Involving people who are in receipt of benefits

An introduction

This page provides general information about the benefit system where it may affect service user and carer involvement/participation/co-production in health and social care service design, delivery, research and training with public agencies such as charities, educational establishments, local authorities, the NIHR and the NHS.

Risk to benefits

Where an organisation involves people who are in receipt of state benefits in their work, there is a risk that people may have their benefits stopped as a result of an inadvertent breach of their benefit conditions. Some people may have their benefits (their income for food, clothing, heat etc) stopped for a week; some for several weeks, and some for several months pending an appeal and some in perpetuity.

Duty of Care

Where people who have been involved could be deemed to be vulnerable, the organisation will have a ‘Duty of Care’. The organisation that neglects their ‘Duty of Care’ may be found legally responsible.

Minimising risks

Many organisations have adopted policies for involving people that ensure that any risks to benefits are minimised. A partnership approach can ensure that people are provided with reliable and up-to-date advice on benefit conditions before they decide to become involved, and that the organisation provides their offer of payments in such a way as to avoid misunderstandings with Jobcentre Plus.

Inappropriate benefit rules were amended

The Social Care Institute for Excellence, forerunners of the Care Quality Commission and other health and social care arms length governmental organisations commissioned Judy Scott to liaise with DWP Ministers with the assistance of Peers. Support provided to DWP in 2009 resulted in the removal of  some inappropriate benefit rules that were causing problems to the Department of Health policy for involvement. Initially the legislation excluded involvement with charities and educational establishments. Eventually after representations to Lord Freud in 2014, further legislation was introduced and now when a person’s benefits are calculated, reimbursed expenses for service user and carer involvement will be ignored; notional earnings are no longer applied in all instances. Previously certain expenses were treated as earnings and an offer of payment that was declined was treated as if it had been received.

New risks

However successive governments have introduced ‘Welfare Reforms’ bringing new risks and threats to people who receive benefits.

Organisations must take great care with any contractual arrangements for involvement. Most people who receive benefits are required to prove they are looking for a job, and to undertake training or work related activity or risk being sanctioned. ‘Sanctioned’ means having their benefit reduced or stopped for weeks or months or longer. People must not be asked to make a commitment for involvement that could conflict with their benefit conditions. This applies to both volunteers and people who are paid for involvement.

Payments for involvement must not exceed set limits for some benefits

The national minimum wage applies to service user involvement. Now renamed the ‘national living wage’ for people who are 25 years or older, it is £8.91 an hour from April 2021.

People who are in receipt of Employment and Support Allowance have Permitted Work which allows an absolute limit of £143.00 a week from April 2021. People who are in receipt of Employment and Support Allowance are allowed to earn up to £143.00 a week without the previous one year time limit.

People who receive Employment and Support Allowance MUST obtain and complete a form from the Jobcentre about their plans to earn some money before they start. This form is a ‘PW1’. The form is now available online here: Permitted Work Form

Carers who care for a disabled person 35hrs or more a week may receive Carer’s Allowance. This benefit allows earnings of up to a limit of £128 a week from April 2021, but if the person also receives a means tested benefit such as a carer’s premium and/or Housing Benefit earnings over £20 reduce this benefit.

These low limits can make paying people for involvement difficult if their assistance is needed for a day at a time. However in some circumstances payments for involvement may be treated by Jobcentre Plus as spread over a month or longer. Barriers to involvement can be eased if the organisation understands the system.

Universal Credit 

DWP have amended the original plans for Universal Credit. DWP had introduced this massive change to the benefit system with an announcement about making work pay for people on the lowest incomes by tapering earnings at an affordable rate. Universal Credit was planned to remove the financial cliff edge between an income from benefits and an income from a wage.

Since these early announcements, both the Coalition and the current government have passed significant cuts to the amount (work allowance) that people with children or who have limited capacity for work/work related activity, can earn before Universal Credit is reduced by a taper.

However recently after the government decided to remove the uplift of £20 a week for Universal Credit, the Chancellor announced that they would alleviate the impact by reducing the taper rate and increasing the work allowance. These changes took effect from 24 Nov 2021.

The taper of 63p has been reduced to 55p in the £. This allows people to keep an additional 8 pence of every £1 they earn.

People who are in receipt of Universal Credit because they are responsible for a child or have limited capacity for work/work related activity, and have some of their rent costs paid through Universal Credit have a work allowance. The work allowance has been increased from £293 a month to £335 a month (the equivalent of £77.30 a week) before Universal Credit is reduced by the 55% taper.

For people with limited capacity for work/work related activity this is of course much less than the current rate of earnings that are allowed for people with the same level of limited capacity who are in receipt of for Employment and Support Allowance. The equivalent work allowance for ESA is called Permitted Work, and this allows earnings of £143.00 a week.

People without children or limited capacity for work/work related activity do not have a work allowance. Their earnings are subject to 55pence deduction for every £1 earned.

The transfer of Council Tax Support to local authorities has led to further charges being made on any earnings. In many instances a person who receives Universal Credit may find that for every extra £ they earn 55pence is lost in Universal Credit reductions and a further 20p Council Tax Support reductions. This is an effective tax rate of 75 % for the poorest in our society.

Where a person is taxed by their employer this ‘taper’ rate on £1 of earnings may be: 1) 20% tax + 12.5% NI = 32.5% deductions, then on the remaining amount 2) 55p taper of Universal Credit, then on the remaining amount 3) possibly a loss of 20p in the £ of Council Tax Support.

Warnings! If you are about to be transferred from ESA to Universal Credit there are two pitfalls if you happen to be earning as allowed up to £143.00 a week according to the Permitted Work rules from April 2021.

  1. If you have a mortgage interest loan being paid, the payments will be stopped for 9 months if you earn any money at all. If you are on ESA and are in receipt of Support for Mortgage Interest loan your earnings will be taken by a £ for £ reduction of the loan. Universal Credit has a more draconian rule: if you accept any payment at all for work or involvement (even £5 on one occasion) your Mortgage Interest Loan payments will be stopped for 39 weeks. If however you are earning enough on a regular reliable basis to cover your mortgage interest costs you could make use of the higher work allowance (for people who do not claim housing costs) of £557 a month from 24 Nov 2021 and pay your mortgage from your earnings instead of Universal Credit
  2. Your entitlement to an additional amount for incapacity may be reviewed if you earn the equivalent of the minimum wage rate x 16 hrs a week. Before you are transferred from Employment and Support Allowance to Universal Credit you should reduce your earnings to less than £143 a week (£140 a week would be an adequate reduction) or risk losing the additional amount allowed in Universal Credit for limited capacity for work which applies to some but not all.

What about Permitted Work rules for people who are now claiming current benefits during the changes? 

People who currently claim Employment and Support Allowance with Housing Benefit, will continue to be subject to the same Permitted Work rules until they are transferred to Universal Credit.

Earning limits and earning disregards according to benefit conditions: 

  • Benefit earning limits: Where Employment and Support Allowance is received Permitted Work rules apply to any paid work or paid involvement. There are absolute limits on earnings in any week. If the limit is exceeded benefits may be suspended for that week or stopped pending an enquiry into benefit entitlement. Housing Benefit is not affected by Permitted Work earnings.
  • Benefit earning disregards: An ‘earning disregard’ is different to a benefit earning limit. If earnings are above the ‘disregarded’ amount then the benefit is reduced rather than stopped (providing earnings are below the benefit amount).Different earning disregards apply to different benefits: Jobseeker’s Allowance has a disregard of £5 a week or £10 between partners or £20 if  person receives DLA or PIP or is a lone parent. Income Support paid to lone parents or carer has a disregard of £20 a week. Housing Benefit has the same disregard as the benefit for Jobseeker’s Allowance and Income Support.

Council Tax Support rules are made by each local authority. There are no national rules on charging.

© Judy Scott Consultancy

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