The Work Programme: Providers and contracting arrangements

Written evidence submitted by Age UK

Key points and recommendations

Age UK agrees that work is usually a good thing for most unemployed people below State Pension Age, and supports the Work Programme’s objectives of helping the long-term unemployed enter sustainable employment.

Age is in itself a barrier to work, owing to discrimination by employers in the recruitment process and various other factors that disproportionately affect people aged 50+

Older claimants are harder to place in sustainable employment than a someone aged 35-49 with the same barriers, therefore Work Programme contractors must receive an additional incentive to avoid the ‘parking’ of their older clients.

Differential payment schemes must accurately reflect the varying barriers faced by different client groups.

The Government should investigate how best to identify individuals who are likely to enter long term unemployment, and allow them early referral on to the Work Programme. If such people are left until they meet the general qualifying criteria, finding employment for them is likely to be difficult.

More detail must be made available to prime and sub contractors on the specifications and funding of the Work Programme in order to allow meaningful and progressive discussions to take place.

Achieving a fair and transparent system of payment by results is essential, especially for specialist organisations who will deal with a low volume of clients.

Prime contractors should be held ultimately responsible for managing the Work Programme contracts, and there should be full equalities monitoring to identify if there are any groups for whom the programme is not working.

1. Introduction

1.1 Age UK is the new force combining Age Concern and Help the Aged. We are a national charity and social enterprise working to transform later life in the UK and overseas. Our vision is of a world in which older people flourish. We aim to improve later life for everyone through our information and advice, services, products, training, research and campaigning.

1.2 Age UK Training, a part of Age UK, currently operates as a sub-contractor under the Flexible New Deal. This will continue for the Work Programme, where we will expect to work as a specialist provider to place people in sustainable employment.

2. Differential payment schemes and older claimants

2.1 We believe that age constitutes a distinct barrier to work, and that it is a significant factor which hampers older (50+) unemployed people from returning to the labour market.

2.2 Age discrimination among employers is rife, and the Work Programme must be designed to counteract it. However, it will be difficult to track progress in dealing with it as such discrimination is largely hidden and therefore not measurable.

2.3 We have two principle concerns affecting the 50+ age group that we believe it is necessary to resolve so the Work Programme can be fully effective:

· Proper incentives for contractors to provide sufficient help for their older clients must be provided; and

· There should be access to early referral on to the Work Programme for Jobseekers Allowance claimants aged 50+

Incentivising contractors appropriately

2.4 We agree that work is the best option for most people without a job below State Pension Age, whether unemployed or economically inactive, and we broadly support the principles behind the Work Programme.

2.5 However, it is important the Government considers the impact on older workers. An older claimant is less likely to find work (see below) and it is, therefore, important that the Work Programme is able to incentivise contractors appropriately to find sustainable work for older claimants.

2.6 If age is not considered an additional barrier to work then older people will simply be ‘parked’ by contractors who will have an incentive to prioritise clients that they see as easier to place. We, therefore, believe that age should be treated as an additional barrier to work within the Work Programme, and contractors should be incentivised appropriately to help their older clients back into sustainable employment.

2.7 The differential payment scheme must reflect the barriers to work faced by individuals as flexibly as possible, or the ‘parking’ of claimants is likely to become problematic. If individuals with multiple barriers are not helped in this manner and all issues accounted for, the motivation for contractors to work with such people will be reduced. Harder to help groups, including older claimants, who are more likely to face such multiple barriers will be the victims if this is not achieved. It is likely, for example, that if a contractor deals with two claimants who share an identical duration of unemployment and identical barriers to work, but one is aged 38 and one 58, the younger claimant will be easier to place and therefore be prioritised.

Barriers to work for the 50+ cohort

2.8 For people aged 50+ it is harder to find work than for the average person. In 2006 – before the recession – a man in this age cohort who lost his job had only a 20 per cent chance of working within the next two years. This is, if anything, likely to be worse today.

2.9 There are various barriers to work that disproportionately affect older jobseekers. Some of these may well already be accounted for within the payment structures of the Work Programme, but it is important that action is taken to prevent all of them inhibiting a return to the workplace. These include:

· Age discrimination, which as mentioned above is common, in spite of it often not being measurable. A 2009 survey by TAEN showed that 63 per cent of jobseekers aged 50+ believed employers saw them as ‘too old’, while only nine per cent could say definitively they had not experienced any age discrimination. [1]

· Long term unemployment, which affects the 50+ age group to a greater extent than others.

· Lower skill levels, as 21% of the 50 to State Pension Age (SPA) cohort have no formal qualifications, compared to 13% of the 16 to SPA average.

· A perceived lack of support from Jobcentre Plus, as research commissioned by Age Concern in 2009 demonstrates, which showed that advisers often do not understand older claimants’ needs, and do not recognise the importance of experience and work history.

· Other barriers such as caring responsibilities and certain health conditions are also more common among older workers.

2.10 There is also quantitative evidence that older jobseekers find it harder to gain employment than other age groups (see paragraphs 2.11 and 2.12).

2.11 Firstly, it should be noted that older workers are less likely to suffer a spell of unemployment. However, for those that do, it is considerably harder to get back into work. People aged 50-59 are likely to experience a spell of unemployment 2.1months longer than someone aged 35-49, and 3.4 months longer than someone aged 18-24. [2]

2.12 People in the older age group are also less likely to exit unemployment into employment. The same study found the youngest age group are 34% per cent more likely to enter employment, over the five quarter sample period, than the oldest. All groups are less likely to enter employment the longer they remain unemployed, but this particularly affects the older age group.

Early referral on to the Work Programme

2.13 Long term unemployment is particularly prevalent among the 50+ age group. With 43.5% of all people 50+ unemployed in long-term (12 months plus) unemployment [3] , it is even harder to get back into work that for other age groups.

2.14 We do, of course, recognise that universal early referral for the entire age group would be expensive and certainly involve some deadweight costs. However, we believe that Jobcentre Plus advisers should receive training to help identify those at risk of entering long-term unemployment and have the power to refer them early to the Work Programme, for example after three months unemployment.

2.15 Access to more intensive help and support at an early stage can, if recipients are carefully identified, help individuals into employment and reduce the long-term payments of benefits substantially.

2.16 The migration of all existing Incapacity Benefit claimants to Employment and Support Allowance presents another challenge. We believe it is important that those current IB claimants being found ‘fit for work’ are transferred immediately on to the Work Programme to get the maximum available support as quickly as possible. Nearly half of those people are aged 50+.

3. Issues identified as a contractor

3.1 As mentioned earlier in this submission, Age UK Training operates as a sub-contractor under the Flexible New Deal and will do likewise once the Work Programme is implemented.

Procurement process

3.2 The procurement process has to date been handled, generally speaking, quite well in terms of the prime contractors making themselves available to the potential sub contractors through a variety of open and transparent ‘speed dating’ type events held throughout the country.

3.3 However the lack of information regarding the specification and funding for the Work Programme means the degree of commitment that the potential prime and sub contractors can give is minimal. In practise, at this point only initial contact can be made, and discussions can progress little further.

3.4 Discussions have only been able to take place in general terms about potential partnerships, which has not necessarily benefited either the prime or sub contractors – the focus has been remaining in the procurement process.

Prime- and sub-contractor relationships

3.5 The prime contractors are often not able to give any realistic assurances to sub-contractors because the Work Programme’s funding and specifications are not available. It is often not even possible to obtain a service level agreement, leaving the negotiating power resting firmly with the primes. There is a risk some sub contractors will make over ambitious promises in order to maintain good relations with the primes.

3.6 When the contracts are finally let and the primes are known, there will be a significant amount of activity and we have concerns that it will not be possible to establish fair and sustainable relationships that meet the long term aspirations of the Work Programme.

Payment by results

3.7 Achieving a fair and transparent system of payment by results is clearly the desired outcome, but it is complex and if the mistakes made in the past connected to mis-setting payment levels and around relationships between primes and sub-contactors are to be avoided things must be done differently. The Merlin standards may help achieve this.

3.8 It is important that the more difficult clients are supported equally by the programme and that the contractors do not just go for what has been termed the "low hanging fruit" (see Section 2 of this submission).

3.9 Specialist organisations who are dealing with low volumes of people need to be paid appropriately if the relationship is to be sustainable. Many sub-contractors will fall under this category. Investment in a knowledge bank of specialists has been discussed and we believe this has some merit as it could improve the service offered to Work Programme clients with particular needs.

3.10 The high risk funding structure is likely to ultimately dictate the direction of travel that organisations take. Cash flow will be paramount and management of the contract in a responsible and ethical manner, which balances the financial viability of the programme with what is actually affordable, will determine its success or not. Good management structures are imperative.

3.11 The Government must ensure prime contractors are held responsible for the successful operation of the Work Programme, and so it is imperative that full equalities outcomes must be made systematically available in order to see if there are particular client groups being failed by the scheme.

November 2010