I got out of this industry and role because there was no care for these clients, nor a plan to help those in need. It was best practice to intentionally suspend a client’s payments because they wanted the client to come into the office to capture their employment details so that we would claim that we actually had anything to do with helping this individual finding their own job… It was always about money and nothing to do with helping these people.
This chapter examines the outcome-based funding arrangements for jobactive providers. The chapter is structured according to the following topics:
Overview of funding model
Precarious employment and churn
Fees for training and other programs
Outcome payments and payslips
Other impacts on service delivery
The committee's recommendations are set out at the end of each section.
Overview of funding model
Jobactive providers operate under a primarily outcome-based payment model. Providers receive outcome payments when a participant has remained in employment for four, 12 and 26 weeks.
In addition, providers receive some funding upfront, unconnected to outcomes. These administration fees range from $250 to $438 depending on the participant. The proportion of funding received up-front has reduced in comparison to previous Job Services Australia contracts.
For an outcome payment to be made, a job seeker must earn enough income over the relevant period to reduce their income support payments or work a certain number of hours. Providers can receive full or partial payments:
A full employment outcome payment to the employment service provider will only be paid when a job seeker earns enough to reduce their income support by 100 per cent. A partial outcome payment is paid when a job seeker’s income support is reduced by 60 per cent.
Outcome fees vary significantly depending on a range of factors including the stream of the participant and period of unemployment. Increased payments for more disadvantaged job seekers are designed to incentivise providers to get these participants into work. Additionally, a 25 per cent loading applies to payments to providers who operate in regional locations. The average outcome payment is approximately $1 400 according to the National Employment Services Association (NESA).
Providers cannot claim an employment outcome for a Stream A participant if the job placement occurred in the first three months of assistance.
The outcome driven funding model has been an element of employment services for two decades, although aspects of the model have changed. An outcome-based model is designed to focus providers on achieving results, however paying for employment outcomes can have high deadweight costs because the value-add of providers is difficult to measure. This is because providers receive their outcome payments regardless of the degree to which they contributed to the participant securing work.
The committee heard that there is insufficient up-front funding under the current model. NESA submitted that there is an over-emphasis on funding employment outcomes:
…the growing degree to which outcome payments are required to subsidise delivery of up front, core and prescribed services; has become excessive.
According to the Australian Council of Social Service (ACOSS), an over‑emphasis on funding outcomes has a number of adverse effects including 'parking' and 'creaming' (these issues are discussed in more detail below). Additionally, the lack of up-front funding can be harmful to the viability of smaller not-for-profit providers, reducing provider diversity.
The committee heard that the current model focusses on short-term employment outcomes. According to Social Ventures Australia, the current system is based on 'a narrow conception of what constitutes a positive outcome'. Some stakeholders were supportive of a broader framework of payments to recognise improved job readiness. For example, the Smith Family suggested that overcoming personal barriers, career plans and skill development could be part of measureable outcomes. A similar approach was advocated by Social Ventures Australia:
…alternative measures of employment outcomes, such as cumulative weeks of employment over a twelve-month period. This kind of analysis will become increasingly similar with better use of Government administrative data rather than relying on the service provider to collect the data. Using these kinds of metrics will also better reflect the experience of people moving in and out of work or taking part-time or seasonal work and help understand strong and weak attachment to the labour force.
For a job seeker with complex needs, the trajectory from engagement, changing of habits and behaviours, learning and consolidation of skills, testing and embedding skills as well as managing complex needs, might be best measured over a period closer to 60 weeks.
Along similar lines, the Smith Family suggested that medium and longer-term employment outcomes should be measured:
…measuring job placements should include whether the candidate was able to sustain employment over the medium to longer-term. In focusing on outcomes, reasons for termination should also be measured, such as the individual’s performance, the employer’s approach, and the impact of broader economic conditions.
During the inquiry there were some misconceptions that providers are incentivised to impose demerit points. Providers do not receive a payment or benefit from compliance activity. Instead they are required to apply the compliance framework or they risk sanctions under the jobactive deed.
Funding model under future employment services
The Employment Services Expert Advisory Panel recommended a payment model that balances higher up-front payments with outcome payments linked to performance. According to the Panel, higher up-front payments ‘will mean providers can immediately invest more in job seekers, leading to better outcomes’. The Panel's report notes that higher up-front payments are used in the Transition to Work program and ‘are considered to be a key reason for the program’s success’.
The Panel also recommended that payments be adjusted for regional and local variation. According to the Panel, this will ensure providers are ‘appropriately resourced to deliver high quality services to job seekers, regardless of their location’. In support of this, the Panel noted that the Organisation for Economic Co-operation and Development (OECD) has emphasised that ‘boosting job creation, productivity and inclusion will not be achieved without taking into account local and regional characteristics’.
The Panel’s report also recommended a reduction in participant churn by assisting them to gain sustainable employment. However the report is not clear on how this would be achieved.
Precarious employment and churn
When defending jobactive's overall performance, the government often states that the program has achieved more than 1.2 million job placements since 2015. However, when participants cycle in and out of short term work, their provider can continue to receive outcome payments. According to the Department of Jobs and Small Business, they have policies and rules to prevent providers moving participants through a series of jobs to receive repeat payments. Yet the Department's own data indicates that from 1 July 2015 to 31 August 2018, providers have received multiple outcome payments for placing the same 4,765 people in seven or more different jobs. In the 2017-18 financial year, the majority of job placements that providers were paid for did not achieve a 26 week outcome.
During the inquiry, the committee heard that the jobactive payment structure incentivises short term and precarious employment over longer term, sustainable employment. The committee was told often that participants are pushed into any job, rather than a job that meets their needs and aspirations. Submitters emphasised that often these short term jobs do not last, for example, because they are incompatible with the circumstances of the participant, or because the job was never going to last (for example, seasonal employment). For example, Ms Imogen Ebsworth, the Director of Policy and Research from Anglicare Australia submitted that the work-first focus does not support long term employment:
…there's quite a lot of evidence that throwing people into insecure work and churning them through casual positions actually diminishes their skills and ability to stay in meaningful work and to stay employed.
According to ACOSS, outcome-based funding leads to providers under‑investing in interventions that assist participants over the medium and long-term:
Evaluations of outcomes-based employment services programs in which there is little or no specification of service inputs (in Australia and elsewhere) have found that this usually leads to service standardisation rather than innovation, with most providers concentrating on the least costly (and least risky) path to a short-term employment outcome: supervised job search (often supplemented by motivational strategies). Under these conditions, providers usually under-invest in more substantial (and costly) help, even where this may substantially improve medium to long-term results.
Additionally, these short term and precarious jobs are more likely to leave the participant underemployed, meaning that if they do not earn enough, they are still on income support and have the added challenge of negotiating part time or casual employment whilst also continuing to meet their mutual obligations. For example, the AUWU provided the following testimonial from a participant whose provider pushed them to apply for other jobs instead of investing in the job they had:
I found myself a job after 8 or more years unemployed. I am now employed but underemployed. I find I am still struggling financially so need to keep going to my agency. They then pushed me to apply for other jobs and not invest in the one I found.
The committee heard that in some cases short term employment can be beneficial for the participant because they gain work experience and the job may lead to another opportunity. Mr Nathan Smyth, Deputy Secretary Employment, Department of Jobs and Small Business emphasised the value of short-term work:
Many unemployed people use part-time or short-term work as a steppingstone to full-time employment, and short-term jobs as a pathway to longer-term employment. A departmental analysis and international research has shown that short-term jobs can provide participants with work experience and work habits that help them to move into sustained employment…
To support this, jobactive providers can claim up to four four-week outcomes for any jobseekers within a year.
Yet, the committee heard that as a consequence of the incentives towards short term and precarious employment, participants often churn through jobs, frequently leaving and returning to the jobactive program as they gain and then quickly lose employment. This point was noted by Ms Ebsworth from Anglicare Australia:
It [jobactive's incentive structure] has also created a system where any job will do and people are forced into work that's not appropriate for them, which means that they pop straight back out. They are churned back into the system. That just costs us all more, and it's demoralising.
According to Mr Andrew Cummings, Acting National Coordinator of the Multicultural Youth Advocacy Network, the incentive to churn participants means that the aspirations of participants are not supported:
…those very low amounts of money encourage that churn mentality of, 'We have to keep churning people through in order to recover the cost it takes for us to deliver the service.'
The Department of Jobs and Small Business advised that it does not collect data on whether job placements under jobactive are full-time or part-time.
The committee is concerned by the evidence that jobactive's payment structure incentivises providers to push participants into short term and precarious employment quickly, in order to receive an employment outcome payment. The funding structure means that providers benefit from participants cycling in and out of precarious jobs. In short, the model rewards churn.
The committee recognises that short term and casual employment does benefit some participants by giving them work experience and exposure to employers. The committee also notes the view of many submitters that the funding model places too much emphasis on short term employment, often at the expense of sustainable employment that meets the needs and aspirations of participants. The committee is of the view that the attainment of short term and casual jobs should not come at the expense of more sustainable employment. Certainly, participants should not be pushed into precarious employment or ‘set up to fail’ in a job that they will not be able to keep because of their personal circumstances, such as caring responsibilities or reduced work capacity. The committee is strongly of the view that it is inappropriate that providers have such strong incentives to push people into work that won’t last, just so the provider can get an outcome payment.
The committee recommends that the government examine the funding model to ensure that the funding model does not inappropriately incentivise the attainment of short-term or insecure employment outcomes at the expense of more sustainable medium and long-term outcomes. This should include consideration of whether outcome payments are desirable, whether payment timeframes are too short and whether a portion of payments should be clawed back if a participant re-enters the system, and whether outcome payments should be less for insecure jobs.
Creaming and parking
The committee heard that the funding model encourages providers to focus on some participants and ignore others. As noted by Ms Emma Dawson, the Executive Director of Per Capita, participants who are easy to place are 'creamed' by providers. Other participants are 'parked', meaning they do not receive assistance from their provider. According to data from the Department of Jobs and Small Business, as at 31 August 2018, 64.9 per cent of job seekers have been on the caseload for at least 12 months, and 19.6 per cent for at least five years. Additionally, the average time on the caseload for Stream C participants is five years. Based on 2016 and 2017 data, just over a quarter of Stream C participants leave income support and return between six and twelve months later.
According to ACOSS (and as previously noted), an over-emphasis on funding for job outcomes has the adverse effects of 'parking' and 'creaming'. The UNSW Canberra Public Service Research Group submitted that providers are incentivised to minimise spending on participants who are less likely to achieve employment:
Achieving employment outcomes for jobseekers not only generates income for jobactive providers but positions them for success in future tenders for government business. That is a powerful incentive for them to minimise the cost of servicing the jobseekers least likely to be employed in an over‑supplied labour market, regardless of flow-on effects.
Similarly, the Accountable Income Management Network pointed out that the funding model is not incentivising providers to address barriers to employment:
In 2015, the Centre for Policy Development’s analysis of jobactive found that, according to the Department of Jobs and Small Business’s own data, job seekers who were struggling with multiple and complex disadvantage (Stream C) had very poor outcomes in the program. Stream C job seekers were less than half as likely as the most employable participants (Stream A) to find work within the first 3 months of the program.
According to the Melbourne Institute of Applied Economic and Social Research, jobactive provides 'little financial incentive for service providers to assist jobseekers with high levels of disadvantage'. This point was also made by Mr Michael Kolomyjec, Group Executive of atWork Australia, a jobactive provider, who suggested that the existing model 'is not sufficient to meet the investments needed to support training and find jobs' for Stream C participants.
However not all submitters considered that there was insufficient attention given to participants in Streams B and C. An ex-consultant for a private employment agency advised that the company she worked for was focussed on Streams B and C who bring in more money:
The company I worked for…was a for profit provider therefore we were focused mainly on Stream B and C clients those who brought in more money for the company. We barely looked at the Stream A clients as they were deemed job ready yet still a huge portion of clients from this category are still unemployed…
The committee notes evidence that the funding model can encourage providers to focus on participants who are easier to place, despite greater outcome payments for participants who have been assessed as harder-to-place.
As discussed in Chapter 5, the Expert Panel recommended that 'job ready' participants no longer have a provider and instead self-service in an online environment. The committee considers that this substantial change would reduce the opportunities for providers to take advantage of participants who are easier to place and ignore harder-to-place participants. Nevertheless, the committee considers that funding arrangements must ensure that there are sufficient incentives to ensure that harder-to-place participants receive adequate attention and support from their provider.
The committee recommends that the government consider options to improve the funding model to ensure it contains sufficient incentives for providers to properly assist harder-to-place participants.
Fees for training and other programs
According to the Australian Unemployed Workers' Union (AUWU), the funding model incentivises providers to push for billable non-work activities rather than focussing on helping people to gain employment:
…this outcome driven approach has created perverse financial incentives for employment service providers to churn unemployed workers into easier and more reliable income-producing outcomes, such as employability training, Work for the Dole, and job search programs, which have little to no effect in helping people gain employment.
For example, the AUWU suggested that the funding model can incentivise a provider to preference training over a participant attending genuine employment:
This outcome driven system has led to a number of unemployed workers actually being encouraged by their employment service provider, under the threat of a penalty, to attend an employability training activity instead of attending employment as their employment does not meet the criteria for an outcome payment. The AUWU is aware of a number of unemployed workers who have lost their jobs in this fashion.
According to one submitter, their provider ran 'bogus' courses through a subsidiary in order to claim fees from the government. Another submitter, an ex-consultant, advised that it was best practice to 'fudge' the number of job seekers in Work for the Dole to get more money.
The quality and appropriateness of training programs is discussed in Chapter 7.
The committee notes evidence that, in some cases, providers are incentivised to prioritise non-work activities for which the provider can claim a fee. The committee also notes that these activities can directly conflict with genuine employment opportunities which do not result in an outcome payment. The committee considers that such perverse incentives must be eradicated from the system, particularly for activities that do not help people get into employment.
The committee recommends that the government review funding arrangements for non-work activities to ensure integrity in the system.
The committee recommends that the government review the funding model to ensure it promotes activities that improve the employability of participants.
Outcome payments and payslips
According to the Department of Jobs and Small Business, 23.3 per cent of job placements are currently sourced by providers. However, many submitters advised that they secured employment without the assistance of their provider, but then their provider was still able to claim an outcome payment associated with the employment. For example, Ms Kylie Wright, a consultant, advised that all the employment claims from her office were created by participants finding their own employment; however her employer (the provider) has continued to make claims based on this and has received outcome payments. Another submitter reported that her provider received an outcome payment for a job she got before even engaging with her provider:
I received confirmation of a position in New Zealand which I had applied for and been interviewed for before attending the Jobactive agency, who claimed a kickback against my securing of that job.
The committee received evidence that providers have sought payslips from participants so that the provider can claim an outcome payment. In some cases, participants reported being repetitively harassed by providers for payslips. For example, Ms Rozie Hart, who sustained a workplace injury and retrained at her local TAFE, submitted that her provider harassed her for payslips despite not assisting her to find work:
I have never received any assistance from a Jobactive Service Provider that led to a job, let alone an interview. Every time I secured another work contract, my provider harassed me for copies of my payslips…
The committee received concerning evidence that some providers were threatening participants who were still on jobactive, including with payment suspension, if they did not provide their payslips. For example, a researcher with a PhD reported being repeatedly threatened by her provider, who was 'overtly focussed' on obtaining her payslips:
On my first refusal to provide payslips, I was told in person that I would be cut off from Centrelink benefits would be suspended if I refused to comply.
I was told that they would find me some work as a cleaner if I refused to comply. I told them that this was good news as I was looking for work. I never heard back from them about any work—as a cleaner or otherwise.
I was taken out of a training program (‘Back on Track’) that I was obligated to attend by my provider on two occasions to discuss my unwillingness to provide payslips.
When I requested support to undertake further training (TESOL training), I was told that my Provider would be unable to assist me in accessing any opportunities as I had not given my payslips to my provider. This was reflective of a general unwillingness to support access to work that is likely to be longer term.
As I was leaving one appointment at my provider, I was told to wait for a one-on-one meeting with a senior staff member. He demanded my payslips, telling me again that if I failed to provide them, then my Centrelink benefits would be cut off.
Additionally, some participants reported that providers lied to them—telling them it was part of their mutual obligations to provide the payslips. For example, a submitter from Victoria reported that she was told she had to provide her payslips as part of mutual obligations:
I had case managers ask for personal documents and pay slips, using ‘mutual obligations’ as a justification. When I asked for proof that mutual obligations included providing these documents, I was provided with a statement from the 1991 Act that stated there were mutual obligations.
The submitter advised the committee that she was threatened for not providing payslips:
I was bullied and threatened with intimidatory behaviour, including deliberate refusal to accept work as a legitimate reason to not attend an appointment – I have emails showing that I informed the employee that I was working and an email reply stating that he would say I didn’t have a valid reason if I continued my refusal to supply payslips.
Providers have also used inducements such as gift cards to get payslips from participants. The committee also received evidence of providers contacting employers directly to request payslips. The AUWU reported that it has heard of a number of cases of people losing their jobs due to providers harassing their employer 'every day for them to hand over the relevant payslips'. The Department of Jobs and Small Business advised that providers are not permitted to contact an employer without the permission of the job seeker. Additionally, the Department advised that if providers are found to have contacted an employer without permission, 'the Department addresses this through its contract management processes for managing provider performance'.
The committee is concerned by evidence that participants are being harassed by providers for payslips in cases where the provider did not assist the participant to secure work. Yet the committee notes that under the current payment structure, and with the limited oversight of jobactive providers, it is not surprising that this practice would occur.
The committee also notes evidence that some providers are contacting employers to seek payslips without the permission of participants, which they are not permitted to do. The government must take action to prevent this from occurring.
The committee recommends that the government take additional action to prevent providers from contacting employers to obtain payslips without the permission of the participant.
Other impacts on service delivery
The committee received evidence that jobactive's outcome driven funding model has impacted on service delivery. According to the Youth Affairs Council of South Australia, some providers have cut staff numbers 'which has dramatically increased caseloads and has led to a significant decrease in the services delivered to clients'. Per Capita and the AUWU submitted that contracts should be restructured to incentivise staff to have constructive engagements with participants.
The committee heard that the funding model, although providing a regional loading, can make it difficult to achieve outcomes in regional areas. According to Mr Matthew Hall, Chief Executive Officer of Sureway Employment and Training, issues in regional locations (transport, limited availability of specialist service supports, long waiting lists, environmental factors and small populations) can affect a provider's ability to deliver outcomes under an outcome based model. Mr Hall suggested that the financial loading for regional job outcomes is insufficient to account for regional challenges:
Unfortunately…a financial loading does not create a bus service or magically generate a mental health specialist.
The quality of service provision under jobactive is discussed in further detail in Chapter 5.
As noted in Chapter 5, service quality under jobactive has been poor, especially for particular groups and the most disadvantaged participants. The committee notes evidence that the outcome driven funding model is contributing to inadequate servicing. Accordingly, the committee is of the view that the government should examine options to ensure the funding model promotes high-quality service provision to participants and employers.
The committee recommends that the government examine options to improve the funding model to ensure that it promotes high-quality service provision to participants and employers.
Senator Gavin Marshall
Senator Deborah O'Neill