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Universal Credit - leaving you out of pocket

Last year the RCN Welfare Service dealt with a number of cases where RCN members who were working and also claiming Universal Credit (UC) had their benefits reduced when they shouldn't have.

This meant they were losing 'work allowances' worth up to £292 per month, and were also sometimes subject to the benefit cap.

On this page you can find more information about this as well as guidance on how to challenge decisions where this happened.

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Applying for Universal Credit (UC)

Due to a large surge in applicants claiming Universal Credit, the DWP is experiencing lengthy delays and technical difficulties with both telephone and online systems. If you cannot get through, do keep trying, as the DWP is in the process of deploying more resources and staff to deal with the increase in demand. Where possible, you are advised to Apply For Universal Credit online.

Paydays and monthly assessment periods

Some people claiming UC (known as “claimants”) were losing hundreds of pounds each year because their paydays clash with the UC monthly 'assessment periods.'

Because of the way UC works, working claimants are often unable to tell how much benefit they will receive from one month to the next.

UC assessment periods run for a calendar month, starting from the date UC is awarded. At the end of each month, claimants’ circumstances and income are assessed to determine their entitlement to UC, with payment made a week later in arrears.

Problems can arise if a claimant’s monthly payday is on or close to the first day of their assessment period , and then they are paid a day or two early some months. (E.g. if payday falls on a weekend or bank holiday.) When this happens, claimants can be recorded as having had two paydays (or two lots of earnings) in one assessment period, and none in the assessment period after.

Two lots of earnings record in one assessment period

When claimants appear to have no earnings in the following assessment period (due to receiving two payments in the assessment period before), then rather than seeing their UC increase to compensate for this, it can actually lead to:

  • A reduction in the amount of UC awarded
  • Losing the effect of one month's “work allowance.”
  • Being subject to the “benefits cap.”

If you’re paid at the end of the month

Claimants whose assessment period start date and payday are both close to the end of the month are especially likely to miss out, as bank holidays are often in the last days of the month.

For example, a worker paid on the last working day of each month in 2018, with assessment periods dated 30th - 29th of the month would have:

  • 6 assessment periods with one payday
  • 3 assessment periods with two paydays
  • 3 assessment periods with no paydays.

Other claimants who may also have different numbers of paydays in different assessment periods over the course of a year include claimants who:

  • Get paid weekly
  • Get paid fortnightly
  • Get paid four-weekly
  • Do agency shifts that are paid intermittently

Losing work allowances

A work allowance is the amount that you can earn before your Universal Credit payment is affected.

You may be eligible for a work allowance if either you (and/or your partner):

  • have responsibility for a child
  • have limited capability for work (e.g. are disabled or ill)

If a claimant is recorded as having two lots of earnings or paydays in one monthly assessment period, they will lose their work allowance every time it happens.

This can mean a loss of £292 if you are claiming housing costs, or a loss of £512 if not.

Backdated pay and tax rebates

If you are claiming UC and receive a:

  • lump sum of backpay
  • payment of accrued holiday pay
  • tax rebate for a previous year’s work,

then this is treated as income for the assessment period in which it falls, even if it relates to a period before you claimed UC. This means that UC is withdrawn at the rate of 63p in the pound against this income.

If you have previously overpaid tax, or are owed pay from a time when you were not claiming UC, you would have kept the money in full if you had been taxed correctly or paid on time by your employer. However, because the money is only received after you have claimed UC, you can lose almost two-thirds of it under the UC system.

Benefit cap

The benefit cap restricts total benefit awards for claimants who have earnings below £520 a month, which is equivalent to working 16 hours a week at the ‘national living wage’ for over-25s.

The limits are £384.62 a month in benefits (£442.31 a week in London) for couples or people with children, or a lower amount for single people without children.

In Universal Credit, the decision as to whether the benefit cap applies in each assessment period is based on monthly earnings.

If you are a UC claimant who is paid monthly and is sometimes paid twice in one assessment period and none in the next (because of when your payday and assessment period dates fall), you may then be benefit capped as you appear to have no earnings in months when you have no paydays.

New regulations 

New regulations have been issued to amend the effect on Universal Credit of double wage payments in one calendar month.

The changes implement the Court of Appeal judgement on Secretary of State vs Johnson && Others and mean that where the second set of earnings of a working UC claimant fall in the same UC assessment period calendar month, the second payment will be reallocated into the following UC assessment period.

Notes within the new regulations explain that "only one set of earnings will be taken into account in each assessment period for people who are paid calendar monthly"', which should allow them to benefit from their full monthly work allowance.

What you can do

Following the new regulations, if you find you have been subject to a reduction in your UC, or lost the work allowance included in your UC because of the reasons detailed above, you should immediately request a mandatory reconsideration and cite the Regulations that are now in force - The Universal Credit (Earned Income) Amendment Regulations 2020.

You could also apply for a mandatory reconsideration if you’ve received (or are due to receive) some form of backdated pay which causes financial detriment due to being treated as earned income in one UC assessment period. We have attached a template letter. 

How we can assist

The RCN Welfare Service can assist you in deciding if you are at a financial detriment, and if you are, give you advice on requesting a Mandatory Reconsideration by the DWP.

Call RCN Direct on 0345 772 6100 and request a referral to the Welfare Service

Case Study

To see an example of why and how an individual's UC could be affected and the problems this could cause, read Carmen's story here.


Use this template letter to request mandatory reconsideration if your UC has been reduced due to getting backdated pay, or problems caused by your payday
Challenging benefits

Challenging a benefits decision

If you don't agree with a decision made about your benefits, find out how you can challenge it.

Appealing benefits

Appealing a benefits decision

If your Mandatory Reconsideration is refused, you can appeal to a tribunal if you think the decision is unfair or incorrect.