Essential Guide: Working and Universal Credit in UK Labour Law

Navigating the World of Universal Credit and Employment

Universal Credit is a key pillar of the UK’s social security system, designed to simplify the benefits landscape and encourage people into work. Replacing six legacy benefits, including Jobseeker’s Allowance and Working Tax Credit, Universal Credit is a single, monthly payment for those on a low income or out of work.

Eligibility for Universal Credit depends on your age, nationality, residence status, and financial circumstances. Crucially for working individuals, even those in employment may be eligible if their earnings fall below a certain threshold. This differs significantly from the previous system, where some benefits were only accessible to those seeking work.

Understanding the Work Allowance and Taper Rate

One of the key changes introduced with Universal Credit is the concept of a ‘work allowance’. This is an amount you can earn before your Universal Credit payment is gradually reduced. Once your earnings exceed the work allowance, the ‘taper rate’ kicks in. This means that for every pound you earn above the allowance, your Universal Credit payment is reduced by a certain percentage.

Importantly, the Department for Work and Pensions reported that, as of January 2023, 2.2 million Universal Credit claimants were in employment. This highlights the significant interplay between employment and Universal Credit.

With this understanding of Universal Credit’s fundamental principles, we can now delve into its impact on employment practices and the rights of workers in the UK.

---

Universal Credit and Its Impact on the Workplace

Universal Credit (UC) has significantly altered the landscape of benefits and work in the UK. Unlike previous systems, UC operates as a single payment, consolidating six legacy benefits. This change aims to simplify the benefits system and incentivise work. However, its implementation has had wide-ranging impacts on employment practices and worker rights.

In-Work Conditionality and Its Implications

One of the key features of UC is ‘in-work conditionality’. This means that even those in employment may still be eligible for UC if their income falls below a certain threshold. While this aims to support low earners, it also introduces a layer of complexity for both employers and employees.

• Employers need to be aware that some employees may be receiving UC and understand the potential impact on things like working hours and pay increases, which could affect UC entitlement.
• Employees need to grasp how changes in their work situation, such as increased hours or a pay rise, might impact their UC payments. They need to be proactive in reporting these changes to avoid potential overpayments and subsequent deductions.

Rights, Responsibilities, and Sanctions

Workers claiming UC have specific responsibilities, including:

1. Reporting changes: This includes changes to income, working hours, living arrangements, and any other relevant information that might affect their UC entitlement.
2. Meeting Claimant Commitments: These are agreed-upon actions to help claimants move closer to employment or increase their earnings, such as attending job interviews or training courses.

Failure to meet these obligations can lead to sanctions, including reductions in UC payments. For example, a 2018 case saw a claimant’s UC reduced after they missed a work-related interview due to a misunderstanding about the appointment time (JC v SSWP (UC) [2018] UKUT 423 (AAC)).

Impact on Zero-Hours Contracts and Part-Time Work

UC’s monthly assessment period and ‘in-work conditionality’ can create challenges for individuals on zero-hours contracts or in part-time employment. Fluctuating earnings can make it difficult to budget and predict UC payments. For example, a worker with inconsistent hours might see their UC entitlement change each month, making it hard to manage their finances effectively.

The introduction of the “Minimum Income Floor” (MIF) further complicates matters. The MIF assumes that everyone subject to it is working their full contracted hours at the National Minimum Wage. If their earnings fall short, their UC payment is calculated as if they earned that amount, potentially leaving them out of pocket.

Navigating the complexities of UC while working requires a thorough understanding of the system and its implications. In the next section, we’ll explore practical strategies for both employees and employers to effectively manage UC in the workplace.

---

Navigating Universal Credit as a Worker

The evolving landscape of UK employment law intersects significantly with the Universal Credit system, impacting both workers and employers. For those in work but earning low incomes, understanding how to navigate Universal Credit is crucial.

What This Means for You:

1. Claiming Universal Credit: To make a claim, visit GOV.UK and complete the online application. You’ll need your National Insurance number, details of your housing costs, income information, and bank account details.
2. Reporting Changes: It’s crucial to report any changes in circumstances, such as fluctuating income or working hours, through your online account or by contacting the Universal Credit helpline. Accurate reporting ensures you receive the correct entitlement and avoids potential overpayments.
3. Overcoming Challenges: Working claimants often face challenges like understanding payment calculations, managing fluctuating payments, and accessing childcare support. Seeking guidance from dedicated work coaches or utilising online resources like budgeting tools can prove invaluable.
4. Debunking Myths: It’s a common misconception that working while on Universal Credit is discouraged. In reality, the system is designed to support in-work progression, with earnings above a certain threshold resulting in tapered benefit reductions.
5. Available Support: Universal Credit offers tailored support through dedicated work coaches who can provide guidance on job searching, training opportunities, and managing your claim alongside work.

The Challenge of In-Work Poverty:

Despite these support systems, The Institute for Fiscal Studies found that in 2022, over half of families on Universal Credit with someone in work were still living in poverty (IFS, 2022). This highlights the ongoing challenge of ensuring decent work translates into a decent standard of living.

Moving Forward:

The interplay between UK labour law and social security systems like Universal Credit presents both opportunities and challenges. For employees, understanding your rights and effectively navigating available support mechanisms is key. For employers, fostering open communication, providing flexible work arrangements where possible, and promoting financial wellbeing can make a tangible difference. HR professionals, positioned at the intersection of these complexities, should proactively equip themselves with up-to-date knowledge to guide both employers and employees effectively. As we navigate the future of work, a collaborative approach is essential to ensure fair and decent work for all.

---