Published October 2021; updated January 2023
This briefing for local authorities, charities and organisations that support people who use services and their carers, looks at how people and carers who receive state benefits can get involved in paid co-production, involvement, participation in health and social care, highlighting what they need to be aware of to avoid any loss of benefits.
Universal Credit work allowances and Permitted Work rates are revised annually in April. This briefing details benefit rates and rules between April 2022 and end March 2023 including updates for the year April 2023 to end March 2024. The briefing now includes recent legislative changes to the treatment of a mortgage interest loan paid through Universal Credit from next Spring.
Organisations paying people for their time as part of co-production, involvement and participation activities have a responsibility to ensure that people who receive benefits are supported with independent welfare rights advice.
Organisations can introduce measures to prevent misunderstandings with Jobcentre Plus that can lead to benefits being stopped.
NB: While the term ‘service user’ is not SCIE’s preferred terminology to refer to those that draw on care and support, the term ‘service user’ has been retained throughout this document to accurately reflect the terminology used by DWP and related legislation.
Key terms used by the Department for Work and Pensions (DWP)
The Department for Work and Pensions uses specific terms in helping it to decide whether someone is taking part in paid co-production, involvement and participation, as there are two benefit rules which are different to part-time work. The following sets out the DWP guidance.
‘Co-production, involvement and participation may be:
- in research
- in education
- with charities
- with the NHS
- with local authorities.
The services are delivered by a body that has a statutory duty to provide services in:
- health or social care, or
- social housing, or
- social security, or
- child support.
The person is consulted to improve services through user involvement by these bodies or by an alternative body (for example, educational establishments and charities) who conduct:
- research, or
- monitoring, or
Service users may also be described as:
- experts by experience
- patients, or potential patients
- focus groups.
A body that seeks to improve services through user consultation may describe the process as:
- service user and carer involvement or
- public involvement or
- participation or
- co-production or
- Local Involvement Networks (LINks).’
Source: Advice for Decision Making: Chapter H3 Universal Credit Earned income – employed earnings (Department for Work and Pensions)
Key benefit rules for service user involvement or co-production
Guidance for Jobcentre Plus staff refers to ‘service users and carers’, stating that ‘a service user is a person who has used or is using or may potentially use or is otherwise affected by (for example, a carer) services’.
Payment for a person’s time is always treated as earnings regardless of how it is described (e.g. vouchers, honorarium).
People who use services and carers will not have their benefits affected by repayment of out-of-pocket expenses.
People who use services and carers may decline an offer of a payment, ask to be paid a lower amount, or ask for the payment to be made to a charity and will not be treated as if they had been paid the full amount on offer. This is referred to as ‘notional earnings’ in the rules and regulations.
People who receive Employment and Support Allowance can earn less than £152 a week with no time limit, provided they follow DWP procedures, and work for less than 16hrs a week. Employment and Support Allowance and Housing Benefit are not affected. This increases to £167 a week from April 2023.
People who receive Universal Credit which includes the costs of rent, who are responsible for a child or have limited capacity for work/work-related activity have a work allowance of £344 a month, shared with a partner if applicable. This increases to £379 a month from April 2023. Earnings over the work allowance will lead to Universal Credit being reduced the following month by 55 pence for every £1.
People who receive Universal Credit which does not include the cost of rent who are responsible for a child or have limited capacity for work/work-related activity have a higher work allowance of £573 a month, shared with a partner if applicable. This increases to £631 a month from April 2023. Earnings over the work allowance will lead to Universal Credit being reduced the following month by 55 pence for every £1.
People who receive Universal Credit (other than the above groups) do not have a work allowance. All earnings lead to Universal Credit being reduced the following month by 55 pence for every £1.
People who receive Carer’s Allowance can earn up to £132 a week. If they also receive a carer’s premium, and/or Housing Benefit and/or Council Tax Support/Reduction these are reduced when earnings exceed £20 a week. This increases to £139 a week from April 2023.
People who receive Jobseeker’s Allowance or Income Support or Pension Credit have an earning disregard of £5 or £10 or £20 a week depending on their individual circumstances. Earnings over the disregard leads to a reduction of the benefit £1 for each £1 earned.
DWP procedures for people who receive Universal Credit
A person who receives Universal Credit can start work or involvement at any time and does not need to get permission before starting.
The organisation that is paying the person, should provide a letter explaining that ‘service user involvement’ is not the same as work, and about the support provided for mobility or care needs.
If the person is attending Jobcentre Plus for interviews they should tell their Work Coach about the service user involvement they are taking part in, and if possible take a letter from the organisation that is paying them that explains how involvement is different to work.
Once a person has been paid for involvement, they should report this to Jobcentre Plus before the end of the monthly benefit payment period. They should do this in their online journal. It is important to specify that this is a payment for service user involvement so that Jobcentre Plus knows that reimbursed expenses must be ignored and notional earnings do not apply.
The earnings of a person receiving Universal Credit will always be treated over a calendar month as it is paid monthly (whereas other benefit rules treat earnings on a weekly basis).
Universal Credit work allowance
Universal Credit is paid for living costs and housing costs. It allows some people to earn up to a certain amount in a month before it is reduced. This is called a ‘work allowance’. Different groups of people have different amounts of a work allowance. Some people do not have a work allowance.
All payments for involvement (or work) will lead to Universal Credit being reduced by 55 pence for every £1 earned when the amount is over the ‘work allowance’. This does not affect entitlement. There is no limit on the number of hours of paid involvement (or work) that is allowed.
- Person qualifies for Universal Credit work allowance AND claims Universal Credit for rent costs
People who have responsibility for a child or have limited capacity for work/work-related activity have a work allowance of £344 a month shared with a partner if applicable, if Universal Credit is claimed for the rent. Work allowance increases to £379 a month from April 2023.
- Person qualifies for Universal Credit work allowance AND does not claim Universal Credit for rent costs
People who have responsibility for a child or have limited capacity for work/work-related activity have a work allowance of £573 a month shared with a partner if applicable, if Universal Credit is not claimed for the rent. Work allowance increases to £631 a month from April 2023.
- Person does not qualify for a Universal Credit work allowance
People who are not responsible for a child or have limited capacity for work/work-related activity do not have a work allowance. They have Universal Credit reduced the following month by 55 pence for every £1 they earn. (Example: earn £100 in a month, the following month Universal Credit is reduced by £55, they are better off by £45.)
DWP procedures for people who receive Employment and Support Allowance
A person who receives Employment and Support Allowance may earn less than £152 net a week without any time limit. NB If they earn more, their benefit is stopped pending a review which may take months. Rate increases to less than £167 a week from April 2023.
Employment and Support Allowance, and Housing Benefit are not affected by these earnings providing the person has followed mandatory benefit procedures and has notified DWP about their Permitted Work. The amount of paid involvement must be under 16 hours a week.
The person who receives Employment and Support Allowance is required to inform Jobcentre Plus before earning any money. They must download the form PW1 for Permitted Work, complete it and return it to the DWP/Jobcentre Plus office that administrates their benefit. They should state that they are doing ‘service user involvement’ so that Jobcentre Plus is informed and made aware that reimbursed expenses must be ignored and notional earnings should not be applied.
They should ask the organisation that is paying them, to provide a letter explaining that ‘service user involvement’ is not the same as work, and about support provided for mobility or care needs.
It is advisable to send the PW1 form by recorded delivery and to keep a copy.
DWP procedures for people who receive the new style contributory Employment and Support Allowance claimed with Universal Credit for rent costs
This benefit may be claimed when a person falls ill after two years of employment with National Insurance contributions. It is paid for one year after which the person will be transferred to Universal Credit.
The earning rules and procedures for both Employment and Support Allowance and Universal Credit must be followed.
This means that although a person can earn less than £152 a week without affecting the element of Employment and Support Allowance, earnings over £344 a month will lead to the element paid for the rent from Universal Credit being reduced the following month by 55 pence for every £1 over. The earnings rate per week for Employment and Support Allowance increases to less than £167 per week from April 2023.
For people who are transferring from Employment and Support Allowance to Universal Credit
People who are earning less than £152 a week as allowed by the Permitted Work rule, should reduce this amount before they are transferred to Universal Credit. This is because, unless certain exceptions apply, earnings of less than £152 a week when in receipt of Universal Credit, may lead to loss of the limited capacity for work/work-related activity status, which may lead to loss of additional benefits. The person will be required to look for work and apply for jobs 35 hours a week regardless of their health condition.
Weekly earnings must be less than the relevant national minimum wage rate of £9.50 per hour x 16 hours = £152 up to April 2023.
The relevant national minimum wage rate increases to £10.42 per hour from April 2023. 16 hours x £10.42 = £166.72 up to April 2024.
The work allowance in Universal Credit is in any case much lower than Permitted Work. People working part-time will see a significant reduction in their final income from earnings.
Mortgage interest loan payments from Universal Credit: legislative change to be introduced Spring 2023.
Previously people who received mortgage interest loan payments as part of their benefits had to consider stopping their earnings before they were transferred to Universal Credit. This is because any earnings at all, even £5, would result in the mortgage interest loan payments being stopped for nine months. This was unless the amount they were earning as allowed by the higher work allowance, was sufficient to reliably pay for their mortgage interest payments instead of benefits.
Legislative change: from Spring 2023 people who receive mortgage interest loan payments will be allowed to have earnings without their mortgage interest payments being affected. The Government have not yet provided an exact date.
DWP procedures for people who receive Income Support, Jobseeker’s Allowance or Pension Credit
People who receive Income Support, Jobseeker’s Allowance or Pension Credit are only allowed to earn £5, £10 or £20 a week before their benefit is reduced by £1 for every £1 they are paid over the relevant limit.
People who in addition also receive Disability Living Allowance (DLA) or Personal Independence Payment (PIP) or Attendance Allowance (AA) or are a lone parent have the £20 a week disregard. See ‘Measures that your organisation can introduce to support people who receive benefits’ section below.
People who attend the Jobcentre because they are looking for work must obtain prior permission from their Work Coach to earn some money through service user involvement. They should ask the organisation that is paying them, to provide a letter explaining that ‘service user involvement’ is not the same as work, and about the support provided for mobility or care needs.
DWP procedures for people who receive Carer’s Allowance
People who receive Carer’s Allowance can earn up to an absolute limit of £132 net a week. However, if they also receive carer’s premium or Housing Benefit, or Council Tax Support/Reduction, earnings over £20 a week will lead to reductions of the benefit.
The person does not need permission to start paid involvement but must notify the Carer’s Unit as soon as possible after starting. They should ask the organisation that is paying them to provide a letter explaining that it is ‘service user and carer involvement’, so that expenses are ignored and notional earnings do not apply.
DWP procedures for people who receive Disability Living Allowance, Personal Independence Payment or Attendance Allowance
People who receive Disability Living Allowance (DLA) or Personal Independence Payment (PIP) or Attendance Allowance (AA) will not have these benefits for mobility and/or care needs affected by earnings or by savings. However, in recent years Jobcentre Plus and DWP have queried the continued entitlement of people who have started involvement but who did not explain about the support they have received for their mobility needs and/or care needs.
The organisation that is paying for service user involvement should provide a letter that explains about the support provided for mobility and care needs. This may include the provision of an alternative to public transport and/or the provision of a support worker. This letter can be given to the Work Coach at the Jobcentre and also sent by the person receiving the benefit to the relevant DWP administration office for DLA or PIP or AA. This is important.
Council Tax Support/Reduction and earnings
The official name is Council Tax Reduction but most councils call it Council Tax Support.
Each local authority makes its own rules on charging for Council Tax for people of working age. The organisation that is paying the person, should provide a letter explaining that ‘service user involvement’ is not the same as work, and about the support provided for mobility or care needs. A person may be charged if they have earnings from involvement, although the local authority may average payments over several weeks. People should contact their council and find out about the local arrangements.
Measures that your organisation can introduce to support people who receive benefits
Enable earnings to be treated as averaged over a month or three months
Your organisation can introduce a helpful measure for people with a low weekly limit on their earnings.
Where people receive any of the above benefits for living costs, the Department for Work and Pensions can decide to average out payments for involvement (or work) over the organisation’s payment period if there is more than one paid involvement event in the period.
For example, a payment of up to £60 for two involvement events over a 12-week payment period may not lead to a reduction of Jobseeker’s Allowance even if the person can only earn up to £5 a week (£5 x 12 weeks = £60). Jobcentre Plus will look at each situation to decide if this applies or not. See DWP guidance Advice for Decision Makers on ‘Calculation of weekly amount’, in ‘Further reading’ section below.
Ensure that reimbursed expenses are ignored by Jobcentre Plus and are not treated as earnings
A repayment of the exact costs of out-of-pocket expenses incurred for paid or voluntary involvement will be ignored providing the Jobcentre has been told that it is ‘service user involvement’.
If a reimbursement is made via a bank transfer the organisation can make this separately to the payment with a reference such as EXP SUI. Or alternatively provide a pay slip showing the expenses separately to the payment.
Expenses can include:
- travel costs
- child care costs
- replacement carer
- personal assistant, support worker, facilitator, communicator
- overnight accommodation, where necessary
- subsistence, where necessary
- stationery, phone costs, etc.
Expenses that are covered
Expenses that are ‘covered’ or paid for directly by the organisations involved do not affect benefits. Many organisations provide travel tickets and pay personal assistants, support workers, replacement carers directly, so that people who use services are not left out-of-pocket while repayments are processed.
Where people may be receiving payments for involvement from another organisation
If a person who receives payments from another organisation as well as from your organisation, they are required to notify Jobcentre Plus/DWP about both activities and the amounts paid in total.
Your organisation can ask the person to advise on the amount of money they can accept from your organisation having taken into account the amount paid by the other organisation(s)
Where your organisation is using PAYE for payments
If your organisation plans to use PAYE, you will need to send a person’s details to your HMRC Tax Office to obtain a tax code.
HMRC and Jobcentre Plus now share information.
It is important for the person to have notified the Jobcentre of their plan to accept payments for service user involvement, before your organisation sends their details to the Tax Office.
This is because the tax forms do not allow a person to say that they will be doing service user involvement. When the Jobcentre sees an application for a tax code they will assume the person has found employment. They will stop their benefits.
Provide a letter addressed to Jobcentre Plus from your organisation
The letter explains how service user involvement is different to work, and about the support you provide for mobility and/or care needs.
Use of letter:
To provide to people who are being invited for service user involvement, and who are in receipt of any state benefits. They can give or post the letter to the Jobcentre/DWP when either obtaining permission for earnings and involvement or when notifying earnings.
Purpose of letter:
Although DWP benefit conditions may be followed exactly, benefit entitlement may be reviewed or stopped, for six possible reasons:
- Involvement and a high rate of pay being mistaken for evidence of capacity for work. This may lead to a review of benefit entitlement (Employment and Support Allowance, Universal Credit for limited capacity for work or work-related activity)
- Paid involvement being mistaken for a commitment that prevents a person from fulfilling Jobcentre Plus requirements to attend an interview or work experience, or to continue their caring responsibilities
- Payments which exceed weekly limit being treated weekly rather than monthly
- Reimbursed expenses being wrongly treated as earnings leading to benefits being reduced or stopped (all the above listed benefits)
- An offer of payment that is declined being treated as if it had been received (notional earnings) (all the above listed benefits)
- Participation in involvement being mistaken for a reduction in care or mobility needs (Disability Living Allowance, Personal Independence Payment, Attendance Allowance) leading to a review of entitlement.
Note: DWP main legislation refers to ‘service user involvement’ and therefore the letter should contain this phrase.
Template example letters
Welfare benefits Jobcentre/DWP letter (National Institute for Health Research)
Another example of a letter addressed to the Jobcentre about service user involvement.
NB: SCIE is aware, at time of publication, February 2023, that there is a discrepancy between what the DWP factsheets and PW1 form. The PW1 form states that earnings that are ‘less than’ £152 a week are allowed. This contradicts the statement on the DWP factsheet that says earnings of ‘up to’ £152 a week are allowed. DWP have been made aware of this discrepancy. SCIE is also aware that the fact sheet suggests that Housing Benefit may be affected by Permitted Work earnings. SCIE understands that this is not the case, but advises you obtain confirmation in an individual case from DWP. Similarly DWP have been informed about our concerns on this wording.
Advice for Decision Makers (ADM) – DWP guidance for Jobcentre Plus staff
- V3070 Community Interest Company
- V3075 Permitted Work
- V3081 Calculating hours of Permitted Work
- V 3091 Voluntary Work
- V4119 Service user groups payment and expenses
- V4120 Meaning of service user calculation of weekly amount
- V4800 Period of a month
- V4801 Period of three months
- V4811 Averaging of amounts
- H3160 Service users – expenses
- H3161 Meaning of service user (full description that applies to all benefits)
- H3225 (3) Notional earnings
- H3241 Service users (applies to all benefits)
- F4020 Circumstances where no amount of Housing Costs Element will be included in an award of Universal Credit where owner occupier has earned income
- The Social Security (Miscellaneous Amendments) Regulations 2015 (SI 2015/67)
- 36 and 37 Service users
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