Irregular Payments: Assessing the breadth and depth of month to month earnings volatility

Published on Jobs, Skills and Pay

This groundbreaking piece of research addresses the question of earnings volatility, unearthing some striking findings about the lived experience of work – and the pay we receive for it – in the UK today. Up until now, our understanding of volatility in earnings over time has been limited to changes in pay from year to year.

This report therefore makes use of anonymised transaction data from over seven million Lloyds Banking Group (LBG) accounts in order to demonstrate the breadth and depth of changes in pay from month to month.





  • Monthly pay fluctuations are the norm for the majority of employees. Only 9 per cent of employees who remained with the same employer throughout 2016-17 had no months in which take-home pay changed by a notable amount (greater than five per cent, either up or down).
  • Most employees with a steady job (73 per cent) had volatile pay, which we define as having notable changes in pay from month to month that are down to more than just pay rises, promotions or bonuses (i.e. at least one notable downward change in monthly pay over the course of the year). Many of this group will have multiple changes in varying directions. In fact, 40 per cent of those with a steady job had notable pay changes that weren’t exclusively positive in six or more months of the year.
  • For employees remaining with the same employer throughout 2016-17, the average notable monthly increase in pay was £530 and the average notable monthly decrease in pay was -£290. These changes are substantial. The average monthly decrease is roughly similar to the average amount UK households spend on groceries each month, which was £250 in 2016-17.


Differences across the earnings distribution

  • Over 80 per cent of lower earners (those with annual take-home pay of around £10,000 a year) with a steady job have volatile pay, compared to two-thirds of those on higher earnings (with take-home pay of around £35,000 a year).
  • The direction of pay changes has a large positive skew for those on higher earnings in a steady job: on average their notable positive pay changes are significantly larger than their notable negative ones (a £990 average positive change compared to a £520 average fall). In comparison, the size of notable upwards and downwards changes is much more similar for those on lower earnings in a steady job (£220 compared to £180).
  • The absolute average monthly pay change for those with a steady job is highest for those on the very lowest earnings (in excess of 15 per cent), and lowest for those with annual take-home pay close to the median amount of £17,500 (at 8 per cent). Those earning close to £45,000 had average monthly pay changes of almost 12 per cent.


Relationship with Universal Credit

  • Our findings highlight the importance of a safety net that is responsive to fluctuations in earnings. A 21st century social security system should be able to respond to monthly changes in pay, in particular a responsive system should mitigate the impact of short-term falls in pay with timely and proportionate increases in benefit awards.
  • Universal Credit (UC) is designed to be responsive to changes in pay on a monthly basis. The taper rate, currently set at 0.63, means that every £1 change in earnings leads to a 37p change in income. This acts as a moderating force, for example if someone’s take-home pay falls by £100 from one month to the next then their personal income (pay plus UC) will only fall by £37.
  • However, there are specific design issues relating to UC’s monthly assessment periods. First, many UC claimants (40 per cent in our sample drawn from LBG customer account data) are paid more frequently than twelve times a year and so will experience volatility in their personal incomes (pay plus UC) even in circumstances in which pay remains unchanged between each pay packet. Second, assessment periods for UC start and finish on arbitrary dates. They are linked to the date on which an individual first makes a UC claim rather than the dates on which pay is received. For some individuals this will act to accentuate rather than moderate the impact of fluctuations in pay on household incomes. This is due to the potential for a sizeable lag between pay receipt and UC receipt.

Policy Recommendations

  • We call for the Department for Work and Pensions (DWP) to investigate the impact of more-often-than-monthly pay packets on volatility and living standards. Monthly assessment periods are a core part of UC’s design and reducing their length may only act to increase volatility, making planning and budgeting even more challenging for those with volatile pay – it would also be a significant technical challenge. But it’s clear that the rigid adherence to monthly assessment periods is acting to introduce volatility in personal incomes in situations where pay is constant from month to month.
  • Given that it makes little sense not to align assessment periods with pay periods where possible – reducing the lags between pay receipt and UC award payment – we also propose that the DWP should grant individuals already in work the flexibility to move their assessment period in order that it better reflects the dates on which they are paid.
  • Further, and as we have called for elsewhere, it is clear that those on a zero hours contract but who are in practice working regular hours should have the right to a regular contract. Similarly, we believe that employers should offer a minimum forward notice for changes to shift patterns.