Carers allowance - termination payment or compromise count?

Carers allowance - termination payment or...

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I have been asked to be treasurer for local pre-school. I am aware of similar question from someone re church and everyone saying "don't do it" re getting dragged in to all sorts. And then some is all I can say......
There may be several questions in next few weeks on this as the pre-school is a bit of a shambles. No budgets no business plan failed ofsted for three months......

The "manager" needs managing out of her job. At the moment she is owed approx £1,200 in unpaid wages. She has for a while been restricting paid hours to £110 or so as she receives careers allowance. So has been working more hours than this but doesn't want to put the Kai-bosh on her careers allowance. In time she thinks she will wind down and Work so much that she earns £75, say, but put £110 through the payroll and £35 is unpaid wages.

Is this benefit fraud? Or any other "wrong un" that I, as a professional, should say no to?. I am taking over with somewhat a liability to deal with. The obvious answer is tough, have the money now in one hit it write it off dearie.

One thought was paying her off. Will the £1200 plus other monies to pay her off as compromise agreement count as "post tax income" in the careers allowance condition?

I should add that the unpaid wages fiddle in the past is nothing to do with reasoning for me/us wanting us to go. But the comp payoff might help.

More questions to follow I am sure.....thank you.

Replies (13)

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By LyneT
22nd Apr 2016 10:18

Restricting hours to ensure that the weekly earnings limit is not benefit fraud.  It is planning, just like tax planning.

What you are suggesting and what appears to be happening is certainly benefit fraud.  What seems to be happening is she is being paid for the hours she is working, but only putting a certain amount through the payroll so that she is  declaring the lower amount but actually being paid the higher amount.

The date she is being paid is irrelevant as she actually has entitlement to the wages in the weeks she is working.

Almost certainly this has been happening for some time and paying her a compromise agreement or arrears is colluding with the fraud.

My advice to you is to steer well clear of this until the wages issue has been resolved or you could find yourself involved.  You should tell her why you are not going to do it, and you should also tell he committee.

I am presuming that there is a committee btw.  I was foolish enough to be a playgroup treasurer for two years and I recall a solicitor who was also involved with the playgroup tell me that when we hired a bouncy castle at a fair once we would be personally liable if a child fell off and hurt themselves so we should get insurance.  I also knew someone who was a trustee for a charity and an employee of the charity claimed unfair dismissal against the charity.  The employee won and the trustee I knew was nearly forced into bankruptcy.  You should warn the committee members.

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By HeavyMetalMike
22nd Apr 2016 11:49

Thank you for answer on benefit fraud.

Forgive the naive Q, but why is "writing off the unpaid wages" but then getting paid a lump sum benefit fraud? Or have I answered it myself?

There is a committee. Of old and inept people. All looking to retire asap.

New committee is planned of us young 40 year olds and we're excited to take over, bin the manager, file accounts at charity commission for the last 5 years!, have a business plan, do budgets. There is none of this at the moment......

We need to sort the constitution out as the old lady current chairman has alerted us to this and that it need changing as at present the trustees could be personally liable. She's been a trustee for 10 years but not sought to make the constitution out. But luckily told us.

My concern is employment dismissal claim and me getting sued personally, no limit of liability.....Hence getting rid, compromise agreement which also coincides nicely with your unpaid wages. But telling the manager that she won't be paid might help her go anyway (threatening it for years).

It had crossed minds of a few new/potential committee to let it go to the wall and then start afresh......

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By LyneT
22nd Apr 2016 12:27

I may be getting the wrong end of the stick here, so correct me if I am wrong.

But my understanding is that she is being paid say, £110 per week, which keeps her within limits, and this is being put through the payroll.  But she is also entitled to an extra £1,200 in arrears which represent monies due to her because the payroll has not got enough money.  Or am I wrong?

If that is the case, regardless of whether you call it a termination payment or a compromise agreement, then it is actually wages above the £110 which is allowed for CA.

So if you pay her those arrears and you have agreed to call it something else just so she can claim carers allowance, then you are colluding with benefit fraud.

But are you saying she has only been actually paid £75 but she is entitled to£110 per week and she hasn't got the whole amount because playgroup hasn't got enough money?  In that case the arrears relate to the weeks that she worked and are not just money received in one week, so will not affect her benefit for that week.

I think what I am confused about is when you say "putting it through...."

So, in a nutshell, if I was right in my first assumption, then she is in trouble, but if it is the second, she is ok.

Does that make sense or have I muddied the waters even further?

You are right to be concerned over the unfair dismissal though.  That is what happened to my friend.  She was not a professional.  She was only a housewife and they still managed to nearly bankrupt her.  If you are a professional your expected standards are higher.  That is why I would never be a trustee.

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By HeavyMetalMike
22nd Apr 2016 12:44

Thank you. I muddied the waters with the £75 comment.

The £1,200 arrears are defo for where she has worked an earned £140, say, but only been paid £110 and only RTI-ed £110. So £30 in unpaid x 40 weeks = £1,200.

Noted on compromise lump sum to clear this being fraud and I won't ask this again.

BUT.....

She's slippery thing. Has been threatening to leave for ages and when I asked her off the record what her plans were and are you leaving????, she said she will leave when arrears are paid the thoughts were she'll work 7.5hrs at £10 and then put £110 through the payroll to make a small start on the £1,200. It'll take ages at that rate.! Hence my wondering on the payoff.

 

So would this "gardening leave arrangement", "you go and we'll pay you £110 a week in your absence" be wrong? Sorry, I'm getting too close and probably missing the obvious.

 

We have grounds for some sort of dismissal. Failed Ofsted for a start. Plus she's unable to do her role adequately by only working 10-11 hrs per week.

But if we sort the constitution out then we can limit our liability to £1 - said the outgoing chairman.

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Replying to SteveHa:
Stepurhan
By stepurhan
22nd Apr 2016 14:56

Run by a lawyer

HeavyMetalMike wrote:
She said she will leave when arrears are paid
Definitely one to run by a lawyer first, but there seems an obvious answer.

Say, "What arrears?". Either she was entitled to a larger amount in wages, and that should have been reported, or she wasn't. If she is insisting on being paid for the "arrears" then make it clear you will have a duty to amend her wages record to reflect the correct (i.e. more than allows benefit entitlement) figures. Anything else and you would be colluding in a fraud.

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By LyneT
22nd Apr 2016 13:15

You need to pay for some employment advice.  Go to an employment solicitor to limit you liability, especially if she is the slippery sort.

You need to be clear about the payment of arrears though.  If she is entitled to £140 and you are in anyway only "putting through"  £110, then you are in as much trouble as she is.  You can call it what you want.  You can call it compromise, termination, ex gratia, garden leave.   If she has earned £140 then her benefit will be affected.  I would not be making any arrangement with her. As soon as you start doing this you are in trouble.

The employment termination is a separate matter for which you should seek advice. You should treat both things as entirely separate matters.

 

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By HeavyMetalMike
22nd Apr 2016 13:24

Thank you.

I should add I am not yet a trustee, I am thinking of being a treasurer and have not done any payroll myself. All of this has come about from discussions about me potentially joining as treasurer.

I am grateful for your confirmation re the fraud and yes as a professional I will not do so :)

And of course it's separate to the employment issue. Pooh's gonna hit the fan when I say I ain't paying the arrears.......

Thank you.

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By mrme89
22nd Apr 2016 13:32

Carefully planning your earnings and hours worked is not benefit fraud.

Fudging the figures to obtain a benefit that you otherwise wouldn’t be eligible for is.

Have you considered your reporting obligations?

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By HeavyMetalMike
22nd Apr 2016 13:36

But if she just waives the earned but not paid amount - and no compromise so it is lost"!! - is that just good planning on her part? Like I said I haven't done any payroll myself. I'm asking the question before I launch the bombshell next week.

As above at the moment I am just an interested party with knowledge of said fraud.

So no obligation yet.

 

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By bendybod
22nd Apr 2016 16:06

Trustee / treasurer roles

I am trustee for a couple of charities, of which one I am also treasurer for.  I, like you, have come in to an almost totally new board of trustees and discovered a hornet's nest of problems.

You say that they haven't filed with Charity Commission, so I take it that it is an unincorporated charity.  If this is the case then tax planning is irrelevant - it's not a sole trader or director planning their hours - it is the employee of a charity.  On that basis I would say it is undoubtedly benefit fraud.  Given that you have not yet taken on the role, I would advise the current trustees to take legal advice on the issue and determine that you will only agree to have your name associated with the charity once the issue has been resolved.  I presume that you would become a trustee when you become treasurer (I insisted upon that so I had a right to attend the board meetings and tell them they can't do something before they vote on it and it's too late, rather than try to untangle something that's been passed!), so your name will be associated with the charity at the Charity Commission

Giving your time to a charity in the kind of situation that your charity is in can be very rewarding but do not underestimate the time commitment - as I probably did!!  Sorting out the constitution, the legal structure of the charity (if you are contemplating going the limited company or CIO route), the governance procedures and the compliance therewith, the policies.... takes a lot of time.  As I said though, if you DO have the time then it sounds like it is a preschool that has been managed by a well meaning but out of date (and out of their depth) management committee / board of trustees which needs bringing up to scratch as quickly as possible.  You can't change Rome in a day but it can be sorted - especially if you communicate with the Charity Commission as they'd far rather enable an existing but struggling charity to succeed than have to launch an investigation into one.

If you want to bounce any further ideas / concerns off me then feel free to PM me and I'll send you my email address.  Oh, and I would definitely look into trustees' insurance!

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By LyneT
22nd Apr 2016 16:31

 

 

She can certainly waive her right to the arrears.  But it would be fairly clear that she is doing this in order to claim benefits. (Why else would she do it), so she would be treated as still having the arrears. If she does not declare this, then it is benefit fraud.   If you do anything to encourage that then you are party to the fraud.

I personally would not go near this with a bargepole.  But if you insist then you must distance yourself from what has happened before.

This means being upfront with the arrears, and getting professional advice about dismissing her.  If you try to amalgamate these two things you are colluding with what has gone on before.

You can call the arrears what you want, but they still are payment for what has gone on before.  You know that, the rest of the committee knows that and she knows that.  Any attempt you make to enhance her benefit position by misrepresentation is benefit fraud.  Are you prepared to say, in front of the committee who may be future clients or know your existing clients, "Lets pretend these arrears are a termination payment and not arrears for work done"  or "Lets not pay her the arrears so she can continue to claim benefits.  But we can pay her exactly the same amount as a termination payment"

If you want to make a good and honest job of this then you cannot go into a committee meeting and pretend that there are no arrears or try to think up another name for the arrears.

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By HeavyMetalMike
22nd Apr 2016 16:41

Thank you Lyne T.

The purpose of this question was in the main to get secondary opinions on the fraud issue or not.  As you know, when one is too close to an issue it is easy to forget the obvious. And the secondary questions were just more ammunition for when I am challenged next week.

Bargepole noted.

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By LyneT
23rd Apr 2016 09:02

Interesting though. If, when she was engaged, she said "I don't want the job if I earn more than £110 per week as it will affect my benefit" this would be fine. If she was entitled to the extra and waived it, then she would be treated as having earned it. Subtle but very important difference.
She clearly was entitled to the money and it sounds like she had it up until the arrears started accruing. Albeit she wasn't being paid it through the payroll.
So the whole thing could have been avoided right at the beginning. But you cannot rewrite history.

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