HB likely earnings-pre-empted bonus in March 2018 included as earnings for period of March 2017-March 2018

Hi everyone,

I have a tenant who has received a bonus from their employer for the past two years. The bonus is paid at the end of each tax year but only if a specified level of performance is achieved in that tax year.

HB have included the bonus the tenant is likely to receive in March 2018 as part of their earnings between March 2017 - March 2018.

We have appealed against this decision.

We feel that although HB have the right to estimate the tenants likely weekly earnings over a period up to 52 weeks, the potential March 2018 bonus should not be included as income because it is not guaranteed and therefore should not be considered as likely earnings.

We feel there is enough doubt that the bonus will NOT be received to mean it is not reasonable for HB to include the bonus as part of their weekly earnings (the tenant/company may not achieve the required level of performance, the tenant could leave the company before bonus is paid etc. etc.)

I imagine this scenario must have presented itself before, however I cannot find any case law or decision makers guidance that relates directly to the above.

Has anyone got any advice on how to tackle this at tribunal?

It looks like the decision will be based purely on whether the judge feels it is likely enough for the bonus to be paid for the bonus to be treated as likely earnings before the bonus is paid.

Hope someone can help!

The LA has to estimate a figure which is ‘likely to be the claimant’s net weekly earnings’. Given that your tenant has received a bonus in each of the last two years, it’s perhaps easy to see why they have reached the conclusion that he/she is likely to receive it on an ongoing basis, and from a legislative perspective they’re entitled to include income from bonuses in their calculation.

In terms of arguments at Tribunal i think you’re correct. You’ll need to show that the tenant is not likely to receive a bonus this year, or on an ongoing basis. i.e. “they received a bonus in 2016 and 2017 but this is unlikely to be the case in 2018 because of X, Y and Z”.

I think an argument that they might leave the company before the bonus is paid wouldn’t be that strong, unless you have some evidence that they actually are likely to leave. Similarly if their performance has slipped such that they are unlikely to hit targets this year, some evidence of this would add strength to your arguments.

Annual bonuses are a nightmare in HB.  It’s not helped by an amendment of the regs a couple of years ago to reverse the effect of a UT decision on earnings from a new job.  The UT decided that earnings should be attributed forwards from the date on which they are paid, so a claimant starting work in mid May did not have a full month’s earnings taken into account for HB until early July.  The Regs were amended after that to say that earnings are attributable to the period in which you did the work for which you are being paid - you wouldn’t start a new job with nil earnings, there would have to be at least an estimate of what you are likely to be paid.

Applying this to annual bonuses is tricky.  If the bonus is dependent upon performance in the previous year, that is arguably the period over which it should be attributed. If it is left out of the assessment now, it will be taken into account retrospectively when it is paid, leading to an HB overpayment.  Or you could argue that it is not payment for work done over a certain number of hours/weeks - it is more vaguely related to a period, in which case it should be attributed forwards ... but then last year’s bonus would still be included in the assessment now, so there would still be a higher earnings figure than the amount being paid from month to month during the year.  Or you could argue that the month in which the bonus is paid is an anomalous one-off and it should only be taken into account in that month, which is what I think you are hoping for.  I’m not really sure about that ... it seems to me that it is periodic and not a random one-off.

The Council in your case is trying to head off any retrospective nasties for the claimant.

I don’t think there is an ideal way to handle these.  I’m amazed that searching for the keyword “bonus” on the UT website doesn’t turn anything up.  The commentary in CPAG doesn’t say much.