Potentially affected state benefits
Finding out about payments made by your employer to you as an employee when in full-time attendance at university or technical college and my entitlement to benefits
If your employer has released you from your job to do a full-time educational course and they are paying you while you study, you may be eligible to receive this income without paying income tax or National Insurance contributions (NICs).
To find out if you qualify for this exemption, take a look at Finding out about payments made to me by my employer when I am an employee to support me in full-time attendance at university or technical college.
If your employer makes payments to you free of tax and Class 1 NICs when you are attending a full-time course, it may affect your entitlement to some benefits, which are work-related or earnings-related.
Such payments when exempted are not regarded as earnings but as scholarship income. You have the right to make an informed choice about whether the advantages of an employer subsidised scholarship, possibly leading to greater future earnings and opportunities outweigh the potential disadvantages on some state benefits.
The state payments or state benefits, which may be affected are:
- work-related payments such as Statutory Maternity Pay, Statutory Sick Pay, Statutory Paternity Pay and Statutory Adoption Pay;
- work-related tax credits such as Working Tax Credit;
- earnings-related benefits such as the basic State Pension and bereavement benefits, additional State Pension, Jobseeker’s Allowance and Incapacity Benefit.
Statutory Maternity Pay, Statutory Sick Pay, Statutory Paternity Pay and Statutory Adoption Pay
You have to be an ‘employee’ to have access to these payments and you have to have earnings from which you pay Class 1 NICs or would if they were high enough.
While you are studying any exempted payments your employer makes to you will not be counted as earnings so you will not qualify for statutory payments.
But instead of Statutory Maternity Pay you might qualify for Maternity Allowance or instead of Statutory Sick Pay you might qualify for Incapacity Benefit if you meet the relevant conditions.
Working Tax Credit
You need to be aged over 25 and working at least 30 hours a week to qualify for Working Tax Credit so it is unlikely that you will be able to work sufficient hours while you are studying to qualify. Your entitlement to Child Tax Credit would be unaffected, as it is not related to working. There are different rules if you are disabled or if you have children. For more information take a look at the HM Revenue & Customs website.
Basic State Pension and bereavement benefits
You can protect your entitlement to basic State Pension and bereavement benefits by choosing to pay voluntary (Class 3) NICs either while you are studying or up to six years later, if it is the right thing for you to do. For more information take a look at Voluntary (Class 3) National Insurance contributions.
Additional State Pension
Your entitlement to additional State Pension is built on earnings between the National Insurance lower earnings limit £4,368 in 2006/2007) and the upper earnings limit (£33,540 in 2006/2007).
In the periods when you are working for your employer rather than studying you may pay or be credited with enough contributions to allow you to qualify for additional State Pension.
Unlike the basic State Pension you cannot secure additional years by paying voluntary (Class 3) NICs. But if you are a carer you may qualify. For more information take a look at Home Responsibilities Protection.
Jobseeker’s Allowance (JSA)
You may pay enough Class 1 NICs while you are working rather than studying which means you may qualify for contribution-based JSA. If you are entitled to contribution-based JSA but your income is still below the income the law says you need to live on, you may be able to get income-based JSA. Also if you have not paid enough NICs, you may get income-based JSA.
For more information about JSA take a look at the jobcentreplus pages of the DWP website.
Incapacity Benefit
Your entitlement to Incapacity benefit in a benefit year depends on the amount of Class 1 NICs paid or credited for the previous three years.
In the periods when you are working for your employer rather than studying you may pay or be credited with enough contributions to allow you to qualify for Incapacity Benefit.
For more information about Incapacity Benefit take a look at the jobcentreplus pages of the DWP website.
