Welfare Rights
Redundancy, Finishing Work and Benefits
If your job finishes due to redundancy or a voluntary severance scheme you may need to claim social security benefits. Payments you get from your employer in these situations may affect benefits.
Please Note: Benefit rules are complicated. This is a summary.
Getting a redundancy or severance payment
When you finish work you may get statutory redundancy pay or a lump sum payment from your employer. These payments may count as capital if you are claiming a means tested benefit. Here are some rules about capital.
If you are under 60 you cannot get most means tested benefits while you have capital (savings) of £16,000 or more. This includes your partner's capital. If you have capital between £6000 and £16,000 you are classed as having a set amount of income each week, called "tariff income".
Means tested benefits include Income Support, Employment and Support Allowance (income related), Jobseekers Allowance (income based), Pension Credit, Housing Benefit and Council Tax Benefit.
If the benefit office thinks you have spent capital or savings to help you get more benefit
In this case they can treat you as though you still have the money - called notional capital. This rule may apply even if you use the money to pay off a mortgage or debts.
If you claim a benefit and it is refused or you get paid a reduced amount because of this rule it is important to seek advice.
Not sure what type of payment you will get?
If you have been offered or paid a lump sum because your job is ending but you not sure what type of payment it is, seek advice.
What happens to Working Tax Credit
You cannot get Working Tax Credit (WTC) unless you work full time. This means 16 hours or more a week.
You must inform Revenue and Customs if your job finishes or you start working under 16 hours a week. Phone the Tax Credits helpline on 0845 300 3900. You can carry on getting WTC for 4 weeks after you finish work. It will count as income for any means tested benefits you claim in that period.
If you have a partner who works full time you can carry on getting WTC based just on their earnings. In this case you have a choice:
- you can let Revenue and Customs know as soon as you stop work and they can reassess you straight away - so you should get more WTC. But if you then get another job in the same financial year you will have to let Revenue and Customs know about your new earnings or you will be overpaid WTC.
- or you can wait until the end of the financial year. You will then get any underpayment of WTC as a lump sum. Or it can be added to your next year's tax credits if you are still getting them because your partner is working.
If you get a pension from work
If you get a pension from your employer or through a private pension scheme when you stop work this is taken into account as income for means tested benefits.
If you get Incapacity Benefit or Employment and Support Allowance (income related) the amount is reduced if you get a work or private pension of more than £85 a week. The amount of the reduction is 50p for every pound of pension over £85.
Incapacity Benefit is not reduced in this way if you get Disability Living Allowance care component at the highest rate.
What benefits are available when work stops?
You may be able to claim one or a combination of these benefits if you are no longer working:
Jobseekers Allowance - if you are looking for work
Employment and Support Allowance or incapacity benefits- if you are not fit for work
Income Support - if you do not have to sign on
Housing Benefit - for help with rent
Council Tax Benefit - for help with Council Tax
Pension Credit - if you are aged 60 or over and do not want toclaim Jobseekers Allowance
Other benefits
Jobseekers Allowance
Jobseekers Allowance (JSA) is for people who are available for and "actively seeking" work. There are 2 types of JSA:
- Contribution based (JSA-C) which you can get for up to 26 weeks if you have paid sufficient National Insurance contributions
- Income based (JSA-I) which you may get if your income and capital are below certain limits. You cannot claim JSA-I if:
- you have a partner who works 24 or more hours a week; or
- you have capital (savings) of more than £16,000
A person who is classed as leaving their job voluntarily may not be allowed to claim JSA for a certain period - called a sanction. If you agree to voluntary redundancy or severance you should not be classed as leaving your job voluntarily.So you should be allowed to claim JSA straight away.
How do payments at the end of a job affect JSA?
Contribution based JSA is not affected by most payments including redundancy and severance payments. If you get a pension from work JSA(C) is reduced by any amount over £50 a week.
For income based JSA:
Example: Ailsa would get £3000 as a statutory redundancy payment. She actually gets £10,000 when she leaves work under a voluntary severance scheme. Only £3000 of this counts as capital for Jobseekers Allowance. The rest is ignored.
Most other payments you get when you leave work, for example pay in lieu of notice and holiday pay are ignored.
But arrears of sick pay, maternity pay, paternity pay and adoption pay are taken into account.
How do I claim Jobseekers Allowance?
You claim Jobseekers Allowance from Jobcentre Plus. They expect most people to claim over the phone. The phone number to ring to make a claim is 0800 055 6688.
How much isJobseekers Allowance?
You can only get contribution based JSA for yourself and an adult dependant. If you claim for a partner or spouse you may have to make a "joint claim".
You can get income based JSA for yourself and a partner. If you have dependent children you can claim Child Tax Credit. If you qualify for income based JSA you may get help with your mortgage interest payments.
Income Support
Income Support (IS) is a means tested benefit for people on low or no income whodo not have tobe available for work. You cannot claim IS and Jobseekers Allowance at the same time. You cannot claim IS if:
- you (and your partner) have capital of more than £16,000
- your partner works 24 hours or more a week
- you are aged 60 or over - you can claim Pension Credit instead
Who can get Income Support?
You may be able to get Income Support if your income and capital are sufficiently low and:
- you are a lone parent with a child under 12. This goes down to 10 from October 2009 and 7 from October 2010. Once your youngest child reaches the cut off age you are expected to claim Jobseekers Allowance, unless you are not fit for work.
- you are a carer:
- you get Carers Allowance, or
- you look after someone who gets Attendance Allowance or Disability Living Allowance care component at middle or higher rate.
Payments when leaving a job - how is Income Support affected?
Most payments are treated the same as for Jobseekers Allowance, see above.
However, redundancy payments and other lump sum paymentsare treated in full as capital.
South Ayrshire Council would like to thank Newcastle City Council Welfare Rights Service for providing this information
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