Payment model
The aim of The Work Programme is to deliver a more efficient service for the taxpayer and a more tailored service for individuals.
We are considering a payment model that reflects the differing nature of the challenges providers face and balances risk and reward. This would mean:
- payment exclusively or heavily based on delivering results – not just placing people in work, but keeping them there
- payment made after results have been delivered.
What challenges does this cause and how can DWP support providers to overcome these?
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Whilst being supportive of an emphasis on payment by results to drive up performance a Social Activation Fee would allow for reward for customers who first have to acquire other skills such as navigation, use of assistive technology, communication in braille etc before they can benefit from traditional employment support activities such as job searching and CV writing.
It would also enable the Department to see a tangible result from an investment in a client even in circumstances where they failed to obtain employment at the end of the contract period.
In the interest of clients, I hope that the prime contractors can see that long termand intensive engagement is necessary to make the difference for the people furthest from the labour market. Purely outcome-based payments would make this type of provision impossible.
Hopefully, payment structure for these groups can be structured with this in mind – remembering that, for the hardest to reach, the impact of a move into employment can be beyond even the value of welfare benefits saved – it can be generational and can affect public expenditure in other areas such as health and social care. Willingness by DWP and the prime contractors to find ways to fund more intensive, longer-term engagement for these groups will tell us whether they have listened to the advice of the voluntary and community sector organisations on the front line of this type of provision.
As a Third Sector organisation we are keen that the third sector has the ability to act as a Framework Provider as well as potentially a sub-contractor for the Work Programme. This will require a payments model where all the risk does not lie with the provider. For the third sector to properly engage in the Work Programme their will be a necessity to have a payment model where some up-front funding is made available. For specialist organisations working with the harder to help client group their must be a recognition that considerable time and staff resources are invested in supporting people so that they are able to progress either into a job or other positive outcomes. Their is a cost attached to this which cannot wait until after the client acheives a sustainable job.
The payment model should also take into account some of the geographic issues that impact on contract delivery costs. In large rural areas and in island communities with low volumes of clients the delivery costs can be extreemly high and largely outcome based funding would make it very difficult for small locally based providers to continue delivering vital services.
We are the main providers of Welfare to Work services in our town, but are not prime contractors. Our Employment Services have been in place since 2001 and we are very proud of the trust and respect that we have built up with our clients, especially when working with those most distant from the labour market. Local delivery and knowledge is extremely important as needs vary from location to location.
Contracts are often given to the big organisations, who then ‘parachute’ into an area for a short time offering the world but not delivering – especially an area such as ours which is on the periphery of a large city region.
We are concerned about payments being so heavily weighted, if not exclusively, on job outcomes as this does not take full account of the client group and how long the journey can be for someone to move from long-term unemployment into sustained employment or all of the support that needs to be put in place in the steps between, and during the first months of employment. Softer measures need to be considered e.g. into voluntary work, training, learning etc.
We also agree with previous posts about evidence requirements – yes they should be rigorous, but surely not so pedantic! We have many clients who have moved into work but for whom we can’t get written evidence in exactly the format requested by DWP or SFA. In the brave new world, this would mean that we would not receive anything at all for the large amounts of support that may have been given to that client.
Whilst we are confident that we offer a quality, holistic, client driven service, we would be concerned that other providers would push people straight into work to get the outcome payment even if the person was not ready to sustain employment, thus damaging longterm prospects and leading to lack of confidence.
However this transpires, please make sure that the ‘workers on the ground’ who know what is needed locally and who already offer professional, quality services are consulted about the content of what is offered to our most vulnerable clients.
Further education is going through drastic cuts….it wouldn’t be able to sustain being involved with the current payment structure. And they’re not taking on people at the moment and so will not be able to support a contract without additional staff and funding….and they can’t wit six months.
Big issue will be that the service user will receive a poor service as everyone seeks to make a contribution with tight margins.
We have been doing this stuff for 12 years, would claim to have invented many of the most successful methods of supporting people into work, and have no problem with payment by results, PROVIDED:
1.There is a sensible and sensitive sliding scale of payment, depending on
a) the client’s distance from the labour market, measured by identified barriers and/or length of time on benefit,
b) the length of time the client stays off benefit afterwards, NOT just the time they stay in their first job. Some clients will get a short-term job to start with, then go back on benefit for a few weeks, then get another job. Not ideal, but increasingly likely in the current market and certainly better than not working at all, and
c)the state of the local labour market, measured by levels of unemployment/ economic activity/current vacancies, or something similar
2.Cash flow for smaller subcontractors is adequately supported
3. There is some central record of individual subcontractor performance. We have been caught out before in a contract where we over-performed on our subcontract, but were penalized, – and possibly discredited by association – when the prime contractor failed to deliver the rest of the main contract.
4. DWP/JCP take responsibility for tracking. We spend hours – days- of staff time chasing employers for outcome evidence when the JCP data base must know when someone comes off benefit and whether they start claiming again later. A complete waste of energy, time, and money.
I work for Lifelong Learning UK which is the Sector Skills Council whose footprint includes the employers who will deliver the work programme.
To be a success the programme needs skilled staff from day one. Although there are many working in the system there is always turnover of staff, with many mving to better paid jobs in the world of Further Education and Work Based learning. Turnover has an impact upon the customers as much of helping people back into work is about personal relationships and rebuilding confidence. New staff usually put them back.
In addition new staff need training (and qualifying) in a range of skills. Few people enter the workforce fully equipped and so training needs have to be addressed in the initial stages of employment(as in any other role).
However with little public support for such it is left to either employers or employees to pay for this.
With payments due six months or more after the person has entered work staff training budgets will be squeezed.
There needs to be some recognition of this through support for W2W staff via such programmes as apprenticeships and bursaries for qualifications.
Lifelong learning UK are working to lobby for these to be put in place.
North West Network is a charity based in the North West of England which helps Voluntary and Community organisations to access funds. We are particularly active in securing ESF funds for organisations working with the unemployed and those distanced from the labour market. We have therefore a keen interest in the way that the Work Programme will impact on organisations in the North West delivering training, employment opportunities and learning. With respect to the particular issue of payment method being addressed here what follows is a short summary of some of the common concerns conveyed to us on this subject by Voluntary and Community organisations accross the North West.Hope this is helpful. john@nwnetwork.org.uk
1. Delayed payment system. Many organisations will not be able to survive purely on outcome based payments, they will need supporting at least to cover their basic costs whilst working with any individual.This is perhaps the key issue. Voluntary and Community Organisations will find it difficult (perhaps even impossible in most cases) if the Prime Contractors simply pass on the payment by results terms they are committing to.
2. How much money will be made available to VCS organisations working with individuals as a percentage of the overall contract value?
3. Concern that Prime Contractors will want to claw back any initial payments if individual does not succeed in obtaining employment.
4. Payment to reflect the level of work involved in supporting the individual, if the sector is working with the hardest to help payment needs to reflect that.
5. Length of contracts and review periods are important if they are to be tied to payment methods.
6. Minimum sub-contract values – organisations need to be able to engage, they need to be able to get enough income to make the work worthwhile but not to be taking on more than they are capable of delivering.
7. Payment profile and reliability is an important issue and needs to be a clear part of any Prime Contractors guidance from DWP.
8. Guarantee of numbers of referral to enable organisations to plan delivery and cashflow.Organisations cannot plan without this and this will make an already inherently risky situation even riskier.
9. Will long term volunteering count as an employment outcome? ( this may not reduce benefit costs but may significantly reduce health care costs)
10. Will continuing education count as an outcome?
We believe that contracts should be in the region of 5-7 years.
Ideally there would be no early “for any other reason” termination clause. If such clauses cannot be avoided, the notice period stated in these cases should be at least two years. This would help to prevent financial disaster in the event of an incoming government cancelling all existing contracts.
A robust change control procedure should be implemented.
Contract terms should be simple and transparent.
We believe that all of these terms should then be passed down from Primes to their supply chain.
We suggest that DWP should issue penalty payments in the event of volumes falling significantly below predicted levels and advance funding to help with cash flow in the event of volumes being significantly increased.
We suggest that payments for the hard to help groups need to be weighted to reflect the intensive work that these clients need in comparison to job ready clients and that payments should reflect the true additional cost of achieving a sustained job outcome for a hard to help client. The assessment tool should be robust to ensure that clients are correctly categorised.
Payments should vary on a geographical basis to reflect the way in which the different costs of achieving job outcomes vary across and within Contract Package Areas. Local labour markets, levels of deprivation and transport issues need to be factored into these calculations.
Sustainment payments should be structured in way that caters for very brief periods of unemployment. A payment could, for example, be paid on a client being in employment for 48 out of the previous 52 weeks.
A process through which providers could access workforce development funding to pass on to their employers could also be considered.
Papworth Trust assumes that the new Work Programme will have a longer payment period than FND but remains unclear about how long it will be. Is it one year, two years, three years… etc?
We believe the Work Programme provides a real opportunity to help those who are hardest to reach, but unless the price for helping that group is proportionately higher there will always remain an issue of providers reaching for the ‘quick wins’ and parking others. There remains the danger that some will ‘play the maths, without delivering the service’.
In addition, by having a model that is based purely on payment when people are in work, does not take into account those people who are furthest away from the labour market and may require additional support upfront to become ‘work ready’. What is a sustainable outcome for those people facing additional barriers into work?
We have concerns that the proportion of funding which will be absorbed through finance costs (10-20%?) and prime contractor fees (20-30%?) will leave inadequate funds to support the target client groups.
As providers, we face many questions concerning the flexibility of the black box and the provider guidance:
• How long do providers deliver the service to individual clients for?
• How long do clients remain on the programme – is it a set period of time or the length of the contract?
We would urge the DWP to give providers greater flexibility than we have been afforded in the past. If provider guidance is set too rigidly, it does not allow the provider to create a personalised programme and will increase delivery costs without necessarily increasing outcomes. Providers will also require support from Jobcentre Plus to carry out sanctions in an appropriate and timely manner. This has not always been carried out in the past.
To help ease the cashflow of providers, we believe the DWP will need to consider a form of staged payments. We suggest that staged payments are seen as payments for every period (e.g. month or quarter) those clients remain off of benefits. If there remains a larger final payment at the end of the programme, we believe the incentive remains for providers to support clients to maintain sustainable employment.
Whilst I understand the drive for payments on results and pushing as much risk to the provider as possible I think we need a reality check. Many of the hard to reach long term unemployed need some specialist personal development type work which will create a genuine paradigm shift in their motivation, aspiration, self confidence and belief. Without this, they are not really fertile to training and are certainly not employable. There will always be some exceptions but by and large, it will end in failure. This has been acknowledged by almost every organisation I have dealt with from local authorities, RSL’s, primes, training providers, colleges and employers.
The problem is that no one is really doing anything about it. Certainly no one wants to put their hand in their pocket to pay for it.
On the naive assumption that we are genuinely going to get these people into work I suggest all parties need to wise up. Funders including local authorities are often paralysed by inertia, knowing things need to improve but with no idea or appetite about what to do differently. Given their generally risk adverse nature, this does not bode well. Primes et al want to release as little as possible from their coffers upfront and to some extent, why should they?
Having discussed this with some primes previously they are startled at the prospect of being successful with almost everyone they work with. A lot of people are set up to fail in this system.
Employers that I deal with are extremely frustrated by the status quo. They want to employ people, not become part time social workers.
In our experience, when working with the hard to reach groups you have to do everything required with them psychologically and professionally to meet their needs and that of the employer.
On the basis that primes will have no intention of paying for this work up front, even though it would be ultimately in their and everyone else’s interest, the DWP and others i.e. local authorities have a choice: stick their head in the sand and hope it will go away or fund this type of work in specific circumstances separately so that those who need the help get it and have a genuine chance of getting into sustainable employment.
There is concern all round from the range of services and providers about the funding model. Gov is urging third sector to be an essentail part of the delivery process, great idea – where do they get the essential funding from to ensure that they can employ staff and premises to enable support to this high client group that will enter the work programme? Also public sector play an essential role in supporting and delivering to some of the most disadvantage unemployed people who are farthest away from employment and will need a great of support to be sustained in work. Local authorities cannot stand the risk of no financial payments until employment is sustained for 13/26/52weeks/18 months payment is given, how do DWP and Primes propose to fund this
It’s difficult to create a funding model that can be hypothetically tested without knowing regional performance (Job Entry Rate and, critically, Sustainment Rate) of national programmes like Pathways, FND and old New Deal.
Armed with this information, it would be possible model a cash flow forecast for a specific Lot based on actual performance that would allow us to define exactly how much capital will need to be raised, when the programme will move into profitability and whether a particular funding model is viable.
This would then allow feasibility tests to be done on various payment models, models based on realistic performance expectations.
There has to be an honest, transparent dialogue between DWP procurement and bidwriters. This is a good start but if the industry promises the moon on a stick in the hope of securing a major contract and creates a Work Programme funding model on the back of inflated expectation, the whole supply chain is vulnerable.
DWP Procurement may need to have flexibility in the funding model for the first two years of the programme. The economy didn’t get out of bed this morning saying “everything’s ok, no worries, let’s recruit 145,000 entry level workers”. The economy’s still stagnant at best and public sector redundancies will only make things worse over the next 12-24 months.
This is a really difficult task because the funding model also has to be viable 7 years down the line so we have to factor in salary increases, spiralling costs and the fact that my landlords certainly won’t accept payment 12 months in arrears (that’s office landlords, not pub landlords, who also expect instant payment as it goes). Will DWP commit to reviewing the funding rates and model on an annual basis like the SFA?
So… in order to test the feasibility of a variety of funding models, it would be incredibly useful to have actual performance data (particularly around sustainability) on the major programmes from DWP, an open dialogue around what is a realistic performance expectation and flexibility for the first 24 months of the contract until the economy decides to get up on the right side of the bed.
I suggest that the whole premise of the framework and the work programme be reviewed in the light of its possible contravention of procurement legislation and the negative impact this would have on the market. Any provider large or small which indicates that the payment model suggested is workable is being economical with the truth to put it mildly.
All programmes to date have all had outcome based payment in one form or the other, the only difference with the proposals under consideration is that no set-up costs or on-programme payments are envisaged. It would be almost impossible to secure capital to deal with the cashflow problems that this will engender especially in the current climate. If we are really serious about tackling unemployment then we need to revert to a system which spreads the risks evenly throughout the duration of the contract, the FND payment model did just that. Why is this model not being considered?
The proposed payment model will present huge challenges to Voluntary Sector organisations who have neither the reserves available nor the colateral to raise loan finance to enable them to take part. Whilst sub contracts may be available from some of the Prime Contractors there is no guarantee that they will be in a position to offer appropriate payment terms and it becomes questionable whether charitable organisations should be using their resources to effectively supplement the profits of massive private sector organisations.
However, the people who will lose out if the VCS cannot effectively engage with the programme are those who need to use the sector’s services. We have an extensive track record of effectively supporting people who are the furthest from the labour market and enabling them to move on with their lives in ways that other providers simply do not achieve. Increasing marginalisation of people already experiencing disadvantage must not be an unintended consequence of this programme.
I believe there needs to be some up front paymentto support the establishment of the project and staged payments that reflect both hard and soft outcome delivery in order to nurture and allow for realistic and lasting developments. Without that commitment many smaller but no less effective charities and coluntary groups will be excluded
Working as a training provider in the voluntary sector I believe my organisation is wel placed through the active partnerships we have with VCS infrastrucrure organisations of all sorts to help people disadvantaged groups move towards and into work. However despite government rhetoric about the value of civil society what I have heard of the payment by results model would preclude this activity. I believe there needs to be some up front paymentto support the establishment of the project and staged payments that reflect both hard and soft outcome delivery in order to nurture and allow for realistic and lasting developments. Without that commitment many smaller but no less effective charities and coluntary groups will be excluded.
I work closely with JCP’s contracted providers for 2 different contracts. I think service payments coupled with job outcome payments are good idea in theory as they do drive providers to deliver results, however a more graduated method may discourage the so called ‘creaming and parking’ that recent papers have talked about. I think there should be a set amount for short job outcomes, an extra component for sustained job outcomes and a bonus payment for finding work for customers deemed harder to help such as the long term unemployed or those on long term health benefits. I would hope this payment model would discourage providers focusing only on the ‘easy wins’.
Payments need to balance the expected cost required to deliver the service versus,the risk of success/failure, plus the type of person being given assistance, the savings that are made by a success and time value of money.
SIB structures can work well in this area http://www.socialfinance.org.uk/services/index.php?page_ID=15
Barnardo’s would favour a payment model that offers a proportion of funding up front, and then when the benefit claimant enters employment – payments on a quarterly basis that reflect the benefit savings to the DWP. Under this payment system, up front payments could be reduced once outcomes are being achieved and the provider’s cash flow starts to increase.
As a Social entrepreneur who provided LSC rapid responsiveness projects on similar payment models, we were short-changed quite badly. When you set up a little SE to deliver services to the local community which you are passionate about you expect the support from Government agencies as we really had it enough looking at the problems and not doing anything about it and seen other private providers really don’t solve the problem apart from making the Government money.
You applied for tenders, as it is also daunting process as you have to go through PQQ’s which is not tailor-made to Sme’s or SE’s needs. However you jumped through hall these hoops and get the tender and want to manage that tender and get on with creating sustainable jobs etc.
Since we didn’t have capital; we got a small loan from the bank and delivered the project halfway until the payments comes forward. It was not worthy of all that efforts after all and I didn’t get paid at all ( as I couldn’t pay myself as we have to wait for the payments to come though to go for the next stage ) as I was saving everyone else’s jobs and rent.
After all there are too many regulations were kicked in place such as Matrix, which is accreditation on standards, then you must have academic accreditation, Ofsted, too many communications meetings conferences and al lots of our times were taken into pleasing their attendance rates! Then they also cut the budget to FE.
On top of it paying rent, paper copies as DWP n LSC love to keep records and waste paper as not adopted to computerised methods buying capital items insurance in place paying out salaries: we cannot maintain all these through loans, applying for so many grants bodies having interviews cost us more time we did not secure any funding:
However Small start-up Social entrepreneurs cannot sustained the propose payment model and therefore we need to be looking at how to harness these talents, keep them at their bay and support them to take on better ethical delivery of public services compare to establish cooperation model still failed to create work for those unemployed come through their door. Social Enterprise Management: Bringing the Customer into Focus Rather than fear change, forward-thinking governments need to focusing on improving the quality of their social infrastructure as a strategic imperative to improve service delivery and cut costs. Throughout the world, innovative governments and state…[truncated by the system]
Sorry, should have read “Absolutely no need approval or local authority registration”
I have worked in the employability world for the past 33 years, for both Government and charities, and have seen many payment models come and go. I believe that if the Work Programme is really determined to help people from all walks of life, then there is every potential for it to do so. I currently run a lobbying and campaigning programme within the national homelessness charity Crisis. My project, Welfare Influencing and Lobbying: Learning Opportunities and Work (WILLOW)was designed to support those smaller and specialist organisations that support marginalised people, including those who are homeless, into suitable and sustainable employment. I am currently working within the nine English regions running welfare reform seminars, to gather the views of organisations who support people furthest from the labour market. The messages emerging from everywhere very much echoes what has been said so far in this consultation. Smaller voluntary sector organisations, reliant on funding from Government programmes will not be able to exist if the payment model in the Work Programme only pays by job outcome sustainability. As we all know, people with multiple barriers to work are often far from job ready, and need a considerable amount of support, motivation and training to get them there. What we need is up front payments that support the journey to work, with a differential pricing mechanism that rewards organisations working with the hardest to help. We understand that the majority of the financial risk will be borne by Prime Contractors; but those smaller organisations who have a proven track record of getting people into employment, and sustaining that employment, are worth the risk, and the subsequent payback to the Treasury, and the Prime Contractor will be correspondingly much higher. We have also noted with interest, the Government’s position on making effective use of the charitable sector, and will be pushing for a consortia bid to deliver the Work Programme for our clients. We will be looking at intelligent pricing mechanisms that will allow pre-employment work, avoid cherry-picking and parking, and reward the specialist organisations, the Prime Contractors and most importantly the individual achieving employment.
Perhaps there is another, more radical, way for the coalition government to look at this, in particular for those people with more complex needs who are largely failed by industrial scale ‘solutions’?
Offer people eligible for social care or health support a personal budget to ‘buy’ directly employment support that they feel will meet their needs at a price comparable to existing costs.
SME providers could be approved locally, possibly through a simplified registration process by the local authority in partnership with JCP.
People are then free to look to large ‘prime’ providers to meet their needs but they are also able to look for small, specialist, community based providers including social enterprises and VS organisations.
This approach would support a broad rather than a restricted market and supports the development of a diverse economy of SME providers working closer to communities (of interest or geographic).
If providers meet people’s needs and produce outcomes they will establish a good reputation in their market and flourish, if not they won’t. They will be more directly accountable to the people they support.
It supports the coalition’s commitment to the personalisation agenda.
It gives people in need of higher support the opportunity to braid funding with existing social care, health or other entitlement.
It supports self-determination and choice and devolves the same much closer to individuals and communities.
It could be piloted through existing programmes like Jobs First and Getting a Life.
This is a very interesting idea – but would need the right infrastructure at a local level to make it work. Part of the issue faced by those furthest from the labour market is that often they have had their horizons narrowed, and their sense of what is possible for themselves, massively reduced.
People in that position would need to be to be supported to make informed choices – which means pre-choice programmes of support which are explicitly designed to raise aspirations and break through the limitations imposed by their curent sense of what is possible for ’someone like me’.
This is exactly the position faced by a Council that we have been partnering with in respect of personalised budgets for adults with learning disabilities – we have had to help the Council to develop an experiential programme which enables people to make an informed choice.
Complete and utterly agree. With one caveat. Absolutely need for approval or local authority registration. Let market forces determine the best providers.
See my comments in this related debate. http://tiny.cc/bjrsn
Well said Sue Vasey-I too programme manage the furure Jobs Fund programme. I feel it is the best of other programmes rolled into one. We do not top slice DWP payment, all funding is placed with the individual, all partners on our programme supply match finance to enhance the programme to 50 weeks (job from day one) there are 26 equal partners in the “consortium” none of us have the resources to act as “prime”but would welcome working with others to ensure this cost effective and successful programme continues in some format.We do not have answers to all the questions raised on the issues raised by the single programme, the one solution that is working is the job from day one, the wrap round support that individualises the programme, the qualifications etc-etc all make the person nearer the job market than upon entry.Improvements could be made “community benefit” in the job makes it difficult to work with the private sector the SME’s as this is where the future jobs will be created, like Sue I urge the government to look at areas that have made FJF work, look at improvements and make it part of the single programme.
There are two severe problems with payment by results for employment support which mean that it should not be used:
1) Payment to providers in respect of people they support securing long-term employment transfers risk onto providers in respect of a situation over which they have little or no control. There is no way that any provider of employment support can control (for example) whether a firm that someone is placed with goes bust, whether that person suffers a breakdown because of family bereavement, or a million other highly complex reasons why a person might fail to find work, or fail to stay in work, following their completion of even the very best employment-support programme. In order to create effective incentives which feed back into improved practice it is necessary to reward organisations in respect of the quality of service they provide, not in respect of outcomes they cannot control.
2) Simplistic outcome based payment regimes mean that organisations stop supporting those that they know will find it most difficult to achieve that outcome. Research (Social Exclusion Unit, 2007, “Jobs & Enterprise in Deprived Areas”) has demonstrated that target-based employment support programmes which reward inidividuals or organisations based on simple notions of employment outcomes end up with those individuals/organisations cherry picking easier to help clients (there will be easier/harder to help people within any defined client group). Those with complex needs, such as homeless people, those with mental health problems, drug or alcohol problems, damaging family histories, and special educational needs will be marginalised and unsupported by such a system. It results in a system where those with greatest need are offered least help.
The contracting process should acknowledge those who need advice in managing their health difficulties. I manage an NHS Condition Management Service and also work for the Department of Health on quality assurance of the health elements of Provider Led Pathways. Providers should not be in the position of being unable to help those with more significant needs or who need health advice. Therefore the options, as I see it are for the government to fund this type of service on a non-outcome basis (different from the proposed model) or for the level of outcome payments to reflect the needs of people who are harder to help. A premium payment system, still outcome based, raises the difficult issue of how claimants would be impartially and accurately designated as hard to help. A hybrid would be possible – perhaps retaining a fixed up-front sign up payment for those designated as being in need of greater support. People further from the workplace should still be supported towards work, for social inclusion reasons, and because in the longer term, it makes sense to keep them work-ready, even if they are not successful in returning to work in the short term. NHS services have been very committed in supporting people back into work, and we feel that the impact of our involvement has been underestimated by the national data processes for measuring returns to work. However, we acknowledge that the new work programme will be delivered through the contracting framework. Public sector services are at a distinct disadvantage in bidding for sub-contracted work (contrary to the view held by some commercial providers – there is no mechanism for subsidy or submerging costs). I would ask that funding mechanisms should be considered for harder to help people which do not ask providers to balance business risk against potential profit. NHS providers aim to provide health care services on a not-for-profit basis, and need predictable funding if they are to do this.
In my view, the very idea of an outcome-based approach in itself is not the problem, as all the current programmes are to a certain extent outcomes based in themselves. The problem lies in the time limit expected before said outcome payments are made and how much the outcome payments are. To simply suggest outcome payments will be made from “benefit savings” is not enough, how does one calculate the possible payment levels, and how can one distinguish between “benefit savings” from a new JSA claimant or a very old IB claimant, there are too many anomalies to go through, and organisations large or small will then have a limited ability to plan ahead.
I would suggest a payment model similar to the New Deal model, with set clearly defined rising payments made along the way the longer an individual stays in work, which reflects the ongoing benefit savings. To explain: an initial lower payment when the individual goes into work, and then payments on a rising scale when the individual reaches the 13th week, 26th week, 39th week, and 52nd week in work. With the bulk of the payments realised on the 52nd week. I believe this will not only incentivise providers to be creative in increasing numbers into work, but will also reward the in-work support required to improve and maintain sustainability, while realising the payments directly from savings made by that individual going into work and paying taxes and giving the providers much needed liquidity to stay in business.
The current proposed model of payments made after 26 or 52 weeks will be very difficult to maintain and will not only cause many smaller organisations and to some extent some larger ones to fold, but will initially create a situation where providers will be forced to skim off the top, and ignore the “hardest to help” in order to realise capital quickly.
The fact is that we are where we are. We have known for a long time that we were headed in this direction and the market will take us forward. As a local authority FND subcontractor we are not prone to the same cash flow concerns as the majority of small contractors therefore we have with FND, and will with The Work Programme, need to base our model around the overarching financial return available through successful delivery. That is of course assuming that there is a place at the table for an organisation able to delivery only across a local authority boundary area. If FND can be terminated so easily it seems that contracts are only for as long as the contract termination period therefore payment by results carries significant risk not just in terms of cashflow. If the reward is significant the market will deterime acceptable risk levels however the reward will need to be significant!
Thanks Sue Vasey for putting the case so well. The analogy re car components was inspired!
Payment by results is fine if there is a realistic chance of getting a result. If the only result is going to be 26 or 52 weeks sustained employment providers are guaranteed to NOT achieve a result for a large chunk of the customer base, so what are they going to cut? The customers that will get the worst deal are those that cost the most investment and return the least profit so the funding has to be balanced between investment and return for ALL clients. A customer requiring substantial investment and one requiring limited investment must provide the same “profit” otherwise a proportion of customers will be “parked” as being a poor investment. It’s basic economics.
In effect the Prime will be lending DWP money by bringing capital to the table to tide the contract over until it starts making money with the outcome payments. If they have the capital to invest up front, the fact that they won’t get paid until the outcomes are achieved shouldn’t really an issue. However, Primes will have to fund subcontractors on a totally different basis to that which they are being paid by DWP. It isn’t feasible for them to just take a management fee and pass on the same payment model. That just won’t work and will be the end for many providers (big and small).
The support providers need from DWP is to ensure that payment models for subcontractors are realistic, that the full risk is being taken by the Prime and none of it is being passed on to subcontractors. If the Prime can’t afford to take on the whole risk then they shouldn’t be awarded the contract. DWP need to play an active part in ensuring on an ongoing basis that the supply chain isn’t just being managed effectively ala Merlin, but that the payment models continue to be viable for providers.
I think we all need to start thinking outside of the current delivery models as I can’t see the current prime/sub relationships continuing in their current format, and if DWP allow that to continue into the Work Programme … well shame on them!
Steph, the “profit” for customers requiring substantial investment must be much greater than for one requiring limited investment – its called the return on investment. If the profit is the same then it will actually drive “parking” – why would you risk a higher investment for the same level of return – that’s basic economics. Additionally, “the full risk is being taken by the Prime and none of it is being passed on to subcontractors” – talk about having your cake and eating it. While I agree that Primes must use alternative funding models to REDUCE the risk to subcontractors (and while I recognise this hasn’t always been the case, there where models in FND which did exactly that) you cannot seriously suggest that subcontractors should not bear any risk?
The main issue I can forsee myself with the funding model proposed above is the JCP’s themselves. If you are to regoinalise everything as has been suggested then you will have primes with a bigger catchment working alongside subs. The problem you will have then is companies will cherrypick the clients and those that face the biggest barriers to work will be left in a never ending cycle which has happened before. In my opinion if you are going to have one programme for all, the winning bidders themselves would need departmenatlise themselves. JCP’s should assess the claimants as to how far away from the Job market their clients are and refer to the appropriate department so that they can get the appropriate support. Many people may say this is how it works now with the differing programmes, and I will agree that it is, but the JCP’s themselves do not assess, and refer their claimants to what ever provision they can be bothered to without assessing their needs. In my opinion this is one of the biggest problems with the welfare to work industry. The DWP and JCP’s need to train their staff as to what programmes are available. I currently work on the Support contracts which has been going for almost 7 months, and you will be amazed the amount of JCP’s I visit (Still to this day) that have no idea what the contract is about or what clients we are supposed to be supporting as dictated to us by the DWP.
As a training subcontractor to 2 of the ‘primes’ I understand(and support)the need for payment by results,but I am concerned that the lack of funding ‘upfront’ will jeopardise the quality and quantity of work related training made available to clients. We have delivered(sub contracted)sector specific work related training,very successfully, over many years-on an increasingly tighter budget year on year, despite the huge contract values. I shudder to think how little funding will be allocated to training in the future with a ‘rear end loaded’ system
I have been managing employability and skills programmes in the not for personal profit sector for over 15 years – and now run a Consortium which is effectively providing the honest broker role to ensure engagement of voluntary sector providers large and small in employability activities in our sub region. There are two main difficulties with the payment by results model:
1. The model is designed to encourage providers to work with clients with less need to ensure their financial viability – however it is those furthest from the labour market who need the most support and are less likely to be attractive to private sector employers in the current labour market.
2. A mix of paying a fair price for employability services and a reward for job outcomes would seem fairer and has worked on previous contracts. It also mirrors the private sector model – you wouldn’t have the manufacturer of car components only being paid when the car is sold.
The above comments reflect my views if the model is as advertised. However, I belief the model is fundamentally flawed. Clients remain on JSA and often a string of other benefits whilst providers try to make them work ready with a range of option including work experience, volunteering etc. In my experience the best way to ensure someone is work ready is to actually put them into work. The Future Jobs Fund was genious in its simplicity and yet is the most successful employment programme I have ever worked on. I believe to pay someone minimum wage to do a job that is creating benefit in their community is a cheaper option that keeping them on JSA (and other benefits), paying providers to deliver services to them and funding JCP to support them. I have seen people who I would have considered unemployable flourish and reach their potential within months of starting jobs through the scheme. It makes financial and social sense and no-one is making money out of the public purse – a fair management fee for brokering the roles and on-going support, a sensible incentive to the employer to fund training for the emloyee and minimum wage payment to the individual – simple, effective and minimum bureaucracy resulting in a pool of people with real experience to feed the private sector market as it grows. I woud urge the government to re-look at this programme and do the maths….
With regard to the FJF Sue I agree entirely. Our organisation led a bid with 76 partners, all charities, and has created 400 opportunities, a high percentage of which will become full time roles.
Having never worked on a w2w programme of this size before, we have been delighted with its success and are devestated that we cannot continue, as our outcomes are improving as we learn from our experiences. We are not a large enough organisation to become a Prime Contractor, despite being a Lead Accountable Body for the FJF.
In terms of ‘doing the maths’, we could take the learning from this programme and deliver it more cost effectively in the future given the chance. I would also urge the government to include the FJF in the Work Programme.
many innovative training providers could contribute added value to this scheme however they require regular monthly cash flow to meet their requirements, pay their staff etc.as such they are unlikely to take part unless the outcome payments are a reasonable percentage, managemenmt fees kept by primes are reasonable and cash flow is monthly.
We have worked on welfare programmes for 26 yrs and have seen programmes come and go. Nothing changes except the end of the supply chain get paid less for more risk.
1.Contract transition causes huge cash problems. JC+ doesn’t manage the referral processes well enough. This damages our ability to work on outcome related results.
2.Administration is introduced making working for outcomes like playing football with one leg.
3.The prime and the other layers of management take so much money out that the delivery agencies are left with little to be creative with inside the “Black Box”
4. If the model followed that of a commercial recruitment agency more money would be paid for a positive result with a claw back system. No recruitment company would work on receiving payments after 6 months, 1 year etc and certainly not for the sums the subs receive.
5.For most clients our organisation delivers great results. However we get no support from JC+ or the primes(except reams of paperwork)when forced to deal with the disruptive influence of certain clients.This effects our ability to perform
6.Few of the primes are experienced to truly contribute or positively influence policy and procedures. This leaves delivery subcontractors picking up the pieces taking resource away from outcomes
7.No responsibility is pushed onto the claimant to show they have attended, complied, tried to assist the process or take the help offered. It is left to the delivery agent to make a case for sanction involving masses of admin whilst the offending claimant is unaffected. Clients know this and act accordingly.
8.Our group also has a fully results driven commercial recruitment company. I pay high commissions to my consultants and they perform really well despite operating in a challenging area. The difference is they don’t suffer endless audits, inspections by Ofsted, changing of goal posts, re contracting every couple of years, interminable meetings with public sector managers who don’t contribute or understand the clients group nor do they have to put up with abusive or disruptive clients.
It is not an equitable for DWP put all the risk onto the delivery supply chain in these circumstances. To summarise: Payment by results could be a vibrant and workable model but please lets stop playing at this.If you want to have a truly results orientated programme get your house in , pay for it at the correct market level measure correctly, remove contractors who don’t perform…[truncated by the system]
About time…payment by results…not payment…full stop!
No sympathy for those major mega-providers who complain…there are plenty of foreign companies with cash backing waiting in the wings.
As I said on Indus Delta…its time to sell the family silver…the Jacs…Mercs…furs…jewellery…the rambling pile in Yorkshire…;-)
As a representative of an SME I accept the argument that the outcomes based payment system could cause cashflow problems until delivery performance is realised – this takes time, however, perhaps the DWP could negotiate some kind of working capital scheme for contractors (for example, a working capital advance offset against future payments, or preferential loan, or loan guarantee system)? This still ensures value for money for the taxpayer, but also provides a lifeline for SMEs who can provide the results the DWP wishes to realise, but who need a temporary solution to working capital issues.
Perhaps Prime Contractors could offer subcontractors a phased model which in years 1-2 contains start payments but later reverts to an entirely outcome based model, once income has started to flow.
..or Primes could make upfront payments to subs (anticipating pre-agreed performance levels) based on a performance-based claw-back clause.. then risk would really be substantially held by the Prime (which is after all, quite rightly being paid to contract- manage and take-up the bulk of the risk). Primes would need to apply their juicy research resources to be sure to enlist only the very good subs, that they can trust to deliver – offsetting their own risk.
Prices, volumes, geographies, specialisms and especially performance levels would have to be both realistic and testing though.
Another nail in the coffin for locally driven voluntary And community groups
I manage the contracts for a small independent training provider. We have been delivering DWP funded programmes for several years, most recently as a subcontractor and our overall performance is good. We are not for profit with every penny being reinvested back into the business and are driven by our duty to serve the community. It is our desire to help eliminate worklessness that makes us seek to do better and to continuously improve not just the financial reward. Does this not fit in with the ethos of the ‘Big Society’? I understand fully why DWP seeks to change the payment model, but you will lose high quality community based services because a succession of Primes have made substantial sums without delivering what they said they would. We have seen top slicing of sometimes hideous proportions during this time with all the risk passed down through the supply chain. Most Primes are in it for the profit. Not all are bad, but there aren’t many that are good. The payment models being proposed and the size of the investment needed will exclude those providers who could genuinely meet the needs on an individualised local level. All you will purchase is more of the same.
I manage a charity and have been running a community based employment team for 4 years. We achieve all our targets and have a great working relationship with those further removed from the labour market. We are currently leading a community consortium delivering employment and training support across the borough and working well. We negotiated a contract from Redcar & Cleveland R2E and are paid quaterly. We have a good data management system that has rolled out Tees Valley Wide and we can see a clear audit trail for every client so no duplication. We could not deliver the service without regular payments, the team work hard and deliver I need to protect their salary and update their training regularly to accomodate the life issues our clients have. Some major contracts have been allocated to large organisations who top slice the money using high pay, bonus schemes and non essential gadgets. We put all the money into retaining local staff and training and supporting the into work items that have previously been barriers. Give us the contracts, negotiate fair terms and watch us deliver!
I work for a small charity to place adults with learning difficulties into employment. If DWP want to exclude my client group further from the labour market, then the model will work. Providers are already finding it increasing difficult to stay in business, if this model is implemented they would effectively become forced to “cherry pick clients in to placements” those clients who are deemed to have fewer barriers towards employment.
We give all our clients/customers the opportunity to work but if this model is implemented we will be given the choice, go out of business or do careful selection – not a choice for front line staff who work for the best interests of the clients!
First & foremost this is a cash issue. The model proposed favours providers who have capital (or access to capital in many cases) over those who do not.
Providers may not have capital or access to capital for a number of reasons. A provider may be consituted on a not-for-profit basis & invest more heavily in their customers than those providers required to generate profits. Other providers operate in a niche market to a very specific target group or in a very specific geographic area. Both types of organisations are incredibly useful for good quality delivery but neither could be expected to have developed substantial working capital due to the nature of their respective remits.
Lack of capital, a disadvantage for Work Programme delivery, should not be viewed as failure. The availability of money will dictate who runs this programme. Organisations good at making money are not necessarily good providers or leaders of multi-disciplinary, cross sector partnerships comprising of organisations with different values & bottom line requirements.
The programme will still lack the role of “honest broker” (although several infrastructure organisations have attempted, with no success, to position themselves as such) and as a result will be much weaker in its absence.
A tricky one this. Payment needs to be balanced to ensure that successful outcomes are rewarded but without penalising providers by causing poor cashflow. It may take several months before consistent levels of positive outcomes are achieved, during which time providers need to be paid to remain solvent. At the same time, poor performers should not be rewarded for poor service. Also, how do smaller providers fit into the equation? Many small organisations are providing excellent service but could be priced out of bidding if payment is delayed and they have high start up costs. Do we only want the big players to be able to tender and deliver? I agree with Ally – frontline staff are better placed than those purely focussed on the profit their organisations can make, and many excellent smaller providers might not be able to underwrite the costs involved.
Having worked in this sector for many years, supporting people with labels such as “hardest to help”, “economically inactive”, “far removed from the labour market”, it bewilders me that financial security isn’t there to support the plethora of people working with these individuals. The amount of knowledge/intelligence lost (both locally and nationally) is criminal due to contracts closing/ending/going under. Although the new ‘world’ informs that longer term contracts will be around, so we believe, it will not help those who are hitting limbo stage at this moment in time and the months ahead. Support those supporting – use this time to ask the delivery / front line staff for their comments and suggestions, not only the major contractors who lets face it are in business and perhaps are a key reason why we are in the situation we are now. Trust me, you’ll get very different opinion on the way the employability agenda works or doesn’t.
I manage a small team for Basic Skills and Work Experience 18-24 and 25+. The team work so hard within the tight time constraints to try and find work for clients who are often nowhere near ready.
I believe that the payment schedule be split, and should ensure that providers have enough money to secure staff, premises etc for the service delivery. I agree with the idea of results payments but feel it should reflect on the economy at the time. It seems that many genuine providers are being penalised for the malpractice of the unscrupulous firms who fraudulently claim outcomes.
Simplifying the “outcome” definition would be useful to remove adjustments for early leavers, this will enable providers to rely on their own figures rather than waiting for the version from DWP. This serves only to confuse us and the public. There should also be a small recognition for progression on to volunteering or further education, this is currently ignored on New Deal.