly assessment period which had been ‘chosen as the cornerstone of the system’.4 (See UC: escaping the benefit cap and pay cycles and the write-up of the Court of Appeal’s judgment in Bulletin 285 (December 2021) for a more detailed discussion.)

In August 2022, the Supreme Court refused Ms Pantellerisco’s application for permission to appeal, without providing detailed reasons. This refusal represents an end of the proceedings in that case and means that the Court of Appeal’s findings stand as final. As such, it continues to be lawful for the DWP to apply the benefit cap to this group of claimants, whose earnings will, for 11 out of 12 assessment periods in a year, consistently fall just short of the prescribed exemption level required to escape the cap due to their four-weekly pay pattern.5

A human rights discrimination argument (as yet untested) remains open for claimants in a similar position to Ms Pantellersico – see CPAG’s test-case page: Universal credit, benefit cap and those paid 4 weekly for details.

Constructing solutions

The DWP said in its evidence in the Pantellerisco litigation that it is ‘considering reforms in relation to pay cycles’. As such, a policy solution may yet be forthcoming. Of course, problems for working claimants arising from the interaction between non-monthly pay cycles and the monthly assessment period go much broader than the benefit cap issue faced by Ms Pantellerisco. CPAG’s Early Warning System continues to receive reports of four-weekly paid claimants who are not affected by the Pantellerisco issue, but who nonetheless suffer significant fluctuations in their amount of UC when they receive two pay packets in one assessment period, causing their UC to drop significantly or even be wiped out entirely.

Regarding the benefit cap issue specifically, the Court of Appeal in Pantellerisco did not consider the possible solution of retaining the existing method of calculating earned income for the purposes of the exemption, but fixing the level of earnings required to escape the cap at the minimum amount that those working 16 hours per week at the hourly national living wage rate or above earn, irrespective of their pay patterns (see Bulletin 285, pp4–5, for an explanation of how this works). Further, it is still not clear the extent to which the application of benefit cap exemptions are a manual process carried out by DWP agents, rather than part of the automated monthly calculation. To the extent applications of the earnings exemption to the cap is already at least partially manual, there may be more scope for flexibility when the DWP is considering possible solutions.

Double payments of wages

One area where it has shown to be possible for the Department to create a solution for problems caused by the monthly assessment period is regarding monthly paid claimants who receive two wage payments in a single assessment period due to their pay dates shifting slightly. Following the successful Johnson case in the Court of Appeal, in November 2020 the Secretary of State introduced powers to reallocate one of two monthly wage payments received within a single assessment period to a different assessment period,6 for the purpose of ‘maintaining a regular pattern’.7 Consequential adjustments to the calculation of a claimant’s employed earnings can also be made in respect of other assessment periods.8

These legislative changes represent, to a limited extent, a loosening of the ‘actual receipts of income in a monthly assessment period’ principle of UC. But this change was only introduced after the Secretary of State was forced to find a ‘solution’ for this issue faced by some monthly paid claimants, after the failure to do so was found to be irrational by the courts. Commenting after the judgment, the UC Senior Responsible Officer (and witness in the litigation) commented: ‘it is possible to construct a solution to the issue raised in the court without breaking some of the core concepts and core design’ – demonstrating the importance to the DWP of maintaining the principle of calculating benefit based on actual earned income within the UC monthly assessment period.

In August 2021, the DWP deployed a system change which meant that double monthly wage payments in a single assessment period could be automatically identified, thereby reducing the burden on claimants facing the Johnson issue from needing to raise the issue with DWP. While this automated ‘fix’ was welcome, since its introduction CPAG has continued to receive reports from claimants who face the Johnson issue, sometimes on a repeat basis, and for whom the issue has not been picked up automatically. It may be that in situations where the second wage payment in a single assessment period needs to be moved forward to the next assessment period, rather than the first of the double wage payments being moved back to the previous assessment period, then the system is less adept at dealing with cases. Even in cases where the issue is automatically identified, it seems to be the case that manual adjustments still need to be applied by DWP staff.

Conclusion

It is clear that the UC monthly assessment period remains the core building brick in the UC system – as a concept, in the legislation and in delivery. It is evident that it is here to stay and is hard-wired into UC. The courts, in Pantellerisco in particular, showed that they are hesitant to interfere with this ‘cornerstone’. Nonetheless, the Johnson example shows that where particular issues can be solved with solutions that do not fundamentally disrupt the earned income principle in the UC calculation, there is scope for the DWP to use automation to make adjustments to avoid unacceptable outcomes for claimants. But in the absence of such solutions, it is likely that the DWP will continue to be reluctant to introduce any further such changes that fall outside of the automated calculation and might require agent time to administer each month.