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. Benefit rules are
complicated. This is a summary.
We recommend you seek independent
advice
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 pension age 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
Support.
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
For more detailed information click here.
You may not be able to get Working Tax Credit
if you:
- Leave work or you start to work less than the
minimum number of hours a week for your circumstances
- Leave your job and receive pay instead of
notice because you won’t be counted as being in work for Working
Tax Credit purposes during that period – but if you get another job
during that time, you may still qualify based on your new
job.
If you’re already getting Working Tax Credit,
your payments may carry on for a short while. Tell the Tax
Credit Office on 0345 300 3900 straight away if your work
circumstances change.
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 (contribution based) 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 - 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 Support - for help with Council Tax
Pension Credit - if you are of pension age or over and do not want
to claim 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:
- a statutory redundancy payment counts as capital
- contractual redundancy pay or severance pay only count as
capital up the amount of any statutory redundancy pay you would be
entitled to.
You can work out a
statutory redundancy payment using this ready reckoner.
- 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, holiday pay and ex gratia payments are
usually ignored. However if you get any wages in lieu,
you will probably not be able to claim benefit until the period
they cover expires. It is still advisable to contact
Jobcentre Plus to make a claim. You can sign on throughout
your lieu of notice period to make sure that you get NI
Contribution credits.
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 is Jobseekers 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 who do not have to be 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 of pension age 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 not required to sign on, for
example because:
- you are a lone parent with a child under 5. 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 including ex gratia payments and
other lump sum payments are treated in full as capital.
How do I claim Income Support?
You claim Income Support 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 is Income Support?
You can claim Income Support for yourself and a partner.
If you have children you can claim Child Tax Credit. If you
qualify for Income Support you may get help with your mortgage
interest payments
If you are not fit for work
If your job ends and you are not fit for work due to ill health
or disability you may be able to claim:
Employment and Support Allowance (ESA); or
Incapacity Benefit, Severe Disablement Allowance, or Income
Support (for incapacity) but only in very limited
circumstances. And people getting these benefits will be
reassessed before April 2014 under the ESA test and transferred to
ESA if they pass.
Employment and Support Allowance
Employment and Support Allowance (ESA) is for people
who have "limited capability for work". There are 2 types
of ESA:
- Contribution based (ESA(C)) which you can get if you have paid
sufficient National Insurance contributions
- Income related (ESA(IR)) which you may get if your income
and capital are below certain limits. You cannot claim ESA(IR)
if:
- you have a partner who works 24 or more
hours; or
- you have capital (savings) of more than
£16,000
Payments at the end of a job - how is ESA
affected?
Contribution based ESA is not affected by
most payments including redundancy and severance payments. If
you get a pension from work ESA(C) is reduced by any amount
over £85 a week.
For income related ESA the rules on payments at
the end of a job are the same as they are for Income Support, see
above.
How do I claim Employment and Support
Allowance?
You claim ESA 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.
Most people who claim ESA have to attend a medical examination
to assess their capability for work.
How much is Employment and Support
Allowance?
Contribution based Employment and Support Allowance is only paid
for you. You cannot claim for your partner or any
dependants. If you have dependent children you can claim
Child Tax Credit
Employment and Support Allowance (income related) can be paid
for you and your partner. You have to claim Child Tax Credit
for dependent children.
ESA is paid at a "basic" lower rate for the first 13
weeks. Provided you pass the medical assessment you then get
an extra amount.
Incapacity Benefit, Severe Disablement Allowance and Income
Support (for incapacity)
From 31 January 2011 people can no longer make new claims for
Incapacity Benefit. You should claim Employment and Support
Allowance instead. Please seek advice.
Incapacity Benefit and Severe Disablement Allowance are not
affected by most payments at the end of a job. If you
get a pension from work Incapacity Benefit is reduced by any amount
over £85 a week, see above.
For Income Support see above.
Housing Benefit and Council Tax Support
These are means tested benefits to help people on low incomes
pay their rent and Council Tax.
You cannot claim Housing Benefit (HB) or Council Tax Support
(CTS) if you and your partner are under pension age and
have capital of more than £16,000. If you are of pension
age or over and entitled to Pension Credit Guarantee this
capital limit does not apply.
The rules on how HB and CTS are affected at the end of a job are
the same as for Income Support except that arrears of sick pay,
maternity, adoption and paternity pay are ignored.
How do I claim Housing Benefit and Council Tax
Support?
HB and CTS are administered by the local authority.
If you are claiming Employment and Support Allowance (income
related), Income Support, Jobseekers Allowance (income based) or
Pension Credit, you can complete a short claim form for HB with
your claim for those benefits. You will then normally be sent
a claim form from your local authority.
If you are not claiming any of these benefits or wish to
claim council tax support only, you can obtain a claim form
from your local authority.
Click here to
download an application form
How much is Housing Benefit and Council Tax
Support?
If you qualify for income based Jobseekers Allowance, income
related Employment and Support Allowance or Income Support you will
get maximum HB and CTS.
For anyone else, the amount you get is reduced by a taper for
any income you have over a set "needs allowance".
If you live with someone who is classed as a non dependant your
HB and CTS may be reduced. Your non dependant is expected to
contribute towards the cost of your rent and Council Tax.
Pension Credit
Pension Credit (PC) is a means tested benefit for people of
pension age or over on low incomes.
Pension Credit has two elements:
- the Guarantee Credit which is basically Income Support for
people of pension age and over
- the Savings Credit:
- for people aged 65 and over who have
'saved' for retirement above a certain level. This includes income
from capital and private and occupational pensions. But it only
goes up to certain limits and is reduced as these 'savings' get
higher.
There is no upper capital cut off limit for Pension Credit.
If you have capital over £10,000 you are classed as having a
set amount of "tariff income" per week.
How do I claim Pension Credit?
Pension Credit is administered by the Pension Service. You
can claim by:
phoning the Pension Centre on 0845 606 0265 for a claim form;
or
make a telephone claim on the Pension Credit application line,
phone 0800 99 1234
Click here for further information from the Pension Service
website.
Other benefits
There are many other benefits which people in particular
circumstances may be able to claim, for example benefits for people
with disabilities, benefits for carers.
To check what other benefits you may qualify for please
click here.
Help with your mortgage
You may get help with the interest part of your mortgage
payments if you can claim:
- Jobseekers Allowance - income related
- Income Support
- Employment and Support Allowance - income related
- Pension Credit Guarantee
You cannot get help with mortgage payments with any other
benefits.
Part time workers and finishing work
If you work part time and get some of the benefits
explained here while you are working, there are different rules for
how payments when you finish work are treated - seek advice if this
applies to you.
Tax and employment information
Redundancy payments are only taxable above £30,000.
Arrears of pay and pay in lieu of notice are taxable.
Northumberland County Council would like to thank
Newcastle City Council Welfare Rights Service for providing
this information.
