Universal credit and ‘real time information’: Uncertainty for low paid workers?
UNISON has recently been looking in more detail at a new computer system – Real Time Information (RTI) – that will be used to calculate how much Universal Credit low paid workers are entitled to. The results are worrying: there is too little information or guidance for all the parties – employers, employees, DWP, HMRC – involved and that some anomalies need to be addressed to ensure that RTI works to benefit in–work claimants rather than penalise them.
RTI is a new PAYE system, introduced this year by Her Majesty’s Revenue and Customs (HMRC) to calculate income tax more accurately and quickly. All UK employers will have to use RTI by April 2014 and they are currently in a transition phase moving on to the new system. They will have a legal obligation to input details about employee’s status and wages, just before employees are paid – whether weekly, fortnightly or monthly. Employers are required to register all employees on the RTI system including causal labourers, zero hours workers, daily and seasonal labourers but not the self employed.
The Department for Work and Pensions (DWP) has decided it will use RTI for in-work claims for Universal Credit. That is, where workers have low enough pay to qualify for the new benefit, the DWP will use the RTI information to calculate how much universal credit individuals will be entitled to.
So far there have only been a few comments about the importance of understanding the consequences of poor RTI management and regulation. HMRC have said to employers for example:
“It is important to record the correct number of hours your employees have worked to help ensure that they receive the right amount of benefits and tax credits they are entitled to.”
If employers fail to comply, UNISON understands that there may be penalties which HMRC will charge and enforce on the employer. Penalties haven’t currently been determined nor discussed in the context of wrong payment information leading to miscalculation of universal credit so it is not clear exactly what the penalty payments are for. The HMRC say that penalty payments will start at some time in 2014.
In the meantime HMRC is urging employers to be careful when reporting the RTI hours worked so employees will not miss out on any benefits owed to them. However nothing has been said about how employees will be able to recover their lost UC payments, tackle regular wrong wage inputs from employers or what procedures and timescales for recovery will exist. Once we begin to scrutinise more carefully the current literature and guidance available about the benefits of RTI for employers from the HMRC and the DWP it becomes even more clear that this dialogue currently is a one way conversation, with the representative voice of the working claimant completely missing.
The government claims RTI will reduce bureaucracy, making it easier and less risky for claimants to move from benefits, as the system is responsive to fluctuations in working patterns and earnings. Universal Credit and real time reporting will benefit both employers and claimants, who will see the benefits of increasing their earnings by taking on more hours or doing some overtime, and be clear about their entitlements
UNISON is not convinced that these benefits will be realised. We are even more worried about their messages to employers, who are being advised that RTI will enable them to have a ‘flexible workforce’ and be able to vary working hours in line with business demands, without the need to recruit and train new staff. It is not HMRC’s job to encourage firms to mould employees around business demand fluctuations, create more underemployment when demand is low and further dependency on welfare tax credits and benefits. What is to stop RTI being used by employers to allow the taxpayer to subsidise the cost of their business risks and fluctuating demands?
UNISON has other concerns and unanswered questions remain on how exactly RTI and UC calculations will work compatibly to ensure that in-work claimants are not penalised in receiving their monthly universal credits.
UNISON is seeking clear guidance on the following issues:
1. Unnecessary monthly fluctuating UC payments need to be removed
The DWP will calculate individuals’ monthly UC payments using RTI data for their pay in the previous month. Individuals with an irregular pattern of employment payment such as casual workers, zero contract hours, term time, bonuses, shift work or overtime could find that their UC exacerbates these fluctuations. For example, many workers will find that last month’s higher pay leads to lower UC this month and this month’s lower earnings lead to higher UC next month – when their pay rises again. This could see household finances even become more difficult to manage for the low paid and those in household poverty.
2. Payroll practices which unfairly penalise in-work claimants need to be remedied
Employers will pay employees irregular payments differently – different payroll payment times for e.g. bonuses paid over the year as opposed to one lump sum or overtime paid bi -monthly as opposed to monthly, holiday and sick pay payments in arrears rather than at the time. There will be no annual adjustment payments made for those workers who may have earned the same over the year compared to other workers, but lost out in benefits due to their employers’ payroll practices affecting monthly UC calculations.
3. Protection of vulnerable workers and causal labour practices needs to be in place
Employer responsibility for RTI reporting is applicable to casual workers but not ‘self employed’ workers. This may encourage rogue employers to make casual workers work with a status of ‘self employed’ even more, to avoid these responsibilities. Employer representative groups are already advising employers who use casual labourers how to avoid registering them on RTI. Vulnerable workers forced to work as self employed will have the responsibility for ensuring that that they comply with RTI rules for receiving UC payments. UC payments will be suspended if individuals have not submitted a monthly summary within 7 days of the period end and it will be withdrawn if individuals fail to submit their form within 4 weeks of the month end.
4. Challenging poor employment practices
RTI could be used to challenge poor employment practices and ensure that the implementation of RTI does not end up supporting illegal or poor employment practices. We want DWP, HMRC and BIS to consider building employee feedback mechanisms into the RTI system and DWP to investigate cases of potential illegal and poor employment (with care taken to make sure no risk is placed on the employees involved). Poor employment practices that need to be regulated and could be better enforced by RTI mechanisms include:
- Regular working longer than contracted/agreed hours and not being paid deliberately
- Unpaid travel times or being required to be on unpaid call.
- Working below the National Minimum Wage.
- Companies telling employees that they are on zero contract hours and/or that the position is technically self-employed.
- Using zero-hours contracts to deny holiday, maternity/paternity or redundancy pay.
- Workers who complain or ‘whistle blow ’having their hours reduced or being told there is no work at the moment.
- Workers being “dismissed” with little or no due process if sick.
5. Employer duty of care needed
Currently the HMRC implements an employer ‘reasonable care’ regime for PAYE tax. It is not clear how this will be applied to RTI and what appropriate penalties will be applied to employers. For example, if an employee takes unpaid leave they need to set an irregular payment indicator when they make their final payment for that period or HMRC will assume that they’ve left their employment.
6. Clarity on the appropriate use of civil penalty charges
The government has introduced a £50 civil penalty for claimants who fail to report a UC overpayment. UNISON is concerned that where there is significant variation in working hours, individuals’ entitlements can vary and may generate overpayments to an individual. We want clear guidance on the use of civil penalties in this situation; how mistakes can be reported and remedied; as a rule, workers should not face a penalty when overpayment of benefits is due to a mistake by the employer or the DWP.
7. Mandatory regulations on the use of zero hours contract needed
Employers rarely dismiss a zero hours worker – they are simply told there is no work for the time being. This leaves workers unsure of their position and whether they should or can claim benefits and this uncertainly will still remain for in-work claimants.
We now know that as many as 1 million workers are on Zero contract hours. Zero hours contracts impact negatively on the management of household budgets, impinge on family commitments, undermine employment rights and relations and complicate access to tax credits and other benefits and are effectively being subsidized by the taxpayer at present through tax credits, later through Universal Credit.
To sum up, it is clear that guidelines are needed on employer, employee, HMRC and DWP liabilities and responsibilities. Low paid workers should not be placed in situations where due to employer, HMRC or DWP mistakes they are forced to take out short pay day loans and get into debt to cover benefit underpayments.
For more information on UNISON’s Welfare Reform Campaign contact Allison via [email protected]