ZERO HOURS CONTRACTS PREVENTING RENT ARREARS

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1 ZERO HOURS CONTRACTS PREVENTING RENT ARREARS Zero hours contracts are in the news at the moment- they have been criticised f being unfair to wkers who don t know from week to week how much they will earn. And - due to fluctuating hours and earnings - causing headaches f people claiming benefits. So how can you help a tenant who s on a zero hours contract, to avoid them getting into rent arrears? It is imptant to ensure that those with a zero hours contract make best use of the benefits available. They may need to rely on Tax Credits Income-Based Jobseekers Allowance / Income Suppt / Income- Related Jobseekers Allowance to help boost their wage, Housing Benefit to help them pay their rent, and Council Tax Suppt to help them pay their council tax. But many zero hour contract wkers may not be claiming the benefits they are entitled to either because they don t realise they can claim, aren t presenting the infmation on their income / hours in the best way. The general rule is that you can t get both Wking Tax Credit and Income-Based Jobseekers Allowance / Income Suppt / Income Related Employment Suppt Allowance at the same time, as Wking Tax Credit is f people in wk and the other three are f people out of wk - although the hours that determine what in wk means vary. And what causes confusion is that Income-Based Jobseekers Allowance / Income Suppt / Income Related Employment Suppt Allowance are weekly benefits, looking at actual hours wked in each week, whereas Wking Tax Credit considers income over a whole year and looks at hours nmally wked over an appropriate period. So the issue of which benefits can be claimed by someone on a zero hours contract is not straightfward: Income-Based Jobseekers Allowance / Income Suppt / Income-Related Employment and Suppt Allowance When someone has a zero hours contract and has no wk very little (less than 16 hours a week less than 24 hours a week if it is the claimant s partner who is wking) then they could sign on and claim Income-Based Jobseekers Allowance (IB-JSA). Or Income Suppt if they are a lone parent with a child under five they their partner are a carer. Or Income-Related Employment and Suppt Allowance (IR- ESA) where it is the partner that is wking and the claimant is unfit f wk. Although whether they get any and how much they get will depend on their income and personal circumstances. And those claiming IB-JSA will have to look f wk and be willing to take another job. They should contact their local Job Centre to make a claim. When someone on IB-JSA, IS IR-ESA sees their hours increase to above 16 ( 24 if it is their partner who is wking) then they will not be entitled to any IB-JSA, IS IR-ESA f this week and need to notify the Jobcentre and the HB Office straight away. If their hours drop again they can re-claim IB-JSA, IS, IR- ESA via the rapid reclaim system. Only if the increase in their hours if likely to be f 4 weeks me can they make a claim f Wking Tax Credit if entitled (if they delay claiming, WTC can be backdated f up to a month). However if they are already getting Wking Tax Credit (WTC) because their hours had previously been higher, then they won t qualify f IB-JSA / Income Suppt / IR-ESA as well as WTC (apart from term time wkers in holidays- click here.) They might be able to withdraw their claim f WTC and claim an out-ofwk benefit instead, but this is probably only wth doing if they know that their hours are going to be too low to qualify f WTC f a prolonged period. Many people will be better off staying on WTC, because WTC can be paid on higher earnings than IB-JSA / Income Suppt / IR-ESA and, as it is based on nmal hours see below someone can remain entitled even if they have the odd weeks on low/nil hours. Also where someone is entitled to and has claimed WTC, they/their family is not affected by the Benefit Cap. If they do have to swap onto IB-JSA Income Suppt IR-ESA there could well be delays in payment, and further delays if, when their hours increase, they need to re-apply f WTC. It would be best to seek advice to find out what is the better option f their particular circumstances.

2 Wking Tax Credit Wking Tax Credit can be a big help to low paid wkers, especially as some claimants will be eligible f help with their childcare costs. They can claim by calling the Tax Credit helpline Whether not someone is entitled will depend on their income and how many hours they wk. How many hours must someone wk f Wking Tax Credit? To claim Wking Tax Credit a wker must be nmally wking: 16 me hours a week and be a single parent 16 me hours a week and be a disabled wker (ie has a disability which puts them at a disadvantage in getting a job and satisfies the "qualifying benefit" test) 16 me hours me a week and be aged 60 over 30 me hours a week and be aged 25 over 16 me hours a week, and is a member of a couple with children where their partner is incapacitated in hospital in prison either are entitled to carers allowance in a couple with children where one wks at least 16 hours a week and, either their own hours theirs and their partner s together, add up to at least 24 hours a week. And they must be in what is called qualifying remunerative wk. This means: They must either be wking at the date they claim have accepted an offer of a job that s expected to start within 7 days of claiming. The wk must be expected to last at least 4 weeks after making the claim/ wk starting. The wk (employed self-employed) must be done f payment in expectation of payment. What does nmally mean? Someone with a zero hours contract will wk some hours most weeks. It is the hours that they actually wk rather than the hours they are contracted to do - that count. But the hours are likely to vary from week to week so it may be difficult to wk out how many hours they nmally wk. Paid meal and refreshment breaks count towards the total number of hours. Where the claimant s hours fluctuate but are always above the required number to claim WTC - ie 16, 24 30, then there is no problem with qualifying f WTC they will nmally be wking above the 16,24,30 hours. Problems start when someone s hours fluctuate above and below the 16, 24, 30 hours required to qualify ie what hours do they nmally wk. The trouble is that there s no actual definition of nmally in the regulations but HMRC s Tax Credits manual says that it should be given its dinary everyday meaning of regularly, usually, typically, in contrast with what is abnmal exceptional. So the claimant will need to explain that although their hours vary, they do nmally wk at least the 16, 24, 30 hours required to be eligible. Caselaw CTC/2103/2006 has said that a common sense approach should be taken, that it is not sufficient f a decision maker to rely on a strict average, and that there is no requirement in the regulations f the claimant to be wking me than the required hours in every week. What if the person has just started wk and has no set hours in the contract? If the claimant has started is expected to start a new job, the hours should be based on those the new employer expects him/her to wk. The HMRC website says If your hours vary from week to week, put down what you and your employer(s) think of as your nmal number of paid hours - so the employee

3 doesn t need to ask their employer f verification unless this is specifically requested. It will be needed however if there is any dispute over nmal hours. What if someone on WTC is likely to be without wk of less than 4 weeks? Where there are currently no hours of wk hours available but the claimant is still under a contract of service and expects to return to the same/similar number of hours of wk as befe with the same employer, then they should be considered as nmally engaged in qualifying remunerative wk f up to four weeks from the date they started the period of zero hours and therefe remain entitled to Wking Tax Credit. What if someone on WTC is likely to be without wk of me than 4 weeks? But if the period that the claimant is without wk continues f me than four weeks, then they are treated as having finished wk at the end of the four week period without wk, and will no longer be entitled to Wking Tax Credit. If they are in a situation where their employer tells them that there will be no me hours until further notice, then they are treated as having finished wk from the point they are notified, but will be paid the Wking Tax Credit 4 week run-on. This puts them in the same position as someone who, as above, f four weeks in a row is told there s no wk. In either situation they should notify HMR&C of their change in circumstances and claim Jobseekers Allowance Income Suppt Income Related Employment and Suppt Allowance instead. They should also notify the Local Authity Housing Benefit and Council Tax Suppt office. If they find that in the future the hours that they nmally wk increase to the 16, 24, 30 hours again that allows them to claim Wking Tax Credit they should notify the Job Centre, and make a claim f WTC. What happens if the wker knows that their nmal hours are going to be below the 16, 24, 30 hours needed to be entitled to WTC? If the change is / is likely to be, f less than 4 weeks, then they will count as still being in remunerative wk and therefe can continue to claim WTC. But if the drop in hours is likely to last me than 4 weeks they will cease to be entitled to WTC. They will continue to receive the same rate of WTC f four weeks after entitlement ends called the Wking Tax Credit run-on. Any WTC paid during the WTC run-on is taken into account as income f Housing Benefit, IB-JSA, Income Suppt and IR-ESA. Again such changes should be notified to HMRC and the Local Authity; and consideration be given as to whether they now qualify f IB-JSA, Income Suppt IR- ESA If help with childcare costs are paid in the WTC and the claimant stops paying f childcare f at least 4 weeks in a row, weekly childcare cost reduce by at least 10 a week f at least 4 weeks in a row, they must notify HMRC within a calendar month they will be overpaid. Income f Wking Tax Credit WTC is calculated on an estimate based on the claimant s (and their partner s) previous year s gross taxable income then adjusted at year end, meaning there could be underpayments and overpayments. Income changes can be notified either during the tax year at the year end. If the claimant s income reduces so that they will have been underpaid, they might prefer to wait until year end as any underpayment of WTC they later receive will be treated as savings and will not reduce their weekly HB entitlement. However any likely overpayment, which will occur when in year income is me than 5,000 gross higher than the previous year s income on which the WTC award has been based, is best notified at the time. This is because the claimant s HB award will not be increased retrospectively if they are found to have been overpaid WTC to take account of the reduced award although any on-going award of HB will only take into account the amount of WTC in payment after the recovery of a tax credit overpayment.

4 Housing Benefit Where the claimant their partner is getting IB-JSA Income Suppt IR-ESA, then they will be entitled to their maximum Housing Benefit ie gross rent less under-occupancy reduction and/ ineligible services / LHA restriction, less non-dependant deductions, less Benefit Cap reduction. Where the claimant their partner is not on one of the above benefits then the HB Office will need to wk out their total income including earnings from wk. Nmally, the HB Office estimate a claimant s (and/ partner s) earnings by looking at the 5 weeks immediately befe the benefit week in which a HB claim is made 2 months if paid monthly. But where earnings fluctuate, a different period up to a maximum of a year- can be used to get a me accurate estimate of likely earnings. The claimant would need to notify the HB Office of this and supply a statement of expected hours from their employer. If the earnings turn out to be considerably lower than the estimate, the claimant can ask the HB Office to revise the amount that was paid- but note that they have to have notified within a calendar month of the change to get the underpayment back from the date of change (known as the beneficial change rule). Otherwise it will only be altered from the Monday following the notification. If the earnings turn out to be higher than the estimate, the HB Office might argue that the claimant has been overpaid. The claimant could counter this by saying that as Regulation 29 allows HB to be calculated on an estimate, that the calculation based on an estimate was not wrong as such. However this is less likely to be accepted if there s a big difference between the estimated earnings figure that was used in the assessment and the actual earnings paid. So if someone s hours vary widely from week to week they might prefer to keep notifying the HB Office every time they change. Doing this weekly could be difficult so they could instead notify on a 4 weekly basis- but no longer, so as to avoid the beneficial change rule as above. As this could mean delays in processing, wkers with a zero hours contract might be one of the rare cases (as with agency wkers) where it s best to have their HB paid direct to themselves that way they ll know how much rent to pay (all of it!) and will know they are in charge of sting out their claim. So, to summarise, how can you help someone on a zero hours contract? Avoid arrears building up Being on a zero hours contract can be very stressful f a tenant and it can be difficult f them to manage their money on constantly changing wages. In general the best way to help them avoid arrears is by keeping an eye on their rent account and contacting them as soon as there appears to be a problem, ensuring they know you are there to offer advice and suppt. To avoid rent arrears building up you could ask the tenant to pay the full rent that is due every week, and discuss the possibility of paying me when their earnings are high to compensate f when their earnings are low. But many tenants on zero hour contracts will not earn enough to do this, and the benefits they receive to boost their wages will often be insufficient to allow f any spare. Ensure they are claiming all the benefits they are entitled to: Wking Tax Credit See the notes above, but in particular - Explain to them the various routes to claiming especially people aged 25+ without children who nmally wk 30 hours pw, as this is the group least likely to know they qualify. Help them show HMR&C that their hours, whilst fluctuating, meet the criteria f claiming. IB-JSA / Income Suppt / IR-ESA See the notes above, and explain that if their (their partner s) hours are below / reduce below 16 (24) hours a week they could claim whichever applies this includes those who no longer qualify f WTC.

5 Contributy JSA If someone has been wking enough in previous tax years to have sufficient NI contributions they may qualify f Contributy JSA- which is not means-tested, but only lasts 6 months. To qualify f Contributy JSA the claimant must not be wking 16 hours me a week- a partners wking hours/income are igned. Carers Allowance If someone is caring f a severely disabled person 35 hours a week me, they may be able to claim Carers Allowance if they are wking their net earnings (after certain expenses such as Child care costs) must be below 100 a week- a partners wking hours/income are igned. Permitted Wk If someone starts wk from Employment and Suppt Allowance Incapacity Benefit, and there hours of wk are below 16 a week, then they may be able to continue to receive ESA / IB under permitted earnings rules see our summary sheet. They should contact the Jobcentre befe starting the wk. If someone in the household is sick disabled: A child under 16 might qualify f Disability Living Allowance this can then increase the amount of Child Tax Credit the claimant is entitled to. An adult (16 over, under 65) might qualify f Personal Independence Payment. If the disability was caused by an accident at wk an illness contracted at wk then they may be able to claim an Industrial Injuries Benefit. Other benefits? Check Which Benefits f other benefits people might be entitled to. Discretionary Housing Payments (DHP) A family/person who has exceptional circumstances that make it difficult f them to meet their full rental shtfall and are getting an amount of Housing Benefit (however small) can apply f a DHP. One of the circumstances the Local Authity can take into account is where there are sudden changes in household income that make it difficult to adjust. And note that if someone s HB fluctuates, you may think that this would make it difficult f the Local Authity to make an award, but they can still be awarded a DHP over the ups ad downs as long as there is some entitlement to HB because a DHP award is not restricted to the shtfall between the rent and HB award, but can be awarded up to the full weekly eligible rent. Money Advice If someone is struggling with managing their money, has debts, signpost them to a local advice agency ( your own suppt/money advice staff if you have them) f budgeting advice and money management. Some good news f the future. The good news is that under Universal Credit, things should be less complicated f wokers with a zero hours contract. This is because: There are no hour rules f claiming Universal Credit. Rather than having Tax Credits from HMRC, Housing Benefit from the Local Authity, and IB-JSA/IS/IR- ESA from the DWP, these are all replaced by the one benefit, thus avoiding the need to notify changes to different departments, and no need to change between in wk and out of wk benefits. F people paid via PAYE, Real Time Infmation on wages will go directly to the DWP who are assessing Universal Credit awards from HMRC. Universal Credit is reassessed on a monthly basis at the end of the claimant s personal monthly assessment period, with the payment of Universal Credit at the end of the month being based on the earnings received in that month. A Universal Credit claim is kept live f 6 months after someone ceases to be entitled (eg because of higher paid wk) and so if they become entitled again within those 6 months they just notify the DWP of a change in their circumstances rather than re-claim.