This Commons Library briefing paper gives an overview of the Permitted Work Rules, which allow people in receipt of Employment and Support Allowance to do some paid work without it affecting their benefit.Jump to full report >>
The “Permitted Work rules” allow people claiming Employment and Support Allowance or other incapacity benefits to undertake some paid work without it affecting their benefit.
Provisions have existed for many years enabling people in receipt of incapacity benefits to do some paid work without losing completely their entitlement to benefit. Originally the emphasis was on work considered to have “therapeutic” value, but in April 2002 new rules on Permitted Work came into force. The intention was to remove barriers to work for people with long term health problems wanting to take steps back to work.
There are a number of Permitted Work options, depending on the person’s circumstances. People can earn up to £120 a week. Income tax, National Insurance contributions, half of any contributions to a private or occupational pension, and (in some cases) childcare costs are deducted when calculating earnings. Claimants need to inform the Department for Work and Pensions before starting any Permitted Work.
Until recently, most people could only undertake Permitted Work and benefit from the more generous earnings limit for a limited period of time, but from April 2017 this restriction was lifted. The 2015 Government said that the existing rules were unnecessarily restrictive, and that the removal of the time limit would improve work incentives.
Universal Credit is replacing means-tested benefits and tax credits for people of working age. When UC is fully introduced, income-related ESA will no longer exist. Contributory ESA – which is non-means-tested and which depends on the person’s National Insurance record – will continue to exist as a separate benefit (“new-style ESA”), alongside UC.
There are no Permitted Work rules under Universal Credit. There is no limit to the number of hours people can work under UC. For claimants with a “limited capability for work” (i.e. who would currently qualify for ESA), their maximum UC award will be reduced if they have monthly earnings in excess of their “work allowance.” This is £397 a month, or £192 if the UC award includes a housing costs element. For every £1 of net earnings in excess of the work allowance, the maximum UC award is reduced by 63p.
Commons Briefing papers CBP-7909
Author: Steven Kennedy