| SECTION 9 - EARNINGS
What are earnings?
General
9.001 Earnings consist of any remuneration or profit
derived from employment. This will include such things as:
· bonus or commission
· payments in lieu of notice
· holiday pay except any payable more than four
weeks after the
termination or interruption of employment
· any payment by way of a retainer
· any payment made by the person's employer in
respect of any expenses not wholly, exclusively and necessarily incurred in the
performance of the duties of employment. eg travelling expenses incurred by the employee
between his home and the place of employment.
Regs 10 and 13
9.002 Earnings do not include
· any payment in kind
· any payment made by an employer for expenses
wholly, exclusively and necessarily incurred in the performance of the duties of the
employment
· any occupational pension
Gross earnings
9.003 "Gross earnings" means the amount of
earnings before any deductions are made, for example tax, National Insurance
contributions, pension contributions and trade union subscriptions.
Net earnings of employed earners
9.004 To calculate the amount of earnings to be considered
in the assessment, deduct from the gross earnings:
· the amount of income tax the resident pays or is
liable to pay, or
which is deducted by the employer
· the amount of the deductions made by the employer
in respect of
Class 1 National Insurance contributions
· half of any sum paid to an occupational or
personal pension scheme
which is:
Reg 14
Occupational pension
9.005 An occupational pension scheme is one which provides
benefits payable on termination of service, or on death or retirement.
Personal pension
9.006 A personal pension is one which provides benefits
payable on death or retirement, but which is not directly related to any previous
employment.
Statutory Sick Pay and Statutory Maternity Pay
9.007 The amount of SSP and SMP to be taken into account is
the gross amount less:
a. any income tax paid;
b. any National Insurance employees contributions paid; and
c. half of any sum paid by the resident as a contribution
towards an occupational or personal pension scheme.
Details of these payments should be obtained from the
resident in the first instance but, in the event of any queries the local authority should
ask the employer for clarification.
Period over which earnings should be taken into account
Payments for regular periods
9.008 Where the earnings are paid at regular intervals the
weekly amount should be calculated as follows:
a. earnings paid for periods of a week or less should be
taken into account for one week.
b. earnings paid for a calendar month should be multiplied
by 12 and divided by 52 to arrive at the weekly amount.
c. earnings paid annually should be divided by 52.
d. earnings paid at other regular intervals should be
multiplied by 7 and divided by the number of days for which the payment is made.
Reg 18(a)
Payments which are not for fixed periods
9.009 Where a resident who works as an employed earner
receives payments which cannot be attributed to a set period the payments should be taken
into account as follows:
Income Support in payment
9.010 Where a resident, who is getting Income Support,
receives a payment of earnings which is not for a set period the Benefits Agency
Adjudication Officer will calculate a number of weeks for which Income Support will be
withdrawn. The local authority should work out the same number of weeks by dividing the
payment by the amount of Income Support normally in payment plus any disregards which
would be applicable if the payment was a regular payment of earnings. The balance of the
payment (if any) should be taken into account in the assessment in the final week.
Reg 18(2)
Example
A resident receives a payment totalling £750.
He had been receiving Income Support of £130 per week and
would have been entitled to a weekly disregard of £15.
The local authority should divide the £750 by the amount
of Income Support in payment plus the disregard (£130 + £15 = £145) £750 ¸ £145 =
5.17
The £750 should be taken into account in the assessment
for a period of 5 weeks at the rate of £145 (the Income Support previously in payment
plus the disregard)
In the 6th week the balance of the payment should be taken
into account (ie £750 - (5 x £145) = £25)
In assessing the charge over these 6 weeks the local
authority should remember that Income Support will be withdrawn for the first 5 weeks and
will be paid at a reduced rate for the 6th week.
Income Support not in payment
9.011 Where Income Support is not in payment and a resident
receives a payment of earnings which is not for a fixed period, the payment should be
taken into account over the number of weeks calculated by dividing the payment by the
difference between the standard charge and the charge the resident was previously paying
(or, if the resident was not liable to pay any charge, dividing by the standard charge).
If
this calculation results in a fraction of a week, the
balance of the payment should be taken into account as income for that final week.
Reg 18(1)(b)
Example
A resident is paying a charge (A) of £120, the standard
charge (B) is £250.
He receives a payment (C) of £750, in respect of which he
would be entitled to a £15 disregard if it was paid weekly.
The number of weeks over which the payment is to be taken
into account is calculated as follows:
C ¸ (B-A) = 5.77 weeks
The resident pays the standard charge of £250 less the
£15 for 5 weeks (ie he pays £235 which is £115 more than he was paying).
At the end of 5 weeks he has used up £575 (5 x £115) and
has been allowed to keep £75 (5 x £15).
He therefore has £100 of the £750 left to be taken into
account in week 6, less the £15 disregard.
Net earnings of self-employed earners
9.012 To calculate the amount of net earnings to be
considered in the assessment, deduct from the gross earnings any relevant outgoings,
liabilities or expenses such as:
· the amount of income tax the resident pays or is liable
to pay
· the amount of National Insurance the resident is liable
to pay
· half of any sum paid to a personal pension scheme
· stock purchases
· transport costs, wholly related to the business
· stationery
· advertising
Reg 11
Assessing the weekly net earnings of self-employed earners
9.013 Where the resident has recently started
self-employment or where circumstances result in a change in the normal pattern of
business, the weekly earnings should be calculated by averaging the earnings over whatever
period is going to result in the fairest assessment of earnings for the resident.
9.014 In all other cases the weekly earnings should
generally be calculated by averaging the net earnings over a period of a year. This means
that the annual income will be divided by 365 (or 366 in a leap year) and multiplied by 7.
Reg 12(1)
Royalties or fees from copyright
9.015 Where the resident receives royalties or fees from
copyright irregularly, the period of weeks over which the payment should be taken into
account is as follows.
Income Support in payment
9.016 Where a resident, who is getting Income Support,
receives a payment of royalties or fees from copyright which is not for a set period the
Benefits Agency Adjudication Officer will calculate a number of weeks for which Income
Support will be withdrawn. The local authority should work out the same number of weeks by
dividing the payment by the amount of Income Support normally in payment plus any
disregards which would be applicable if the payment was a regular payment of earnings. The
balance of the payment (if any) should be taken into account in the assessment in the
final week.
Reg 18(2)
Example
A resident receives a payment totalling £750.
He had been receiving Income Support of £130 per week and
would have been entitled to a weekly disregard of £15.
The local authority should divide the £750 by the amount
of Income Support in payment plus the disregard (£130 + £15 = £145) £750 ¸ £145 =
5.17.
The £750 should be taken into account in the assessment
for a period of 5 weeks at the rate of £145 (the Income Support previously in payment
plus the disregard).
In the 6th week the balance of the payment should be taken
into account (ie £750 - (5 x £145) = £25).
In assessing the charge over these 6 weeks the local
authority should remember that Income Support will be withdrawn for the first 5 weeks and
will be paid at a reduced rate for the 6th week.
Income Support not in payment
9.017 Where Income Support is not in payment and a resident
receives a payment of royalties or fees from copyright which is not for a fixed period,
the payment should be taken into account over the number of weeks calculated by dividing
the payment by the difference between the standard charge and the charge the resident was
previously paying (or, if the resident was not liable to pay any charge, dividing by the
standard charge). If this calculation results in a fraction of a week, the balance of the
payment should be taken into account as income for that final week.
Reg 18(1)(b)
Example
A resident is paying a charge (A) of £120, the standard
charge (B) is £250
He receives a payment (C) of £750, in respect of which he
would be entitled to a £15 disregard if it was paid weekly.
The number of weeks over which the payment is to be taken
into account is calculated as follows:
C ¸ (B - A) = 5.77 weeks
The resident pays the standard charge of £250 less the
£15 disregard for 5 weeks (ie he pays £235 which is £115 more than he was paying).
At the end of five weeks he has used up £575 (5 x £115)
and has been allowed to keep £75 (5 x £15).
He therefore has £100 of the £750 left to be taken into
account in week 6, less the £15 disregard.
Disregards
9.018 The amount of earnings to be taken into account in
the assessment is the net amount calculated in accordance with paragraphs 9.001 to 9.016
above, less the appropriate disregard.
9.019 Disregard £5 of the net weekly earnings unless the
resident qualifies for a different disregard under paragraph 9.019 to 9.022 or a
discretionary disregard under paragraph 2.004.
Schedule 2 para 4
People entitled to a £15 disregard
9.020 Disregard £15 of the net weekly earnings if the
resident:
a) receives Income Support which includes a disability
premium or a carer's premium
or:
b) is under 60 and:
(i) receives one of the following benefits:
• Disability Living Allowance (mobility or care
components at any rate)
• Disability Working Allowance
• Mobility supplement
• Severe Disablement Allowance
or:
(ii) has an invalid carriage or other vehicle provided
under:
• Section 46 the National Health Service (Scotland)
Act 1978; or
• in England and Wales, under Section 5(2)(a) National
Health Service Act 1977.
or:
(iii) receives a grant under:
• Section 46 of the National Health Service (Scotland)
Act 1978; or
• in England and Wales, under paragraph 2 of Schedule
2 of the National Health Service Act 1977.
or:
(iv) is registered blind in a register maintained by or on
behalf of, a regional or islands council
or:
(v) has produced medical evidence of incapacity in support
of a claim for:
• Incapacity Benefit; or
• Severe Disablement Allowance
for a continuous period of not less than 28 weeks.
or:
(vi) has ceased receiving Attendance Allowance or
Disability Living Allowance solely because he has been in residential accommodation for
more than four weeks.
or:
c) is over 60; and
satisfied one of conditions in b) above before reaching 60;
and
has worked continuously since reaching the age of 60
or:
d) is a lone parent.
Schedule 2 para 3
People who have ceased or interrupted employment
9.021 In the case of a resident who has been employed as an
employed earner and whose employment has ended or been interrupted, any earnings paid, or
due to be paid in respect of that employment shall be fully disregarded.
Schedule 2 para 1
People who have ceased self-employment
9.022 In the case of a resident who has been self-employed
and whose self-employment has ended, any earnings, apart from any fees from copyright or
royalties, paid or due to be paid after the self-employment has ceased, shall be fully
disregarded.
Schedule 2 para 2
Earnings frozen abroad
9.023 Any earnings derived from employment which are
payable in a country outside the UK, the transfer of which to the UK is prohibited, shall
be fully disregarded.
Schedule 3 para 15 |
