Universal Credits and payroll

In April 2013, the government introduced a new benefit, the Universal Credit in almost 100 job centres.  It combines six working-age benefits, including housing benefit, JSA and tax.  On Monday 16th February 2015, the government extended this to a further 150 job centres and by 2016, it will be available in all. The aim of the Universal Credit is to encourage people to work, therefore helping them earn more.


So what does this have to do with payroll?  The introduction of Real Time Information (RTI) in 2013, for the majority of the employers, assists with notifying HMRC of employee earnings for each pay period.  It is essential that employees are paid the correct rate of pay, at least the national Minimum Wage for their respective age, and accurate hours worked to ensure that precise information is used to assess their entitlement to universal credit, as their benefit shall be altered automatically depending on whether the earnings go up or down.


Accurate reporting via the Final Payment Submission (FPS) and Employer Payment Summary (EPS) on or before the date of payment to the employee is vital in ensuring the correct benefit is calculated for the individual.

  • The FPS records the year to date figures, tax, NI and pay and the totals for each pay period.  It reports several pieces of critical information about the employee, including the hours they work.
  • The EPS submission is used to report to HMRC recovery for statutory payments, such as SMP, SPP and if there is a nil payment due for the month.

HMRC will forward the information received via the FPS to DWP and the data is used to make any necessary adjustment to any Universal Credit awards


If incorrect RTI data is submitted to HMRC by the employer, the employee’s earning figures will also be incorrect.  However, regardless of whether the figure is a true record, it will be used for Universal Credit purposes.  The following month, should a correction be made, this will in theory, amend the claimant’s Credit. Late submission of FPS will also cause an adjustment to the Universal Credit assessment.


So, the key points to remember are:

  1. Ensure your employee personal data is up to date.
  2. Accurately record the number of hours worked by your employees.  Contracted hours should be noted on Employee records.
  3. Pay at least the National Minimum Wage for the employee’s age.
  4. Submit FPS on or before pay day.
  5. Submit EPS upon completion of the month’s payroll.
  6. Be prepared to answer employee questions, should their Universal Credit award be adjusted following late/incorrect submissions.


Once again, this demonstrates that accurate and efficient payroll processing is very important to maintaining a happy workforce, not to mention HMRC and DWP!


For more information on the topic, please contact Tracey Simpson.