Millions skimmed off government welfare contracts

Outsourced employment service providers are funnelling millions of dollars in government funding earmarked for people on welfare through their own companies, related entities and labour-hire outfits, creating paper empires out of their impoverished clients.

Under the $6.3 billion, five-year Workforce Australia model, private and not-for-profit job service providers are able to receive “outcome” payments for placing jobseekers in “work” within their own organisation and receive funding to refer them to other services and training, which can also be delivered by subsidiaries or related parties.

In short, a provider can be paid to take on a welfare recipient by the federal government and then be paid to place them into training within their own organisation and then be paid again by placing the person into work somewhere else in that organisation’s network.

This comes at the same time as an increasing awareness that mutual obligations – the system by which people on welfare must apply for an arbitrary number of jobs, enrol in training or perform set activities each month under threat of payment suspension – is damaging and does not lead people to employment.

Data released under freedom of information laws and through budget estimates reveals that in the year to June 30 the Employment Fund made $33.6 million in commitments to job providers within their own organisation, for example for counselling services provided by an entity with the same ABN.

Excluding wage subsidies, which cannot be claimed in this way, the spending represents a quarter of the more than $100 million allocated from the Employment Fund in total. One provider alone made $5.5 million worth of claims via its own entities in a nine-month period to March 31.

While the Department of Employment and Workplace Relations has tallied the figures for organisations using the same ABN, it took longer to come up with a figure for how much providers were spending on related companies – such as those that shared a director or major shareholder – because providers self-report and the reports are often unreliable.

The Saturday Paper has been told the dollar value for related-party claims from the fund is $9.2 million in the year to June, bringing the total amount of money being recirculated within companies to $42.8 million.

“We are as confident as we can be, based on the information that we have to date,” then department deputy secretary Nathan Smyth told Senate estimates at the end of May.

“If we find that entities have not been disclosed to us, as we’ve asked, and we’ve sought that information and funding is being funnelled through a related party, then that may well be a breach of the deed and we will take appropriate action.”

Smyth left the department and moved to Home Affairs in July. His position leading employment service reform has not yet been replaced.

The Department of Employment has no idea, however, how much money is being piped to providers for job outcome payments as a result of placing their own welfare clients into work somewhere else in the organisation or extended network.

A spokesperson said: “In relation to the 56 per cent of Workforce Australia services providers who have reported they have placed participants from their caseload into jobs within their own organisation or a related entity, the department does not have readily available information about the number of job placements and any associated outcome payments.”

Payments for so-called employment outcomes range from $240 for a partial four-week outcome to $5000 for a full 26-week outcome. For the very-long-term unemployed, out of work for more than 24 months at the time of the job placement, the provider will also receive an additional bonus ranging from $1000 to $4000.

The jobs don’t necessarily have to last beyond those arbitrary markers of “success” and the settings give job agencies a mix-and-match opportunity to “place” people in work, training or other services across their sprawling enterprises to maximise profit.

According to self-reports made to the department, some job agencies have as many as 12 related entities, which include registered training organisations, psychologists and recruitment firms. Although there is a ban on claiming wage subsidies for placing jobseekers with labour-hire companies owned by one provider, there is nothing stopping employment providers from shuffling their caseload on to someone else.

They tried to force me into a ‘learn to use computers’ course or cut my payments off … explaining to them that I had a master degree in internet communication and a graduate certificate in digital law … fell on deaf ears .

In the nine months to the end of March, there were 79 such agreements made under Workforce Australia, worth almost $5 million, more than 26 per cent of all wage subsidies.

Woolworths and Coles are the two biggest single companies where unemployed people have been “placed” in work, but six of the 10 largest employers are labour-hire companies including Randstad Pty Limited, Hays Specialist Recruitment and Probe Asia Pacific Pty Ltd.

These companies are used across government to fill “temporary” labour gaps. Last week, the Department of Employment, which oversees the employment services industry, published contracts for temporary personnel services worth $87,000 with Randstad, $1.6 million with face2face Recruitment and another $2.5 million with Adecco Australia.

Federal government departments often pay placement fees, as a proportion of a position’s total cost, to these same labour-hire firms.

Two weeks ago, welfare rights group the Antipoverty Centre and GetUp! launched a damning report titled “Punishment for Profit”, which included a survey of hundreds of people who had been forced under threat of sanction to engage with a phalanx of job agencies.

The report details accounts of cookie-cutter, job-ready “training” packages that are laughably basic and a suite of behaviours by employment provider consultants that range from competent to abusive in some cases.

One respondent said they were ordered to “listen to an audio clip of Goldilocks and the Three Bears and answer questions like ‘Who is Goldilocks?’, ‘How many bears were there?’ and ‘What was in their bowls?’ ”

Another, working seven days a week in two different jobs, had to attend classes to develop work skills such as “photocopying my résumé”. Such examples are common.

“The government has outsourced human services to the extent that it has created these massive conglomerates, both for-profit and non-profit, which cannot exist without hundreds of millions of dollars of public funding,” Antipoverty Centre spokesperson and report co-author Kristin O’Connell tells The Saturday Paper.

“So they’ve got to find a way to unwind this behemoth of too-big-to-fail organisations that are, at the very best, doing very little and at the very worst causing mass harm.”

For the first time in decades, anti-poverty advocates have found common cause with some providers of employment services who have recognised the system in which they operate simply is not working.

WISE Employment, the 10th biggest job agency with $123 million in government contracts, told a parliamentary inquiry chaired by Labor MP Julian Hill that the system of mutual obligations should be terminated.

“Despite periods of reform, there has been an increasing convergence between major parties on social policy,” its submission earlier this year says.

“Eligibility has been increasingly narrowed with the distinction made between different classes of payment, along with the introduction of increased compliance and reciprocity (mutual obligation) creating a distinction between those ‘deserving’ (age pensioners), and ‘undeserving’ (unemployed) poor being treated much more harshly,” it says.

“It is WISE Employment’s opinion that the current mutual obligation based employment services model is inappropriate, compelling participants who are unlikely to enter employment for a range of reasons (including for example behavioural and social issues, or experiencing crisis, such as homelessness) and with severely limited income to undertake compliance driven activities or risk losing income thereby compounding their crisis, disadvantage and disengagement from the system.”

When Employment and Workplace Relations Minister Tony Burke was sworn into the ministry, he inherited signed contracts for the next five years of an apparently reformed employment services industry. Workforce Australia, as it is now known, replaced Jobactive, set up by Tony Abbott.

They are variations on a theme, however. Burke worked with Hill to establish the parliamentary inquiry into the new system, because it was required by the legislation, but it has also bought the Labor Party time to figure out how to deal with a major shift in mood.

In June last year, Burke was asked on Sky News Australia if he believed in the concept of mutual obligations. “Absolutely,” he said.

The Coalition has tried to pressure Labor MPs on this point. Senator Michaelia Cash, a former employment minister, asked department officials and Labor Senator Murray Watt in May this year if mutual obligations were subject to review through the Workforce Australia inquiry.

They are, deputy secretary Smyth conceded.

Watt was still walking the line.

“We support mutual obligations. A critical part of that is ensuring that programs which are said to help people find employment actually do so,” he said.

“There’s not much point pouring taxpayers’ money into programs that are ineffective. If there are opportunities to make programs more effective, then our government is keen to do that.”

A draft platform for last weekend’s ALP National Conference attempted to flesh out this position. “Labor believes that unemployed people with the capacity to work should make reasonable efforts to secure work, and that the government and service providers should provide services and support to job seekers that genuinely help attain secure employment,” the draft platform said.

“Labor also recognises that current aspects of the mutual obligations system can be punitive, cause stress and anxiety, and be a barrier to attaining employment.

“Therefore, Labor will review the nature and extent of mutual obligations and develop a revised approach that provides the help people need and is based on trust and shared accountabilities for government, service providers and job seekers.”

The amendment was adopted. What that means in practice, however, is anyone’s guess. Much lip-service has been paid already to making the mutual obligations system more logical.

Last year, Tony Burke said it made no sense, for example, that someone studying full-time should have to apply for an arbitrary number of jobs every month to meet their activity requirements. The Antipoverty Centre says this has not translated.

“Many people have reported to the Antipoverty Centre that their full-time study … is not being counted at all,” the report says.

During a hearing for a separate Senate inquiry into the extent and nature of poverty in Australia on August 15, Greens Senator Janet Rice asked Department of Employment representatives about the growing body of testimony calling for an end to mutual obligations, from WISE Employment, Joblink Plus and others.

“We have heard that evidence and are aware of it,” Department of Education, Skills and Employment director Dr Andrew Wright said. “In response, I would point to the significant volumes of international and Australian research showing the effectiveness of mutual obligations at speeding up the rate at which people on unemployment payments do find work.”

Dr Wright cited an Australian study that showed a 50 per cent reduction in payment recipients in the cohort.

“Okay, does that necessarily mean that they found work?” Senator Rice asked.

“Not necessarily,” Wright responded.

One of the key problems for the department and successive governments is that no serious work has been done to try to understand what happens to the people actually using employment services. Some suggest this is because they know what it would find: the average duration of someone on the unemployment benefit is 180 weeks, or almost four years. Almost half of the 843,390 JobSeeker recipients in March this year had some form of disability or incapacity to work.

Between May and December last year the government paid $119,000 to Market Access Consulting to find out what was “occurring in the lives of job seekers experiencing financial penalties”. Financial penalties, distinct from suspended welfare payments, are applied to those who “commit a mutual obligation failure without a valid reason” or “commit work refusal or unemployment failures”. The report has not been published.

In its submission to the Workforce Australia inquiry, Anglicare Australia said a “perverse set of decisions” meant for-profit providers had been given the power to issue breaches and penalties against clients, and that this provided operators with a “new funding stream”.

“There is widespread evidence of system errors that penalise people who have not done anything wrong,” the submission said.

“Many people are unfairly enduring a loss of income as a result of flawed systems by their providers. Some have reported being breached for missing appointments that had not even happened yet. Others were breached after providers refused to reschedule appointments that clashed with training, job interviews or even casual work.

“The system routinely punishes people without due process, yet it has endless tolerance for mistake-prone providers. Those who bear the brunt of the system’s errors cannot afford to be breached, with the JobSeeker payment already well below the poverty line.”

This week, the Department of Employment published a new contract for a $2.6 million “Workforce Australia longitudinal survey” awarded to social research company Wallis Consulting Group. What this research hopes to uncover, which hasn’t already been published by decades of academic study of poverty’s long tail, is unclear. Even the Productivity Commission has lost faith in the dubious economic “benefits” of punishment for welfare.

“We’ve seen overwhelming evidence for many years about how pointless and harmful mutual obligations are,” the Antipoverty Centre’s Kristin O’Connell says.

“We’ve got an opportunity where [robodebt royal] commissioner [Catherine] Holmes has highlighted that policies that hurt people on the lowest incomes are enabled by the way that politicians and media talk about us.

“And we now have some providers willing to admit that their whole system of mutual obligations is unnecessary and potentially harmful and many other providers who are not willing to go that far but who want to wash their hands of it and don’t want to be the ones doing the compliance.”

For the privatised employment services sector, whole worlds of value have been plucked from the artificial environment created by two words: mutual obligations.

There are few better examples than APM Human Services International, which listed on the Australian stock exchange in late 2021 and has a market capitalisation of $1.6 billion. As one client told the Antipoverty Centre: “They tried to force me into a ‘learn to use computers’ course or cut my payments off.”

The course was conducted by an APM-linked entity, “meaning they would get paid more for me doing it”.

“Explaining to them that I had a master degree in internet communication and a graduate certificate in digital law, which meant I was in all likelihood far more computer literate and capable than the person teaching the course, or themselves, fell on deaf ears,” the person says.

As employment service providers refer clients to their own training organisations, PwC has just finished a $2.9 million contract to provide “expert advice on qualifications reform” as part of an overhaul of vocational education and training.

PwC is also working on another Workforce Australia contract, worth $770,000, to provide assurance for changes to the digital platform.

The consulting firm had a sideline in advising companies on training and “conducting independent reviews of small and large registered training organisations”.

Rewards are clearly baked into the employment services industry, but not for the people who use it.

This article by Rick Morton was first published in the print edition of The Saturday Paper on August 26, 2023 as “Exclusive: Millions skimmed off government welfare contracts”.