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What Impact Will Universal Credit Have On UK Employment Law?

Universal Credit is starting to roll out across the country, following a series of UK law reviews into the policy. This policy will see six existing benefits – income-related Employment and Support Allowance, income-related Jobseeker’s Allowance, Income Support, Working Tax Credit, Housing Benefit and Child Tax Credit – gradually phased out, to be replaced by a monthly single benefit.

The benefit began to become available in April 2013 and is scheduled to become available throughout Great Britain in 2016, with the majority of benefits claimants being put on Universal Credit in 2016 and 2017.

What Impact Will Universal Credit Have On UK Employment Law?

This benefit will also lead to some changes to UK employment law; there are no limits to the number of hours a claimant can work every week, with payments gradually falling as people earn more. Currently, people can lose out on all their benefit accident at work claim if they work for a short period of time, and it can take weeks or months for their benefits to be reinstated, which could discourage long-term claimants from looking for work.

What does Universal Credit Mean for Employers?

While addressing the National Youth Employment Summit in London on January 28th, Lord Freud discussed the impact Universal Credit will have on employers. Lord Freud, who is Parliamentary Under-Secretary of State (Minister for Welfare Reform), explained the flexibility Universal Credit adds to UK employment law creates a benefit system that is “flexible and responsive” to the demands of the labour market.

Research by the government revealed that 65% of former Jobseeker’s Allowance claimants said that they think Universal Credit offers a better financial incentive to find employment, with people spending twice as long looking for work when they received Universal Credit than when they received Jobseeker’s Allowance.

Lord Freud noted that because Universal Credit tapers off when people work for longer, employees will be able to agree to work longer hours without worrying about the impact this will have on their benefits, as they will always be better off working for longer when they receive Universal Credit.

UK Employment Law Changes though Universal Credit

As a result of Universal Credit, the 16-hour rule has been abolished. This rule saw people able to work for up to 16 hours while still claiming Jobseeker’s Allowance, which saw many people refusing to work for longer for fear of losing their benefits. Many employers will have developed HR structures based around this 16-hour rule, and will have to amend these structures to enable their employees to work more flexibly.

Furthermore, the PAYE in real time system has been amended to support Universal Credit, seeing claimants have their monthly claims adjusted according to their overall returns.

Finally, claimants will receive 35p in benefits for every £1 earned, compared with JSA claimants who can only earn £5 a week before their benefits are reduced.

Universal Credit may complement the growth in zero-hours contracts, which also support business flexibility, although these contracts are a controversial element of UK employment law. The government is holding a consultation into zero-hours contracts, which forms part of a UK law review into this form of employment.


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