Welfare-to-work Contents

5 Work Programme Plus: helping people furthest from the labour market

49.The Work Programme is DWP’s large-scale mainstream contracted employment programme, to which the very large majority of long-term unemployed claimants are referred; few witnesses questioned the necessity for a similarly large-scale scheme to replace the current Work Programme contracts when they expire in 2017.49 There was wide-ranging consensus that the current structure of standardised JCP support in the early stages of claims, followed by referral to contracted providers for those who require a more personalised approach, should continue. However, many witnesses believed that the successor to the current Work Programme, which DWP called “Work Programme Plus”, would need to be significantly reconfigured if it is to increase the likelihood of success in helping those with more entrenched or complex barriers to employment back into work. ERSA told us that the central challenge was to structure Work Programme Plus in such a way as to ensure that “the right organisations are able to be there at the right time, with sufficient money to be able to do what they need to do.” This chapter sets out how we believe the next set of contracts could evolve to achieve this more consistently, while maintaining a level of continuity to protect the main strengths of the current Work Programme.

Simplified payment groups and an “accelerator” payment model

50.The current Work Programme differential payment model is set out in a table on page 20.

51.There was little evidence that the current differential payment model was having its intended impact of incentivising providers to focus more of their resources on participants with more challenging barriers to working. Maximus, a Work Programme prime, suggested that the payment group of participants was simply ignored.50 There were three main reasons for this;

52.As our predecessor Committee identified in 2013, benefit-type is a poor proxy for the level of employment support required: many JSA claimants have a complex set of needs and require resource-intensive help; some ESA claimants have comparatively straightforward needs. Providers therefore routinely carried out their own assessment of participants’ barriers to work; the payment group of individual participants had no bearing on this.51

53.Furthermore, there was a view that, even where payment groups reflected the relative difficulty of supporting different categories of claimant, the differential between maximum available payments for each group was insufficient. The maximum total fees (including job outcome fee and the maximum available sustainment fees) available to providers for supporting an ex-IB ESA claimant into sustained employment is £13,120, slightly less than three and a half times the maximum available fee for helping a mainstream JSA claimant aged 25 or over into sustained work (£3,875). Providers’ experience was that this did not adequately reflect the relative likelihood of achieving an outcome for someone who is far from ready to return to work, compared to someone who is ready, but perhaps just needs more personalised help with a job-searching strategy or other relatively generic or “light touch” support.52

54.Primes told us that the payment model was not currently set up adequately to compensate them for the extra resources required to help some people get back into work. Maximus explained that primes looked at the financial model in terms of the “unit price per participant” i.e. the average fee received per participant in a particular group, rather than the maximum fee available per participant in each group. From this perspective, the payment model was not incentivising providers to support ESA claimants as was intended. The ESA groups in Maximus’s provision were yielding lower average fees per participant: £1,030–£1,260 per person in ESA payment group 6, compared to £1,320–£1,610 per person in JSA payment group 2, for example.53 In making a similar point, ERSA noted that providers were effectively “subsidising the ESA cohort from the JSA cohort.”54

55.Experts told us the current model had too many payment groups. Providers pointed out that there was very little difference between the available fees for some of the groups. This was thought to be unnecessarily complicated and ineffective.55

Table 1: Work Programme differential payment model

Maximum payments available

Payment group

Job outcome
Yr 3 attachments

Job outcome
Yr 4 attachments

Job outcome
Yr 5 attachments

Max number of sustainment payments payable. Paid every 4 weeks

Max amount payable to providers in sustainment fees

Max payment for job outcomes and sustainment fees (based on a Yr 3 attachment)

1. JSA aged 18-24

£1,080

£960

£840

13

£2,210

£3,290

2. JSA aged 25+

£1,080

£960

£840

13

£2,795

£3,875

3. JSA Early Access

£1,200

£1,200

£1,200

20

£5,000

£6,200

4. JSA Ex-IB

£1,200

£1,200

£1,200

20

£5,000

£6,200

5. ESA Volunteers

£1,000

£1,000

£1,000

20

£2,300

£3,300

6a. ESA claimants 3 to 6 months prognosis

£1,080

£960

£840

20

£4,700

£5,780

6b. ESA claimants 12 months prognosis

£1,080

£960

£840

20

£4,700

£5,780

7. ESA Ex-IB

£3,500

£3,500

£3,500

26

£9,620

£13,120

8. IB/IS (ended 31 Mar 2015)

£1,000

£0

£0

13

£1,885

£2,885

9. JSA Prison leavers (From Mar 2012)

£1,200

£1,200

£1,200

20

£4,000

£5,200

Source: DWP

“Accelerator” payments

56.The Department recognised that a reconfigured payment model was necessary if it was more successfully to incentivise providers to support people with more challenging barriers. DWP told us that it was considering introducing a model with fewer payment groups, and replacing the flat differential payment with an innovative “accelerator” model, by which providers would receive larger fees as they supported more participants within a group into sustained employment. The benefit of this model would be more directly to link financial rewards to addressing the more complex cases within a cohort of claimants. Iain Walsh, DWP’s Director of Labour Market and International Affairs, explained that no matter how the Department chose to distinguish between claimants, no group of claimants would be homogenous; a flat fee was therefore likely to elicit creaming and parking, as a rational response from providers seeking to earn maximum return from their investment. Mr Walsh noted that the main challenge in introducing an accelerator payment model would be to set the performance thresholds above which providers would receive higher outcome payments at reasonable levels, based on the best available evidence.56

57.There was enthusiasm for this approach from within the sector, including from ERSA, and some more cautious support from charitable organisations supporting disadvantaged groups.57

Retention of PBR with a level of service fee for those furthest from the labour market

58.Kirsty McHugh told us very clearly that the Work Programme was under-investing in claimants who are furthest from the labour market. She said that the withdrawal of upfront fees since April 2014 had exacerbated this. ERSA’s view, supported by numerous others, was that:

Pure PBR for people on ESA is a mistake; we should not be doing that. There does need to be some level of service fee. A lot of the very good organisations in this space are charities, and surviving on PBR is a very difficult situation for many of those.58

A range of organisations believed that service fees were required to “de-risk” providers’ investment in the intensive support these types of participants need.59

Clearer, simpler (and generally earlier) referral points

59.A number of Work Programme participants we spoke to during our visits had been unemployed and claiming an out-of-work benefit, interspersed with short periods of temporary employment, for a number of years. A common experience was that the JCP regime had not provided the personalised help they required. The people we spoke to were making more progress, or had found work, since being referred to the Work Programme, and they wished that they had been referred earlier.

60.Currently the point in benefit claims at which a JSA claimant is referred from JCP to the Work Programme varies according to their payment group, as set out below:

In all cases the referral period is a continuous period of claiming JSA i.e. if a claimant has a short break from claiming, the period will commence again from day one of a new claim. For ESA claimants, referral is dependent on completion of the Work Capability Assessment, the eligibility test for ESA, which has been subject to substantial delays and backlogs in recent years. The resultant decision on eligibility for ESA is often appealed by the claimant. This has had a significant impact on the flow of ESA claimants onto the Work Programme.60

61.A strong theme was that providers needed greater certainty and clarity around the referrals they would receive in Work Programme Plus.61 Inclusion and the National Institute of Adult Continuing Education (NIACE) recommended earlier referral—at nine months as standard for mainstream JSA claimants. This was because the Work Programme had proven to be effective for this group, and also because Work Programme Plus was otherwise unlikely to receive sufficient referrals of more mainstream claimants to achieve the economies of scale of the current programme (Work Programme Plus is in any case likely to be significantly smaller in scale due to the much reduced JSA claimant count since 2010, and the proposed devolution of welfare-to-work in Scotland).62

62.The Work Programme’s innovative differential payments model has not had its intended impact on the behaviour of providers. Payment groups based largely on benefit-type have not provided an accurate proxy for the level of support required by individual participants. There are too many payment groups in the current model, with financial differentials which do not adequately reflect the relative likelihood of providers achieving an outcome for individual participants: this is both unnecessarily complicated and ineffective. There is a confusing array of referral points at which claimants are referred from JCP to the Work Programme, and many claimants would benefit from earlier referral. We welcome DWP’s acknowledgement of some of these issues and support the Department’s intention to address them in Work Programme Plus from 2017.

63.We recommend that Work Programme Plus participants be segmented into three payment groups, based on an assessment of characteristics known to affect likelihood of long-term unemployment, as recommended earlier in this Report:

64.We strongly support the Department’s intention to reconfigure the payment-by-results model for Work Programme Plus: it must more directly incentivise providers to invest in support to tackle participants’ more challenging barriers to working. The payment model should continue to have a very strong payment-by-results element and retain the focus on sustained job outcomes, but the new model must address the current under-investment in participants who are furthest from the labour market. We therefore support DWP’s intention to introduce an “accelerator” payment model. We recommend that accelerator payments be applied in relation to the intermediate support and intensive support groups described above, based on the best available evidence on what constitutes average, good and exceptional job outcome performance in relation to these groups. We further recommend that a service fee, set at 30% of the job outcome fee, be introduced for participants in the intensive support group.

65.Estimating the optimal point at which to refer claimants from JCP to contracted employment programmes is difficult. It must be carefully considered to minimise “deadweight” spending (money spent to help claimants back into work, where they would have done so without any intervention). It must be based on assumptions about claimants’ likely period of unemployment, and the added value, above an estimated “non-intervention level”, of the contracted support available. We are likely to return to this issue later in this Parliament, perhaps by commissioning research into whether it is possible to challenge the Government’s current deadweight assumptions and make a case for much earlier referral to particular types of contracted employment support for particular types of claimants. However, there is already a strong case for generally earlier referral to contracted providers. For Work Programme Plus, we recommend the simple referral system set out below:

Clearer and more measurable minimum service standards

66.The delivery of the Work Programme was designed to be largely free from prescription by DWP. The 2010 Invitation to Tender stated that:

Specialist delivery partners […] are best placed to identify the best ways of getting people back to work, and will be allowed the freedom to do so without detailed prescription from central government.63

This freedom to deliver services without prescription was intended to facilitate innovation and promote a focus on outcomes, rather than centrally-prescribed processes. It has become known as a “black box” approach.64

67.The 18 Work Programme primes are each required to publish minimum service standards, but our predecessor Committee found that they “vary greatly in detail and measurability”, and that some were “so vague as to permit providers to virtually ignore some participants if they so choose.” DWP told our predecessors, in response to the last Committee’s recommendation of a single set of clearer and more measurable minimum service standards, that a more prescriptive approach was “not feasible” within the contractual framework of the Work Programme.65

68.Dave Simmonds, Chief Executive of Inclusion, emphasised that “there is always going to be a balance between how much the black box is genuinely completely hands-off and the emphasis on customer service standards.” His view was that a reintroduction of upfront service fees in relation to participants with more challenging barriers to working would create an imperative for “a tightening up of the quality standards or customer service standards”. Inclusion’s view, supported by a number of charitable organisations, was that these claimants “should join the programme knowing what to expect.”66

69.The changes to the payment model set out in this Report will be a more effective way of incentivising providers to provide support for people who are facing greater challenges in returning to work; but more should be done to ensure that all participants in Work Programme Plus receive an adequate level of service and are not “parked”.

70.We reiterate the recommendation of our predecessor Committee: the Department must establish a single set of clear and measurable minimum service standards, applicable to all providers, and to which all Work Programme Plus participants are entitled.

49 The Public and Commercial Services Union, which represents DWP staff, including many who work in Jobcentre, was a notable exception (WTW0019)

50 Maximus (WTW0016)

51 Ibid.

52 Ibid.

53 Ibid.

55 Qq30–3 [Dave Simmonds]; Maximus (WTW0016)

57 ERSA (WTW0003); Maximus (WTW0016); Gingerbread (WTW0031)

58 Q9

59 Essex County Council (WTW0012); Maximus (WTW0016); National Housing Federation (WTW0020); NCVO (WTW0038)

60 ERSA (WTW0003); Prospects Service (WTW0043)

61 See, for example, Maximus (WTW0016); Crisis (WTW0032); NCVO (WTW0038); Fit For Work Team on behalf of the Health Work and Wellbeing Group (WTW0044)

62 Inclusion and NIACE (WTW0041)

63 Cited in Work and Pensions Committee, Fourth Report of Session 2010–12, Work Programme: providers and contracting arrangements, HC 718, para 21

64 Work and Pensions Committee, First Report of Session 2013–14, Can the Work Programme work for all user groups?, HC 162, chapter 6

65 Work and Pensions Committee, Second Special Report of Session 2013-14, Can the Work Programme work for all user groups? Government Response to the Committee’s First Report of Session 2013-14, HC 627

66 Q3 [Dave Simmonds]; Gingerbread (WTW0031); Crisis (WTW0032)