Work and Pensions CommitteeWritten evidence submitted by A4e

1.0 Introduction

1.1 A4e is one of the largest providers of the Work Programme on behalf of the Department for Work and Pensions (DWP) and Jobcentre Plus (JCP). We are the Prime Provider for five Work Programme Contract Package Areas (CPAs): East London; East Midlands; North West; South East; and South Yorkshire. A4e is also a subcontractor in the following contract package areas: North East; Wales; Scotland; Surrey, Sussex and Kent; and West Yorkshire.

1.2 In delivering the Work Programme across these areas, A4e has directly supported tens of thousands of people into work. We have seen particular success with young people. Nearly half (47%) of the 18–24 year olds claiming Jobseeker’s Allowance, who were referred to A4e at the start of the Work Programme in June 2011, got a job. Since the Work Programme began, A4e has also supported jobseekers in setting up over 2,000 new businesses—81% of these were trading successfully at six months.

2.0 Executive Summary

With A4e’s insight, expertise and front-line experience, in our submission we make the following recommendations:

2.1A review of current categories, definitions and pricing to produce a fine-textured set of cohorts.

2.2Investigate the potential for more effective profiling tools, and if successful, for more day one entries to the Programme.

2.3A review of referral mechanisms to the Work Programme and the effectiveness of minimum referral guarantees.

2.4The DWP to lead a pan-government effort to create a common social outcomes procurement framework, which allows a single provider to pool budgets around an individual.

2.5Use of the claimant to vacancy rate as a preferred metric of labour market ease/difficulty, rather than gross domestic product (GDP).

2.6Local and national media should follow the lead of those publications already championing the Work Programme to help employers to understand the potential to support local jobseekers into work.

3.0 The Differential Payments Model

3.1 A4e strongly supports DWP’s differential payment model. Some customers are much further from work, much more costly to the taxpayer, and much more expensive to move into work than others. It guards against so-called “parking and creaming”. Paying according to the complexity of the work in hand is therefore sensible.

3.2 In an ideal system, the differential payments would be so well calculated and precise that all customers would move into work at exactly the same rate, because both the incentives and resources to deal with them would all be exactly equal to the challenge of that cohort. Other things being equal, if one group is moving into work faster or slower than others, this indicates the payment level is too high, or low (although clearly in reality there are many other factors at play that determine the rate at which customers move into work, such the strength of the local economy).

3.3 One way the Work Programme could be enhanced further is by strengthening the use of differential payments. The nine current payment groups for the Work Programme are still loosely based on the previous type of benefit recipient. A4e is a provider to Job Service Australia, which means that we also operate with the Australian model. The Australian system has over eighty different payment groups. Our experience is that this creates better incentives, and better reflects the true costs and difficulty of dealing with a very diverse group of customers.

3.4 Mental health, self confidence and skills all deteriorate the longer a person is out of work. Therefore, we would support greater use of day one entry for some types of customer. Ex-offenders now enter the Work Programme immediately upon release. Having a criminal record presents an enormous barrier to employment, and these customers need bespoke, in depth support as soon as possible. A4e believes that there may be other groups that would benefit from a similar approach: customers with very low qualification levels for instance.

3.5 An improved profiling assessment tool, either managed by Jobcentre Plus or independently, which could take into consideration a wider set of personal indicators and situational issues (location, poverty, local job market, etc.), would help to create an even more efficient market. Better profiling would allow for a faster and more effective diagnostic of the many issues an individual can face in their first twelve months of unemployment. With a better diagnosis of the level of a person’s need, it would be possible to collect data to make a better judgement about which customer groups could benefit from being fast tracked to the Work Programme on day one of unemployment in the future.

Recommendations

A review of current categories, definitions and pricing to see if it is possible to hone the accuracy of cohort divisions.

Investigate the potential for more effective profiling tools, and if successful, for more day one entries to the programme.

4.0 The Prime Provider Model

4.1 Prime contracting is a sensible way to combine the advantages of large and small organisations. Across our five CPAs, over 40% of A4e’s delivery comes from our supply chain partners. We have a diverse supply chain with a mix of third sector (44%), public sector (31%) and private sector (25%) partners. A4e has worked with each of these sectors for many years and understands the different challenges partners within these sectors face, and different strengths that each sector can bring to our supply chain.

4.2 We provide an array of support to our supply chain partners, including financial modelling workshops, face to face advice and flexible payment options, from the initial contract negotiation phase through to current operations. In the last ten months, A4e has delivered over 900 training days to our partners, averaging 20 days per organisation in less than a year. For example, specialist training has been delivered to help partners to build employer relationships and securing employment opportunities for customers. Over 50 partner representatives have undergone this training, to date.

4.3 Looking ahead, the most important way to enhance the prime contracting model would be to improve the consistency of referrals onto the Work Programme from Jobcentre Plus and the Work Capability Assessment. Primes like A4e have built supply chains to suit the expected blend of referrals, including many smaller, community providers who specialise in the particular types of barriers which Employment and Support Allowance (ESA) customers often face. At the start of the Work Programme, prime contractors expected 30% of customer referrals to be ESA. However referrals have consistently been substantially below expectations, particularly in the first year of the contract. As a result, primes often have not always had the customers to refer to their specialist suppliers. This has created issues for those suppliers, who often have fixed costs that they have to maintain without the anticipated revenue stream. The heart of this issue is good communication from DWP/JCP to primes and suppliers, and continuing the improvements to the referral process.

Recommendation

A review of referral mechanisms to the Work Programme and the effectiveness of minimum referral guarantees.

6.0 The Black Box Approach to Service Delivery

6.1 A4e strongly supports the black box approach. Frontline providers know what works best at the frontline. Moreover, in a system where risk is transferred, providers must have the flexibility to operate as they see fit. DWP should monitor outcomes and distance travelled by customers, not how that is achieved.

6.2 It is vital customers have a voice in the service they receive. It is crucial both to ensuring quality service and to suggesting further improvements to the service model. Therefore having good mechanism of feedback and complaint is a very important part of the Work Programme’s black box.

6.3 The length of Work Programme contracts supports innovation, because it permits longer term investment, better data, and stronger links with local employers, community organisations, Local Authorities and many other crucial stakeholders.

6.4 An example of service innovation is The Dearne Approach, a ground-breaking joint project involving A4e, Serco, local residents, Turning Point and Barnsley Metropolitan Council. The project trains up local people to be community researchers, developing new insight into their needs and aspirations. This bottom-up research will then inform a closer alignment of public, private and third sectors working in Dearne, providing services which are better targeted to meet the needs of local people.

6.5 Another example is A4e’s job creation work with a local housing association in Southampton. The intent of the project is to refer customers who are further from the jobs market to the housing association for an interview, selection and six month job placement. Those who complete the programme will be either offered employment by the association or put forward for opportunities locally with their newly acquired skill set. The pilot has been running for four months—so far without a single drop out.

6.6 Customers are a vital focus for the Work Programme, but so are employers too. The black box also gives us much more flexibility when working with employers. A major focus for us has been creating long term partnerships with employers. We work with employers to understand their HR strategy, and the kinds of roles that they will need to fill over not just next week, but next month or next year. A4e can then work with customers to skill them up, not just for that industry, but for that specific role and specific employer. For the customer, knowing an employer is ready to give them a chance gives them a great boost to their confidence and motivation. For the employer, they know they will get good quality candidates who understand the role they are entering, and have the necessary skills and attitude. Unlike a recruitment agency, A4e charges no finder’s fee. This cuts costs for employers in recruitment, reduces turnover, and helps them fulfil their social responsibility objectives.

Employer Case Study: QUBE Telecommunications

A4e has joined forces with telecommunications firm QUBE, to help them to staff their nationwide network of telecomms engineers. The partnership with QUBE has given A4e customers all over the country the chance at a brand new career; nearly 200 have successfully made that step. We now manage the whole recruitment process for QUBE—from sourcing to selection. Our sustainment rate has been exceptionally high, a sign that both our customers and our employers are happy with our service:

“A4e have supported QUBE through a rapid and exciting phase of growth. By working with them we have recruited around 200 engineers. They have provided us with an efficient, professional and extremely cost effective service.”

- Caroline Keefe, HR Director, QUBE

6.7 We are now working to extend the number of employers we can support in this way, by integrating higher and higher levels of skills training into our pre-employment support, so that we provide a complete pathway for a customer to work. In some cases this begin with basic hygiene, time keeping, literacy, numeracy, confidence building; then job search, health support, employer link up, interview preparation; through to help starting work, and an apprenticeship in work. The further integration of welfare and skills spending would greatly help this process.

6.8 An important component of our black box model is to help people start their own business. So far we have helped 2,535 people on the Work Programme to start their own business. Self employment is particularly appropriate for customers who have a barrier to the normal workplace, such as caring responsibilities or a disability.

Looking ahead: where the black box goes next

6.9 The next development for the black box model centres on innovation and integration with public services around the individual customer. Being out of work is rarely the only challenge our customers face. Inadequate skills, low self esteem and poor health are very common issues. For instance, 27% of our customers consider themselves to be overweight. 54% smoke, far more than the national average. Poor mental health is also a large concern for our customers, which in turn involves issues such as loneliness (19% of our cohort see friends or families less than once a month).

6.10 These problems are often more entrenched amongst our customers than the majority of unemployed people seen by Jobcentre Plus. For instance, whilst two thirds of short term unemployed people (unemployed for less than a year) say they have a health issue, amongst our customers the figure is even higher at 84%.

6.11 This creates a complex, overlapping set of problems which are mutually reinforcing.

Tackling all these issues requires a coordinated effort across all public services to achieve agreed outcomes. This requires not just the right range of support, but also careful sequencing. The right support in the wrong order will not stick.

6.12 A4e welcomes the cross-government move towards payment by results to do just that. However, in doing so, it is vital that any new procurement frameworks for reoffending, health or addiction outcomes mesh with the Work Programme. Recreating silos across the Ministry of Justice, Department of Health and so on might result in a single individual having three providers working in isolation towards three outcomes for three ministries—which would see no improvement for the individuals receiving services, or the taxpayer.

6.13 The DWP has been at the forefront of designing payment by results contracts. Along the way it has built an unparalleled expertise in commissioning for outcomes, building an effective market, and securing value for money. We hope that departments work together to build systems which are mutually reinforcing of positive outcomes on the ground.

Recommendation:

The DWP to lead a pan-government effort to create a common social outcomes procurement framework. This should build on the work of the recent Social Justice Framework for measurement and the Cabinet Office’s Social Outcome Fund, to allow a single provider to pool budgets around an individual.

7.0 Regional Variations in Job Outcome Statistics

7.1 One way to counter difficult local labour conditions is to work with local media to change the perception of unemployed people. The media labelling of unemployed people as “scroungers” or “benefit cheats” is not only unhelpful for customers, it also makes employers more cautious about taking on people who have been out of work for some time. It is vital to make the case that our customers are hard working, diligent and keen to be given a chance. A4e is working with several local newspaper groups on a “We want to Work” campaign, encouraging employers to take on people who have been on the Work Programme. The campaign began in Derby, where all six candidates featured in the paper have now found work, and has spread to Oxfordshire, Grantham and Doncaster. All of the campaigns have attracted local support from their constituency MPs, many of whom have acted as crucial champions of their unemployed constituents.

7.2 Providers work within a system of very different local economies across the country. Moreover, forecasts suggest that these differences will become starker as the national economy recovers.1 These variations show up somewhat in official figures. However, the main national measure—GDP—is perhaps not the best reflection of local labour markets. A4e believes a better measure of the state of the local labour market is the Claimant Count Vs Vacancies rate—the ratio of the number of people looking for work to the number of jobs available locally.

7.3 Using this measure demonstrates just how different local labour markets are now becoming. In some parts of the country there are twice as many vacancies per claimant as the national average, whilst in others there are three times fewer vacancies per claimant as the national average.2

VACANCIES: CLAIMANTS RATIO OCTOBER 2012

Top 5 Jobcentre Plus Districts

Standard full time

vacancies

Total claimants

Number of vacancies

for every 100 claimants

Staffordshire and Shropshire

11,494

30,549

38%

Thames Valley

11,693

31,668

37%

Mercia

10,818

30,183

36%

Leicestershire and Northamptonshire

12,755

37,325

34%

Greater Manchester Central and Cheshire

15,837

50,180

32%

Bottom 5 Jobcentre Plus Districts

Standard full time vacancies

Total claimants

Number of vacancies

for every 100 claimants

South East Wales

4,405

34,802

13%

East London

6,254

61,592

10%

Durham and Tees Valley

4,465

44,933

10%

South London

6,302

68,697

9%

West of Scotland

2,453

30,500

8%

Recommendations

Local and national media should follow the lead of those publications already championing the Work Programme to help employers understand the potential to support local jobseekers into work.

DWP should use the claimant to vacancy rate as a preferred metric of labour market ease/difficulty, rather than GDP.

7 December 2012

1 Oxford Economics (2012), Regional Economic Outlook Autumn 2012

2 October 2012 figures.

Prepared 20th May 2013