Payment by results and the Work Programme

Work Programme providers are still not hitting their targets. The worse performers are being penalised by losing market share to their better performing rivals. This direct competition is a feature that the DWP deliberately built into its payment by results model...

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How is the Work Programme performing?

The Department for Work and Pensions published the 3rd performance statistics from the Work Programme last Thursday 26 September 2013.

Overall, the results are mixed.

  • Peformance has improved – but still hasn’t hit the DWP’s minimum expectations.
  • Job outcomes have improved month on month for those on Job Seekers Allowance, but is now plateauing.
  • Job outcomes for those on Employment and Support Allowance has improved but is still way below target.
  • JSA claimants who are found work are staying in those jobs longer.
  • ESA claimants are not sustaining  jobs at the desired level.
  • Three providers are being penalised for poor performance.

Does it work for offenders released from prison?

Released prisoners on Job Seekers Allowance were first made eligible for the Work Programme immediately on release in February 2012.

A total of 19,800 of these released prisoners were referred to the Work Programme between February and December 2012.

13,560 (68%) of these were “attached” to the Work Programme (that is, providers started working with them).

360 of these (2.7% of the attached figure) have so far (figures up to June 2013) been found sustainable jobs  – jobs that lasted for at least six months.

This figure is obviously very low, although it can be expected to increase as it takes several months to find some individuals work.

Payment by results

The Centre for Social & Economic Inclusion estimates that the DWP has paid providers a total of £856 million over the life of the Work Programme, made up of:

  • £456m in attachment fees, which are paid when customers start on the programme.
  • £191m in job outcome payments.
  • £208m in sustainment payments.

However, the Work Programme is evolving into a total payment by results model, meaning that finding and keeping customers jobs is the only way of generating income – from next April the DWP will not pay up-front attachment fees. This helpful chart from CESI shows that provider’s sole key to success is to find job seekers sustainable jobs:

 

CESI work programme Sept 13

One of the key features of the PbR Work Programme was the way the DWP built competition between providers into the model.

By having more than one provider in a Contract Package Area, the DWP announced from the start that higher performing providers would be rewarded by giving them a greater share of the referrals in that area.

DWP implemented this “market share shift” mechanism following the latest figures with providers in ten areas receiving an extra 5% of referrals at the expense of their poorer performing rivals.

My assumption is that this shift will amplify both positive and negative performance.

High performing providers will be able to secure more income from a larger client base, whereas low performers will need to make cuts in staff and other resources.

There is no equivalent competitive element built into the next big government Payment by Results initiative – the radical reform of the probation service via the MoJ’s Transforming Rehabilitation project.

However, given that TR contracts have been announced as being 7-10 years long, it’s possible to speculate that high performers will get the full 10 years (plus an option to extend for three more) while poor performers will have their contract re-tendered after 7 years.

Of course, these time spans are much longer than the Work Programme which only started in June 2011.

 

For readers interested in Work Programme peformance, I recommend two key sources.

Firstly, the Centre for Social & Economic Inclusion produces excellent, coherent analysis of the DWP data which take into account the economic context. Some of this post is based on their latest report. You can also follow them on Twitter: @InclusionCESI

Secondly, the DWP itself provides an excellent Tabulation Tool which allows us to interrogate the data anyway we like – which is how I got the detail about how released prisoners are faring on the Work Programme.

 

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