how will compensation affect my benefits?

[beaniesq]

Hi all

I have been off work and receiving Incapacity Benefit for 18months, although I have technically been employed during that whole time.

Recently I came to a compromise agreement with my employers (in order to keep them out of court, which is another story altogether), for a lump sum of 5k in return for a severence of my contract with them.

This will be a tax free sum, but a friend of mine told me that I might have to pay it all back to the DWP or the benefits office!

Is this true? How does compensation affect my benefits?

[buildersmate]

A Compromise Agreement is an agrement to sever the employment contract and not to pursue any further claim on the employer. In exchange, a sum of money is paid over which covers at least the notice period or money in lieu of notice, plus more.
It is typically structured so it isn't salary, so no tax or NI is due on it.
It is not a redundancy payment as such.

[TCL-MUMPING]

Once entitlement to SSP ends you can claim Incapacity Benefit (IB) and if a salary continued to be be paid, IB would not be affected.

[beaniesq]

Thanks all - that's great news. The pay-off is classed as "compensation for loss of office", which means it will be a tax free sum. And I dont have any other savings, so I will be well below the 8k barrier.

It would be a big disappointment if I had to pay it all over to the benefits office after I fought so hard to get it!