Changes to employment and support allowance

Issue 227 (April 2012)

Simon Osborne sets out the changes made to ESA by the Welfare Reform Act 2012, and other changes and procedures that result from them.

Introduction

The Act makes changes to the rules regarding contributory employment and support allowance (ESA) and ESA in youth. Not in the Act, but consequential to it, are changes to the linking rules regarding periods of limited capability for work. The Act makes no changes to the rules on income-related ESA, or to the work capability assessment. The changes are introduced on 1 May 2012.

Contributory ESA – time limiting

The Act provides that entitlement to contributory ESA will be time limited, so that once the claimant has had a cumulative total of 365 days (ie, a year) of entitlement, it comes to an end.1 However, any time spent in the support group will be ignored. Time spent in the assessment phase will be taken into account in calculating the 365 days, except where the claimant was put into the support group immediately after the assessment phase. Detailed guidance is in Memo DMG 13/12.

This change is introduced from 1 May 2012.2However, time already spent on contributory ESA (excluding time in the support group) before the date of change will be taken into account in calculating the 365 days.3Claimants who are appealing (including to claim membership of the support group) will still be subject to time limiting, although those put into the support group as a result of the appeal will be entitled to arrears. For claimants being ‘migrated’ onto ESA from incapacity benefit, time spent on incapacity benefit will not be taken into account.

After contributory ESA is lost

Claimants who lose their entitlement to contributory ESA due to time limiting may still be entitled to income-related ESA, under the normal rules. Claimants who are no longer entitled to any ESA but who still have limited capability for work will (as the DWP confirms) still be entitled to national insurance contribution credits on that basis.4

It is possible to requalify for contributory ESA. This is where at least one of two situations apply:5

  • the national insurance contribution test is satisfied, and the tax years that apply to that test are different in that at least one of those years is later than the later of the two years that applied to the previous award; or
  • the claimant has retained limited capability for work, but is now assessed as being in the support group.

Note that under the linking rules, contribution years may remain the same, but the linking rules are being changed (see below). Time limiting will apply to any new entitlement to contributory ESA, under the rules described above – ie, so that if a claimaint requalifies only by getting into the support group and s/he is later put back into the work-related activity group, entitlement will end straight away.

ESA in youth – abolition and time limiting

The Act provides that ESA in youth will be abolished for new claimants, and that existing claims will be time limited as for contributory ESA – ie, so as to expire after 365 days, excluding time in the support group.6The changes are introduced on 1 May, so that a new claim for ESA in youth is possible up to and including 30 April 2012.7Detailed guidance is in Memo DMG 13/12.

Following the abolition of ESA in youth, new claims will not be possible. So it will not be possible to requalify for it once it has been lost, even where the claimant is subsequently put in the support group. Such a claimant will be able to get contributory ESA under the normal rules, but that will not include having to satisfy the national insurance contribution conditions. Claimants may also be entitled to income-related ESA under the normal rules.

Linking rules – abolition of 104-week rule

There is nothing in the Act about changes to the linking rules regarding periods of limited capability for work; but regulations make such a change on the same date as the changes to ESA.8

The change is the abolition of the 104-week linking rule – ie, so that periods of limited capability for work may only be linked under the 12- week rule (which will remain unchanged). The 104-week rule is abolished for both contributory and income-related ESA, including for support group members. The 104-week rule may apply up to and including 30 April 2012. The change is to avoid claimants being treated as having the same tax years for national insurance contributions even where (after 12 weeks) they have broken their period of limited capability for work, and so find it even more difficult to requalify for contributory ESA. However, for income-related ESA it will mean that returning claimants can in general no longer use the 104-week rule to go back immediately to their old level of ESA, although the 104-week rule is retained for the purpose of housing costs where the claimant is a ‘work or training beneficiary’.

Procedures

It is expected that around 100,000 people will lose entitlement to contributory ESA immediately when the change is introduced on 1 May. Regarding claimants in Great Britain (separate arrangements will be made in Northern Ireland as it is a devolved matter), the DWP says that it will contact all claimants of contributory ESA before their entitlement ends to inform them of when that will happen and what their options are.

The Department also says that where it is ‘aware of an underlying entitlement’ to incomerelated ESA, the claimant will be ‘automatically’ moved onto that when her/his contributory ESA ends. Anyone on contributory ESA who wishes to claim income-related ESA does not need to make a new claim for ESA; instead s/he should contact Jobcentre Plus and complete form ESA3. However, the Department is maintaining its position that claimants living abroad cannot get income-related ESA.

Since 29 February, the Department has been telephoning and then writing to claimants whose contributory ESA will end between 1 May and 3 June 2012 and who have not claimed incomerelated ESA, to ask them if they wish to claim it.

For claimants whose contributory ESA ends after 3 June 2012, a standard process will ensure that they are issued with a notification eight weeks before the date entitlement will end, including details of how to ask for consideration for income-related ESA.9


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