Disregarded Earnings and Permanent Health Insurance for ESA

Hello, I'm hoping someone can help clarify a few things for me.

I used to live in Australia and was injured at work. I am receiving an income from the insurer in the form of:

Weekly payments to support my recovery and lost earnings due to my injury
Medical and rehabilitation expenses that are reasonably necessary to help me recover.

The payments are made regardless of my employment status and have nothing to do with the termination of employment. The only thing that determines whether I receive the income is my capacity for work, which is assessed by an Australian doctor every 28 days.

Initially, my payments were paid through my employer's payroll, but they illegally terminated my employment after 3 months (the law prohibits them ending the employment within 6 months of the claim).

Since then, the insurer pays me directly, exactly the same amount as before. My income is subject to income tax, the same as if I were still employed and all of my documents from the insurer continue to state my ex employer as “employer”.

The policy is in their name and I did not contribute to the insurance premiums. It is a legal requirement for businesses in Australia to have workers compensation insurance

There isn't really a like for like system in the UK as far as I am aware, so I am confused about what these payments should be considered as. They could be classified as either:
- Earnings derived from Employment
- Permanent Health Insurance

If it is considered Earnings, DMG Chapter 49 states:

49017 [See DMG Memo 08/20] Earnings do not include
3. payments made for periods when an employee is on maternity leave, ordinary and additional paternity leave, adoption leave, shared parental leave or is away from work due to illness
49018 The words “derived from” mean having their origins in. Payments made for past or present employment should be treated as earnings, unless they are excluded under DMG 49017

If it is considered Personal Health Insurance, and therefore treated as a pension for ESA purposes, it should be disregarded based on DMG Chapter 51:

In connection with the coming to an end of the employment:
51790 A pension must be paid in connection with the end of employment of the person who it is paid for, to fall within DMG 51768. Occupational or public service pensions that are paid where the employment has not ended do not fall within DMG 51768. For example, war pensions paid
- Because of disablement and
- Regardless of whether the employment is continuing.

And:

Insurance policy providing benefits in connection with physical or mental illness or
disability
51798 A payment under a permanent health insurance policy is a pension payment for the purposes of ESA(Cont). It means any periodical payment
- made to a former employee and
- which was arranged by an employer under an insurance policy and
- which provides benefts to the former employee in connection with physical or mental illness or disability and
- Is payable on the termination of employment.

In both situations, I believe my income should be disregarded. If earnings, they are excluded under 49017. If they are pension/permanent health insurance payments, they should be disregarded under 51790. They also don't meet the requirements under 51798 as they aren't payable on termination.

ESA are making deductions based on my income which I believe is wrong but I would really like some confirmation from someone that knows more about this than me!

If anyone can confirm whether I am correct in thinking they shouldn't be deducting from my ESA payments, it would be greatly appreciated.

Thank you!

Hi David, my mistake I meant new style ESA.

Does the DMG Vol 9 Chapter 51 not apply to New Style ESA?

why does it say it needs to be in connection with the end of employment if that's not the case? Sorry I'm so confused!