In order to prevent double payment, the Social Security Agency (SSA) can recover from you some or all of the amount of Jobseeker’s Allowance, Income Related Employment and Support Allowance and Income Support ('state benefit') it pays to an ex-worker who is then awarded compensation by an employment-related tribunal. This process is known as 'recoupment'.
Cases where the recoupment rules apply
These rules apply when a tribunal makes a monetary award for:
- unfair dismissal - including interim relief orders
- failure to make a guarantee payment
- failure to pay an individual employee a protective award
- failure to pay wages during a period of medical or maternity suspension
- compensatory awards in discrimination cases
The rules also apply to awards for failure to consult workplace representatives in collective redundancy situations, ie protective awards themselves.
Recoupment and monetary awards
If an individual receives state benefit during the period covered by a monetary award, the SSA must be repaid any benefit received during this period.
Any amount of the award which represents arrears of pay - or compensation for loss of earnings - up to the date of tribunal is recoverable by the SSA. This part of an award is called the ‘prescribed element’ and is the only part of the award which can be recouped.
Recoupment and monetary awards - Tribunal
Where an award of compensation is made by a tribunal, the tribunal will identify how much of the award represents arrears of pay up to the date of the tribunal hearing (prescribed element).
You should pay the employee the difference between the prescribed element and total award immediately.
However, you must not pay the prescribed element to the individual until you receive a recoupment notice from the SSA. If you pay the prescribed element to the individual beforehand, you will still have to pay the SSA the amount specified in the notice.
You will receive notification from the SSA:
- where a judgment is announced at the tribunal hearing - within 21 days following the announcement or within nine days of the judgment being sent to the parties, whichever is the later, or as soon as practicable after this period
- where no such announcement is made - within 21 days of the judgment being sent to the parties or as soon as practicable after this period
The recoupment notice will tell you to pay the lesser of:
- the prescribed element - after any income tax and National Insurance contributions (NICs) due have been deducted
- the total amount of state benefit received by the individual for any part of the period covered by the prescribed element
When you receive notification, you must - if you haven't already - immediately pay the difference between the prescribed element and total award to the employee.
Recoupment and monetary awards - Arbitration
Where an award of compensation is made by an arbitrator, it will be the responsibility of the claimant to discuss any recoupment required with the SSA. For reasons of confidentiality, the arbitrator will not disclose any information directly to the SSA but will advise the claimant in writing of their obligations.
Recoupment and protective awards
If an industrial tribunal or arbitrator finds that you failed to consult workplace representatives in a collective redundancy situation, you may be required to pay a protective award to the redundant employees or those you proposed to make redundant.
Read about the redundancy consultation process.
Recoupment and protective awards - Tribunals
When an industrial tribunal makes a protective award, it will notify the SSA and advise you to send the SSA the following information:
- the name, address and National Insurance number of each employee entitled to a payment under the award
- the date - or proposed date - of termination of employment of each employee covered by the award
You must send the information within ten days of the judgment being announced at the hearing or, if not, when it was sent to the parties. If you can't meet this deadline, you must do it as soon as reasonably practicable.
The SSA will send you a recoupment notice within 21 days of receiving the above information or as soon as practicable. You must not pay any employee who has claimed or received 'state benefit' until you receive this notice.
The recoupment notice will tell you to pay a specified amount to the SSA out of the amount due under the award. This amount will be the lesser of the:
- amount due - after the deduction of any income tax and NICs - from the start of the protective award period to when you sent the SSA the necessary information
- total amount of the 'state benefit' received by an employee for any part of the same period
Once you receive notification, you must immediately pay the employees any difference between the recoupment amount and total protective award.
If you pay an employee this amount before receiving a recoupment notice, you will still have to pay the SSA the amount specified in the notice.
Recoupment and protective awards - Arbitration
Where an arbitrator makes a protective award it will be the responsibility of the claimant to discuss any recoupment required with the SSA. For reasons of confidentiality, the arbitrator will not disclose any information directly to the SSA but will advise the claimant in writing of their obligations.
Recoupment following appeals - Tribunal decisions
If you appeal - or apply for a review – the SSA should suspend recoupment until the outcome is known.
If the SSA has already recouped and the amount of recoupable benefit is subsequently altered as a result of an appeal or review, the SSA will pay back any excess or recover a further amount as appropriate.
Recoupment following an appeal or challenge to an award made by an arbitrator
Where an appeal or a challenge is lodged in respect of an award made by an arbitrator, the claimant should notify the Social Security Agency and seek guidance from them on the timing of any recoupment which may apply.