THE INFORMATION IN THIS ARTICLE DOES NOT CONSTITUTE LEGAL ADVICE. YOU SHOULD ALWAYS SEEK SUPPORT FROM A WELFARE RIGHTS PROFESSIONAL WHEN NEEDED, BASED ON YOUR OWN PERSONAL CIRCUMSTANCE.
The Department for Work and Pensions (DWP) is taking the bonuses of some Greggs’ staff. This is because many workers receive Universal Credit. But a court case from 2019 could provide a route of appeal for some of the high streets firm’s employees.
The DWP: taking away bonuses?
As much of the media reported, Greggs is going to be paying most of its staff bonuses. This is due to financial success in 2019. The bonuses will be anything up to £300. Good news on the face of it. But as one journalist pointed out on Twitter, it’s not as easy as that.
Ally Fogg tweeted:
Just asked my Greggs inside informant if everyone is chuffed about their ~£300 bonus?
"Not really. Most of us are on Universal Credit. We'll get the bonus end of Jan & it will be taken out of our UC payments in March. They've basically just handed £7m back to the govt."
Fuck.
— Ally Fogg (@AllyFogg) January 8, 2020
You could call the government’s subsidies for the service sector ‘corporate welfare‘:
I'm not criticising Greggs. They're trying to do the right thing. Problems are 1/ Service sector wages are so dismally low that the govt (or taxpayers) are effectively subsidising employers to enable them to pay starvation wages, and 2/ UC is a chaotic, counterproductive mess.
— Ally Fogg (@AllyFogg) January 8, 2020
The Canary has confirmed that Fogg’s source is authentic. So, is this story from a Greggs’ employee correct? In some cases, probably yes.
Work Allowances
The DWP clearly states that:
In most cases bonuses will be assessed along with the salary and, depending upon the individual’s circumstances, could reduce their benefit for that assessment period.
Usually, the claimants will continue on Universal Credit automatically for their next payment.
However, if the bonus reduces the Universal Credit award to zero, DWP can help claimants quickly return to claiming Universal Credit.
In other words, the DWP treats bonuses as it treats wages. As a rule, the DWP get an employed Universal Credit claimant’s earnings from HMRC. This worked out by “assessment periods“. These are for a calendar month, which starts on the date they made their original claim.
It may not affect some staff. This is due to Universal Credit’s “work allowance“. It is an amount some people can earn without the DWP reducing their payments.
But this work allowance is for relatively small amounts (£287 with housing support/£503 without). A minimum-wage employee would have to work around 35 to 61 hours in a calendar month for the DWP not to deduct anything. That’s around 8 to 15 hours a week; not a lot of work. So, it could hit some staff who work more hours. It’s worth noting that for every £1 you earn over your work allowance, the DWP deducts 63p of Universal Credit.
Complexities
Also, some Greggs’ employees on Universal Credit will also fall foul of its assessment periods. Although this does depend on whether Greggs’ follows HMRC guidance on payroll submissions.
The company pays some staff on the 25 of each month. But if that date falls on a weekend, this changes to the Friday before.
If a staff member was on Universal Credit, and their assessment period ran from 25 of one month to the 24 of the next, they could get paid twice in one period. It may mean they could lose all their Universal Credit. This is because the system would assume they earned more than they actually have. It would then deduct both sets of wages off their payments. If this person is also getting a bonus, that would be taken off too. But the flip side of this is it may mean in the next assessment period the DWP classes the employee as nil income.
As the DWP itself points out, this could mean it would end some people’s claims.
A court ruling
The High Court ruled on this issue last January, saying the situation was “odd in the extreme” and “could be said to lead to nonsensical situations”. It said the DWP’s interpretation of its own rules was unlawful.
Astonishingly, the DWP has still not acted on this ruling, as its guidelines show. The Canary understands it is currently appealing the verdict. But this court case could also be the key to Greggs’ employees’ bonus predicament.
A potential lifeline?
Buried within the judgement are two relevant sections. The judges ruled that:
That other factor is the period in respect of which the earned income is earned. It is the earned income in respect of the period of time included within the assessment period that is to be calculated. That is to be based on the actual amounts received in the assessment period. There may, however, need to be an adjustment where it is clear that the amounts received in an assessment period do not, in fact, reflect the amounts of earned income received in respect of the period of time included within that assessment period.
That interpretation of regulation 54 of the 2013 Regulations is also consistent with the wording of the 2013 Regulations read as a whole, and regulation 22 in particular…
That language, too, focusses [sic] on the earned income in respect of the assessment period. It is not expressed in terms of earned income actually received in the assessment period even if the earned income is properly referable to another period of time not included within the assessment period.
The devil is in the detail
In short, the judgement questions whether the DWP should count money that a claimant did not actually earn during an assessment period, in that same assessment period.
Greggs’ staff bonuses are for 2019. So, staff technically did not earn them in the assessment period from which the DWP will deduct them. Therefore, Greggs’ staff could argue that the DWP should not count them as earned income. In other words, it should not deduct the bonuses because the employee did not earn them in the assessment period in question.
These circumstances are all very specific. It’s important to note many people may not be affected at all. Also, some people may be better off if the DWP deducts the bonus in one assessment period. Greggs’ employees would need to check their own claimant commitments and work allowance. They should also seek professional opinion from a welfare rights adviser.
The DWP and Greggs say…
The Canary asked the DWP for comment. It chose not to provide a statement. But it did point us to the rules on Universal Credit and the work allowance, which this article has detailed.
We also asked Greggs for comment, but it declined to give us a statement.
Head of the Low Incomes Tax Reform Group team Victoria Todd told The Canary:
The Johnson case opens up some interesting issues around when earned income should be taken into account for Universal Credit purposes. Currently, claimants who receive an additional payment and who think it should be treated as income in a different assessment period will need to ask for a Mandatory Reconsideration and, if unsuccessful, ultimately appeal to a Tribunal. Whether it is beneficial to have any bonus treated in a different assessment period very much depends on the circumstances of each case and we recommend that people seek advice from a welfare rights specialist.
The subject of Greggs’ bonuses exposes much wider failings at the DWP. It also shines a light into the still flawed Universal Credit system. But there are also much larger issues at play in this story.
Corporate welfare
As Fogg tweeted:
It's plain fact. Most Greggs employees are on somewhere between 16hrs & 28hrs, large proportion of them are working mothers in low income households, so large proportions of them are on UC. BTW – when did you stop working for Greggs? Guessing it was before UC was introduced?
— Ally Fogg (@AllyFogg) January 8, 2020
Welcome to 21st-century employment, corporate welfare, and Universal Credit. Or, as UN special rapporteur Philip Alston called it:
a digital and sanitized version of the 19th-century workhouse
Welcome to the workhouse
All this makes the national picture dire. Around 8 million people in relative poverty live in working households. 70% of children in poverty live in a household where at least one person works. The Child Poverty Action Group (CPAG) estimates Universal Credit will plunge another 100,000 children into poverty by 2023/24.
Meanwhile, the Joseph Rowntree Foundation (JRF) estimates that under Universal Credit, while:
5.6 million people in working families are likely to see an increase in their incomes. … 5.1 million people in working families are expected to see a reduction in income
Moreover, it says that:
1.7 million people living in poverty in working families… face a substantial reduction in income, on average £2,500 a year.
The government’s aim with Universal Credit is to “support people” to be “better off in work”.
But judging by Fogg’s Greggs’ worker’s comments, it may make people less likely to work more. They’d be forgiven for thinking ‘What’s the point in working hard? What’s the point in a bonus? The DWP and government just take the money, anyway’.
We live in an age of low-wage gig work. Employers and the system treat people as numbers and not individuals. Moreover, Universal Credit operates with that same mantra. This is despite DWP claims to the contrary. So, those affected fighting back is crucial. The information contained in this article may not be relevant to many Greggs’ employees. But when the system herds most of us like cattle, if one person can claim a small victory against the DWP, then it’s a win for all of us.
Featured image via Creative Commons – mrrobertwade (wadey) and Wikimedia – UK government
