The Working Family Payment (WFP) is an in-work support which provides an income to employees on low earnings with children. WFP is designed to prevent in-work poverty for low paid workers with child dependents and to offer a financial incentive to take up employment. To qualify for WFP, a person must be engaged in full-time insurable employment which is expected to last for at least 3 months and be working for a minimum of 38 hours per week or 19 hours per week. A couple may combine their hours of employment to meet the qualification criteria.
The “hours worked” eligibility criterion has been reduced significantly since the introduction of the scheme in 1984, from 30 hours per week to 19 hours per week in 1996. Indeed, in-work supports work very well with the vast majority of families and facilitate an element of choice which allows them to select the option which suits them best.
It is crucially important that WFP does not inadvertently subsidise unsustainable low earnings or encourage employers to offer minimal hours of employment. The longer term goal of WFP, as an incentive to take up and remain in work, could be compromised if the nature of the work taken up is not ultimately sustainable without ever-increasing and perhaps ultimately unsustainable levels of subvention.
Notably every 1000 additional claimants would increase the budget by almost €7.02m. A 10% increase in the current numbers of WFP recipients (5,300 claimants) would increase the budget by €37.2m. Therefore any plans to reduce the WFP hours-worked threshold would have to be considered in the overall budgetary context.
The rationale for 38 hours per fortnight requirement is based on a number of reasons:
- Unemployed couple families are incentivised to gain employment with the option to combine their hours to reach the minimum requirement and raise themselves out of poverty by increasing their income.
- A working lone parent who works 15 hours per week is raised significantly above the poverty line and is therefore incentivised to work additional hours to qualify for WFP.
- WFP is not paid with Jobseekers Transitional Payment so a change in hours would not affect this group other than aggravate the 'cliff effect' of coming off the dual OPF/WFP payment.
A possible reduction in hours could also result in the following behavioural effects:
- A reduced incentive to increase part-time hours, resulting in low incomes.
- Permits employers to offer reduced hours contracts resulting in WFP subsidising earnings
- Possible incentive for those on higher earnings to reduce hours to qualify.
WFP is not intended to subsidise unsustainably low earnings or incentivise employers to offer minimal hours of employment. WFP as a policy instrument is designed to provide in-work support and not contribute to greater number of workers in low hours employment.