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income payment protection taken out be employer
Hi I have a client who is off on long term sick. He is still employed. After 12 weeks of OSP (which should have included SSP but employer denies this), the IIP kicked in. It is paid directly from the insurance provider, not the employer. Reg 66 seems to imply it is counted as unearned income, but does not stipulate whether this has been taken out by the employer or employee. The amount is still subject to tax, NI contributions and pension contributions so should it be treated as earned income? Any ideas anyone? Many thanks
Did the employee pay for the premiums, or pay income tax on the BiK of the premium payments?
If yes, tax and NI should not be deducted (insurance providers often don’t know that the employee contributed towards the premiums, or paid tax on the BiK), and the employee should contact the insurance provider to stop them deducting tax. It would also count as unearned income under Reg 66.
If not, then this is effectively the same as the OSP, and will count as earned income.
Are you saying the employer took out the insurance, and the insurer is making payments direct to the employee?
If the payments are subject to income tax, NI and pension contributions then presumably the employee is receiving payslips? Who is providing the payslips? Is it that the employer is providing the payslips and the insurer is making the payment to the account? In that case I think it would be earned income - the employee is not receiving the payment under an insurance policy; they are receiving it under a contract of employment, even though the employer is relying on their insurer to honour the payments.
I think the fact that NI is being deducted means it must be earned income, doesn’t it? I’m sure somebody like Charles will have a more definitive answer.
Edit: should have checked before I posted!
Thanks both, very helpful. I will check with client’s partner.