Can the Work Programme work for all user groups? - Work and Pensions Committee Contents

1  Introduction

1.  In the text of this report, our conclusions are set out in bold type and our recommendations, to which the Government is required to respond, are set out in bold italic type.


2.  The Work Programme is the latest government-contracted employment programme, which aims to support long-term jobseekers into work and off unemployment benefits. Launched in June 2011, the Work Programme replaced a number of existing schemes, including the remaining New Deals for young people, adults, disabled people and lone parents, the Flexible New Deal and Pathways to Work, the previous scheme for Incapacity Benefits (IB) claimants. It therefore consolidates employment support for a very wide range of jobseekers, including many with health problems and disabilities, into a single mainstream programme.[1] Participation is mandatory for most of the jobseekers referred to the Work Programme; failure to engage with the programme can result in benefit sanctions being applied.

3.  Jobseekers are referred to externally contracted Work Programme providers if they remain unemployed and on benefit after receiving the support offered to them through Jobcentre Plus (JCP) in the early months of their claim. Work Programme providers take responsibility for offering the interventions long-term jobseekers require, which might include help with building CVs, interview techniques, confidence-building, mentoring, work experience and skills training, for example. Participants are attached to Work Programme providers for two years. They remain on unemployment benefits until they find work and typically continue to report to JCP every two weeks to "sign on".

4.  The table below sets out the nine separate groups of participants in the Work Programme, the point at which jobseekers in each group are referred from JCP to Work Programme providers and whether their referral is on a mandatory or voluntary basis.

Table 1: Work Programme payment groups
Payment Group Point of referral Basis for referral
JSA aged 18-24At 9 months on JSA Mandatory
JSA aged 25+At 12 months on JSA Mandatory
JSA Early Access[2] From 3 months on JSA Mandatory or voluntary depending on circumstance
JSA Ex-IBAt 3 months on JSA Mandatory
ESA VolunteersAt any time from point of Work Capability Assessment Voluntary
New ESA claimantsMandatory when expected to be fit for work within 3-6 months, otherwise voluntary from point of WCA Mandatory or voluntary depending on circumstance
ESA Ex-IBMandatory when expected to be fit for work within 3-6 months, otherwise voluntary from point of WCA Mandatory or voluntary depending on circumstance
IB/IS (England only) From benefit entitlement Voluntary
JSA Prison leavers Day one of release from prison Mandatory

Policy intentions

5.  One of the key objectives of establishing a single mainstream contracted employment programme was to create a simpler and more cost-effective welfare-to-work system through a single commissioning process, benefitting from economies of scale and reduced transaction costs, with consequent savings to the Exchequer.

6.  The Work Programme has a number of innovative design features, which aim to address some well-established deficiencies of predecessor programmes. It operates a more results-based model by linking a greater proportion of providers' payments to sustained job outcomes and paying a smaller proportion in up-front fees than has previously been the case. Three types of fees are available to providers:

  • Attachment fees—relatively small initial payments made when contact is first made between provider and participant. DWP plans to withdraw attachment fees altogether from April 2014;
  • Job outcome fees—larger payments made when the participant finds work, comes off unemployment benefit and remains in work for a total of up to 26 weeks within a 104-week window; and
  • Sustainment fees—monthly fees paid to providers for up to 80 subsequent weeks as long as the participant stays off benefit and in work.

7.  The Work Programme operates through DWP contracts with large prime contractors (primes), predominantly commercial companies, deemed to have the capacity to bear the financial risk of operating on a results-based model and sufficient cash-flow (at least £20 million annual turnover) to finance interventions with reduced up-front funding. There are 18 primes delivering 40 separate contracts in 18 regional Contract Package Areas (CPAs) across Great Britain: 16 CPAs cover the whole of England; Scotland and Wales each count as one CPA. There are two or three primes operating in each CPA, with the intention that competition between primes will drive up performance. Primes were encouraged by DWP to deliver services through supply chains of subcontractors from the private, public and voluntary sectors, including niche providers with experience of supporting jobseekers with more complex barriers to employment.

8.  The Work Programme is designed to allow providers greater freedom to choose how best to support unemployed people, without prescription from government—an extension of the so-called "black box" approach.

9.  The Work Programme has an innovative differential pricing model, in which providers can claim higher payments for placing jobseekers into sustained work, according to the payment group they are in. The policy intention of differential pricing is to address the previously observed problems of "creaming" and "parking", in which welfare-to-work providers have prioritised relatively work-ready jobseekers in order to maximise their financial rewards. "Creaming" occurs where easier to place claimants are identified by providers and given greater support while claimants who face greater challenges are "parked" and given very limited support.

This inquiry

10.  Our first report on the Work Programme was published in May 2011, just before the programme was implemented, and considered its design and commissioning.[3] We were and remain supportive of the Work Programme's key policy intentions, in particular the obvious benefits of consolidating the large majority of support into a single scheme with resulting economies of scale and reductions in transaction costs. We also welcomed the Work Programme's more outcome-based model, particularly its focus on sustainable job outcomes, and the extended two-year attachment period. Broadly, we recognised that the Work Programme's design represented a significant evolution in welfare-to-work and an improvement on some previous schemes. However, our 2011 Report highlighted some concerns about how the Work Programme might operate in practice, notably about the management and regulation of supply chains and whether the proposed differential pricing model would be sufficient to incentivise providers to support those furthest from the labour market.

11.  We therefore made clear our intention to conduct a second inquiry into the Work Programme, to consider its effectiveness for different groups of jobseekers, with a particular focus on those who may be considered harder to help. We announced this second inquiry in October 2012. We received 51 written submissions from a range of organisations and individuals. We heard oral evidence from academics and expert commentators; groups representing particularly disadvantaged jobseekers; subcontractors; emqc Ltd, the company contracted to assess the quality of supply chain relationships; primes and the industry body, the Employment Related Services Association; employers and employers' organisations; and the DWP Minister for Employment, Mr Mark Hoban MP, and DWP officials. A full list of witnesses is set out at the end of this report.

12.  We also visited St Mungo's, a homelessness charity and provider of employment services to homeless people; and Willesden JCP in the London Borough of Brent, for a meeting with Work Programme participants followed by a roundtable discussion with Brent Council, JCP staff, local primes, subcontractors, training providers and the Hilton Hotel, a local employer. We are very grateful to all those we met and to everyone who has contributed to the inquiry.

13.  We would also like to thank Richard Johnson, a former Director of Welfare to Work at Serco, for his assistance as Specialist Adviser to the Committee for this inquiry.[4] His deep knowledge and understanding of the welfare-to-work market was invaluable to us and we very much appreciate the contribution he made to our work.

Structure of this report

14.  Our Report begins by considering the implications of the well-publicised low job-outcome performance of the Work Programme in the first 12-14 months of delivery. In chapter 3 we examine the role of JCP in referring and handing over claimants to the Work Programme and its role in the application of conditionality and sanctioning. We consider Work Programme providers' approaches to engaging employers in the programme, and highlight some examples of best practice, in chapter 4. Chapter 5 examines the current differential pricing model; considers its effectiveness in addressing "creaming and parking"; and looks at how the pricing model might evolve in the future. In Chapter 6 we consider whether there are sufficient safeguards to ensure that all types of jobseekers receive an appropriate service within the "black box". The availability of specialist support within Work Programme supply chains and regulation of the welfare-to-work market are examined in chapter 7. Our key conclusions are set out in chapter 8.

1   The Government decided to retain Work Choice, a voluntary welfare-to-work programme, specifically designed to support benefit claimants with severe disability-related barriers to employment. Back

2   The JSA Early Access group includes: ex-offenders and offenders (has or is serving a custodial or community service); disabled people (as defined under the Equality Act); people with mild to moderate mental health issues; care-leavers; carers on JSA; ex-carers; homeless people; ex-Armed Forces personnel; Armed Forces reservists; partners of current or former Armed Forces personnel; people for whom a drug/alcohol dependency (including a history of) presents a significant barrier to employment. See DWP, Work Programme Provider Guidance, para 13. Back

3   Work and Pensions Committee, Fourth Report of Session 2010-12, Work Programme: providers and contracting arrangements, HC 718 [hereafter, "Committee's 2011 Report"]


4   Relevant interests of the Specialist Adviser were made known to the Committee. The Committee formally noted that Richard Johnson declared the following interests: adviser to Brent Council on how to coordinate its services with the Work Programme. Back

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Prepared 21 May 2013