Select Committee on Social Security Appendices to the Minutes of Evidence


APPENDIX 3

Memorandum submitted by Ms Carolyn George (PL 29)

THE BENEFIT IMPLICATIONS OF TAKING UNPAID PARENTAL LEAVE

  The Employment Relations Bill contains provisions, which will allow parents to take up to three months parental leave during the first eight years of their children's lives. It seems that it is not intended to give parents a statutory right to remuneration during such leave. If such leave is to be taken unpaid, however, some parents may not be able to afford to do so unless they can rely on payment of means-tested benefits to provide them with a weekly income. Parents will also be concerned about maintaining payment for their accommodation.

MEANS-TESTED BENEFITS

  At present there is a range of means-tested benefits, each with its own rules of entitlement. Bynature of the fact that the benefits are means-tested, people cannot qualify if their income or capital is too high. Income support (IS), income-based jobseeker's allowance (JSA), family credit (FC)and disability working allowance (DWA) provide (or top-up) weekly income. Housing benefit (HB) provides help with rent and council tax benefit (CTB) provides help with council tax.

  Help with the costs of owner occupation can only be provided via IS and income-based JSA. It is important to note, however, that housing costs are only paid after a period of entitlement to IS or income-based JSA1. In the case of a claimant taking out a mortgage on or after 2 October1995, housing costs are only paid after 39 weeks on benefit. In the case of a claimant taking out a mortgage before that date, partial help is given after 8 weeks and full housing costs are only paid after a further 18 weeks on benefit.

  Whether a parent can qualify for IS, income-based JSA, FC, DWA, HB or CTB while on unpaid parental leave depends on satisfying the basic rules of entitlement. Among other rules particular to each benefit, entitlement depends on whether a claimant:

    —  is a lone parent or a member of a couple;

    —  has earnings (or is treated as having earnings) to be taken into account.

  For IS, income-based JSA, FC and DWA only entitlement depends on whether a claimant:

    —  counts as in "remunerative work" (and in addition if s/he has a partner, whether the partner does).

  NB: FC and DWA are to be replaced by working families tax credits and disabled persons tax credits in October 1999. A presumption has been made that the rules discussed here will be largely unchanged when tax credits replace FC and DWA.

MEMBERSHIP OF A COUPLE

  A claimant is treated as a member of a couple if s/he is2:

    —  married and living in the same household as her/his partner;

    —  not married but living together as husband and wife. Single sex couples do not count as couples for benefit purposes.

  There are situations where someone counts as part of a couple even if absent from home3.

  When a claimant is (or is treated as) a member of a couple, the income and capital of both partners are taken into account in assessing entitlement to means-tested benefits. Where it is relevant whether s/he is in "remunerative work", it is also relevant whether her/his partner is in "remunerative work".

"REMUNERATIVE WORK"

  If a claimant or her/his partner is in "remunerative work" s/he cannot qualify for IS or income-based JSA. S/he can only qualify for FC or DWA if s/he or her/his partner is in "remunerative work".

INCOME SUPPORT AND INCOME-BASED JOBSEEKER'S ALLOWANCE

  A claimant can only qualify for IS or income-based JSA if neither s/he or her/his partner is engaged in "remunerative work"4. "Remunerative work" is defined as work of not less than 16 hours per week (24 for a partner) for which payment is made or which is done in expectation of payment5. There are complicated rules for determining the number of hours someone works, for example,where these fluctuate from week to week or where someone works for a school in term-time only.

  Even if a claimant does not actually work the relevant number of hours in a particular week s/he can be treated as in "remunerative work" while temporarily away if this is without good cause or by reason of a recognised, customary or other holiday6. "Other holiday" can mean a day that is a non-working day by agreement between an employer and an employee7. Unpaid parental leave is therefore likely to count as an "other holiday".

  For JSA only, a claimant can be treated as not in "remunerative work" in specific circumstances, none of which are specifically relevant to a person taking unpaid parental leave. For IS only, a claimant can be treated as not in "remunerative work" where the absence is for one of two specific reasons maternity leave or sickness.

  Even if it could be established that a claimant was not in "remunerative work", for IS s/he would have to come within one of the prescribed groups of people who can claim. These are limited, but include, for example, lone parents and members of a couple looking after children while their partners are temporarily abroad8. For JSA, a claimant would have to satisfy what are known as the labour market conditions, that is, be available for work, actively seeking work and sign a jobseeker's agreement. Someone on parental leave would therefore not usually qualify. Claimants can be treated as available for and actively seeking work, in some cases. Examples include where they are looking after someone when the person who usually does so is away or sick (for eight weeks) or looking after one of their children while their partner is temporarily absent from the United Kingdom (for eight weeks) or dealing with a domestic emergency (for one week)9.

FAMILY CREDIT AND DISABILITY WORKING ALLOWANCE

  A claimant can only qualify for FC or DWA if s/he is engaged and normally engaged in "remunerative work"10. A claimant is treated as in "remunerative work" if s/he undertakes workof at least 16 hours per week and this is done for payment or in expectation of this. In addition, s/he must be employed as at the date of claim11 and must actually work at least 16 hours12:

    —  in the week of claim; or

    —  in either of the two weeks before the week of claim; or

    —  be expected to work in the week next following the week of claim; or

    —  be absent from work by reason of a recognised, customary or "other holiday" (see above). A claimant does not count as on such leave if on maternity leave or sick leave13.

  A claimant can be treated as not in "remunerative work" in specific circumstances none of which are specifically relevant to a person taking unpaid parental leave14.

  An award of FC or DWA is made for 26 weeks. If someone were already getting one of these benefits when going on parental leave, the award would continue for the remainder of the 26 weeks at the same rate regardless of their change in financial circumstances.

SCENARIOS

  All of the following decide to take three months unpaid parental leave:

    1.  Mary is a lone parent. She works 35 hours per week. She is likely to be treated as still engaged in "remunerative work" because she normally works at least 16 hours per week. She potentially qualifies for FC or DWA. Even if she does not claim within the two weeks of last actually working (or if she had already been on FC or DWA but made a renewal claim after that point), she is likely to count as in "remunerative work" because she is on an "other holiday".

    2.  Pat is a lone parent. He works 15 hours per week. He is not in "remunerative work". This will also be the case when he goes on unpaid parental leave. He potentially qualifies for IS because he comes within one of the groups of people who can claim.

    3.  Delia and Winston both work 35 hours per week. Delia takes the parental leave. The couple's only choice here is to claim FC or DWA. Like Mary, Delia is likely to be treated as in "remunerative work" and Winston actually is in "remunerative work".

    4.  Audrey works 35 hours per week and George 10 hours per week. Audrey takes the unpaid leave. Audrey is in the same situation as Mary. She is likely to be treated as in "remunerative work" so George cannot claim IS or JSA. The couple potentially qualifies for FC or DWA.

    5.  Sian works 15 hours per week and Owen works 10 hours per week. Neither is in "remunerative work". Owen takes the unpaid leave. Unless Sian or Owen fits into one of the groups of people who can claim IS, one of them would have to claim JSA and satisfy the labour market conditions.

EARNINGS RULES

  Even if parents can establish they satisfy the basic rules of entitlement to IS, income-based JSA,FC and DWA, they may not qualify if their earnings and other income are too high. There are specific earnings disregards and a child care disregard which reduce the amount of earnings that can be taken into account. However, what is specifically relevant to someone taking unpaid parental leave is the period for which earnings are taken into account.

  NB. Different rules apply for determining the weekly earnings of self-employed earners.

INCOME SUPPORT AND INCOME-BASED JSA

  Where someone has earnings from employment, these are taken into account for a period of equal length to the period for which the earnings are paid15. For example, if someone is paid a week's wages, these are taken into account for a week and if paid for a month, for a month. They are taken into account16:

    —  from the date they are due to be paid if due before the claim; or

    —  on the first day of the benefit week in which they are due to be paid or the next benefit week in which it is practicable to take them into account.

FAMILY CREDIT AND DISABILITY WORKING ALLOWANCE

  Weekly earnings to be taken into account are normally calculated by looking at someone's average earnings in certain weeks preceding her/his claim17. However, weeks can be excluded from the calculation where earnings in them are higher or lower than average18. It is likely that the weeks where a claimant is on unpaid parental leave would therefore be excluded and FC calculated on the basis of her/his earnings when being paid.

Scenarios continued

    1.  Mary's only income other than her wages is child benefit. If she was not entitled to FC or DWA when actually at work and being paid, she is unlikely to qualify when on unpaid parental leave. In working out her average earnings the Benefits Agency will look at the weeks when she was being paid rather than the weeks when she gets no pay. Her weekly income will be reduced to child benefit, and if she qualifies, FC or DWA

    2.  Pat is paid four weekly in arrears and is due to be paid on the Friday before he starts his parental leave. His wages are too high for him to qualify for IS while he is working. His only other income is child benefit. His last pay will be taken into account for four weeks from the date it was due to be paid. This means that he would only qualify for IS after four weeks.

    3.  Delia and Winston, Audrey and George would be in the same situation as Mary.

    4.  Sian and Owen would be in the same situation as Pat.

CONCLUSIONS

  The rules on "remunerative work" and earnings determine whether someone can qualify for means-tested benefits while on unpaid parental leave. Even if parents qualify, there is a potential for a large drop in weekly income. This may mean taking unpaid parental leave is not an option.

    —  Couples and lone parents who are not in "remunerative work" prior to taking unpaid parental leave might qualify for IS or income-based JSA. The amount (if any) will depend on whether they are paid final wages and on their income (or their partners' income) while on leave. Those entitled to IS or income-based JSA before taking unpaid leave, will continue to qualify but will lose the benefit of disregarded earnings (for a lone parent these are worth £15 per week).

    —  Couples and lone parents who are in "remunerative work" prior to taking unpaid parental leave are unlikely to qualify for FC or DWA on income grounds unless they would have qualified in any case before going on the leave. This could mean their only income while on leave would be child benefit (or child benefit plus one wage where both members of a couple work).

    —  Those renting accommodation or paying Council Tax may qualify for HB or CTB on income grounds. However, those with mortgages to pay will only qualify for help with these if entitled to IS or income-based JSA and then only after a lengthy period of time.

Carolyn George

9 June 1999

 REFERENCES

  1.  Sch 3 paras 6 & 8 IS Regs; sch 2 paras 6 & 7 JSA Regs

  2.  s137(1) SSCBA 1992; s35(1) JSA 1995

  3.  Reg 16(1) IS Regs; reg 78(1) JSA Regs; reg 9 FC Regs; reg 11 DWA Regs; reg 15(1) HB Regs; reg 7(1) CTB Regs

  4.  s124(1) SSCBA 1992; s1(1) JSA 1995

  5.  Reg. 5(1) IS Regs; reg 51 JSA Regs

  6.  Reg. 5(3) IS Regs; reg. 52(1) JSA Regs

  7.  CFC/15/1992

  8.  Sch.1B SSCBA 1992

  9.  Regs14-17 and 19-21A JSA Regs

  10.  ss128 and 129 SSCBA 1992

  11.  Reg 4 FC Regs; reg 6 DWA Regs

  12.  Reg 4(5) FC Regs; reg 6(5) DWA regs

  13.  Reg 4(6)(b) FC Regs; reg 6(6)(b) DWA Regs

  14.  Reg 4(3) FC Regs; reg 6(3) DWA Regs

  15.  Reg 29 IS Regs; reg 94 JSA Regs

  16.  Reg 31 IS Regs; reg 96 JSA Regs

  17.  Reg 14 FC Regs; reg 16 DWA Regs

  18.  Reg 20 FC Regs; reg 19 DWA Regs

ABBREVIATIONS

  Social Security Contributions and Benefits Act (SSCBA) 1992

  Jobseekers Act (JSA) 1995

  Council Tax Benefit (General) Regulations 1992 (CTB Regs)

  Disability Working Allowance (General) Regulations 1991 (DWA Regs)

  Family Credit (General) Regulations 1987 (FC Regs)

  Housing Benefit (General) Regulations 1987 (HB Regs)

  Jobseeker's Allowance Regulations 1996 (JSA Regs)

  Income Support (General) Regulations 1987 (IS Regs)


 
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