Severance Payments Briefing No 70
This briefing paper aims to highlight the impact
that severance payments would have on entitlement to state benefits.
Although this paper will provide some information
on state benefits it is important to remember that entitlement
to such benefits are dependent upon your own personal circumstances.
If you are unsure of your full entitlement organisations such
as Citizens Advice Bureau provide advice and guidance on claiming
The effect that severance payments have on benefit
entitlement depends on a number of factors. These include which
types of benefits are applied for as well as what the severance
payment is comprised of, i.e. holiday pay, pay in lieu of notice,
redundancy, etc. Some examples of this are shown in the next section
on Job Seekers Allowance.
However severance payments, in general, are normally
regarded as capital in any benefit assessment and therefore could
affect the level of benefits a claimant receives.
The rules for assessing capital and savings are
dependent upon a number of factors including whether the claimant
is under 60, over 60 (and if so, whether they stay in a residential
or care home).
The table below highlights the current situation
(July 2003) for assessing income-based Job Seekers Allowance and
Over 60 and
stays in residential/ care home
The lower limit is the amount of capital that
a claimant can have without it affecting their benefit claim.
If a claimant has the upper limit (or more) in capital then they
would not qualify for any of these means-tested benefits.
In between the two limits the amount of benefits
a claimant can receive would be reduced by £1 per week for every
£250 (or part of £250) above the lower limit.
Job Seekers Allowance
Jobseeker's allowance (JSA) is a benefit for
unemployed people who are capable of work. They also have to meet
several other conditions. There are two types of jobseeker's allowance,
contribution-based (non-means-tested) JSA and income-based (means-tested)
There are some unemployed people who may be able
to claim income support instead. These people do not have to meet
the same conditions.
Contribution-based jobseeker's allowance (JSA)
Whether someone can claim contribution-based
JSA will depend on their National Insurance contributions (NICs).
They will have to have paid National Insurance contributions in
one of the last two complete benefit years before the tax year
in which they claim JSA. They must also have contributions or
credits for both these years.
Contribution-based JSA is paid for a maximum
of six months. No dependants' additions are paid with contribution-based
JSA. This means that a person receiving contribution-based JSA
will not get more money because they have a partner or a dependant
However contribution-based JSA is not paid for
any week covered by a payment in lieu of notice. Redundancy pay
does not normally affect contribution-based JSA. However, if you
get redundancy pay in excess of the statutory amount, you will
not get contribution-based JSA for the period covered by the extra
payment. If you received holiday pay as part of your final wage,
you cannot get contribution-based JSA for up to four weeks after
your job ends.
Income-based jobseeker's allowance
Income-based JSA is a benefit for unemployed
people who have not paid enough NICs to receive contribution-based
JSA or contribution-based JSA would not be enough to live on,
for example, they have dependants.
Entitlement to income-based JSA depends on a
person's income and capital (savings and property). The income
and capital rules are the same as for income support, except for
the treatment of part-time earnings.
Pay in lieu of notice is treated as earnings.
Holiday pay in the first four weeks after leaving work also counts
as earnings when working out entitlement to income-based JSA.
After the first four weeks it is treated as capital. You will
not be entitled to any JSA for the weeks covered by payments which
are treated as earnings.
Redundancy pay almost always counts as capital
when working out entitlement to income-based JSA. However, redundancy
pay in excess of the statutory amount can prevent you getting
any JSA for a period. If you get redundancy payments periodically,
these count as income, but they are very rare.
The rules about contribution-based and income-based
jobseeker's allowance and payments at the end of a job are complicated.
You should consult an experienced adviser, for example, a Citizens
Income support is an income-related (means-tested)
benefit paid to certain groups of people who do not have enough
money to live on. This means that any money the claimant already
has is taken into account in deciding how much income support
they should get.
The applicable amount will vary for each person
according to his or her circumstances. The capital that a person
has is also taken into account. This could also include severance
Income support also acts as a 'passport' to certain
other help. A claimant and their dependants will automatically
qualify for the following:-
- free school meals
- free prescriptions
- free dental care
- vouchers for spectacles
- free milk and vitamins for expectant mothers and children
under 5, free vitamins for nursing mothers
- maximum housing benefit
- maximum council tax benefit.
There is a further range of benefits that the
may be applied for, dependant on the personal situation of the
applicant. This includes whether you or your partner are working,
you and your partners age and any dependants you may have. Other
- Housing Benefit
- Council Tax Benefit
- Child Tax Credit
- The Social Fund etc
For further information on which benefits you
may be entitled to it is advisable to consult an organisation
with knowledge of the benefits system such as a Citizens Advice
Entitlement to various state benefits is dependent
upon each claimant's personal circumstance.
Organisations such as CAB will provide benefit
advice and guidance.
Dave Watson - email@example.com
@ The P&I Team
14 West Campbell St
Tel 0845 355 0845
Fax 0141-307 2572