Employment Services 2015-2020: New Enterprise Incentive Scheme (NEIS)

Jobs Australia Submission

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This part of our submission responds to the proposed Statement of Requirements for the New Enterprise Incentive Scheme (NEIS).

The new arrangements for employment services will have a significant impact on the delivery of NEIS. The move to 51 Employment Regions will result in the need for much broader coverage by NEIS providers than at present. However, the decision to limit the number of providers to no more than three in each region is a welcome move. In the current contract some areas have as many as six NEIS providers. Experience has shown that this is too many, both for the available resources and levels of demand for NEIS in some locations.

The new model for NEIS also proposes changes to the payment model and to servicing requirements. Jobs Australia supports the emphasis on achieving outcomes but we think that considered together these changes require closer examination.

Twenty two Jobs Australia members deliver the current NEIS program around Australia and we have consulted with them to explore the likely impact of the proposed changes. Several concerns about the changes have emerged. The most significant of these relate to the payment model and to training delivery modes, and the impact these will have on the Programme’s overall viability. In addition, there is a point in need of explicit clarification in relation to the Employment Fund which, if provided, would avoid unintended operational difficulties when the programme commences.

PAYMENT MODEL

The proposed payment structure for NEIS 2015-2020 contains several changes which providers consider make the programme potentially unviable. Furthermore, the changes do not align with the Government’s underlying policy intentions as these have been expressed in the proposed arrangements for the broader ES 2015-2020 model.

While the model proposes that NEIS payments remain at the current level, the way that those payments will now be made is to be changed.

The new model proposes that providers receive 80% of the NEIS fee on achievement of a Commencement. They will not receive the remaining 20% until the achievement of a post-programme outcome. A post-programme outcome cannot be achieved until the Department has verified that the NEIS participant has not been receiving income support for 13 weeks after exiting NEIS.

This means that providers will now be required to provide some level of service to, or engagement with, a NEIS participant for an additional 13-week period beyond the 52-week point. However, they will not receive any additional funding to do this. During this period providers might also face some challenges in staying engaged with participants who, given that they are no longer receiving income support, may well consider that any responsibilities they have to the NEIS provider have ended.

Secondly, the decision to leave the current level of payments in place ignores the reality that the program’s costs have increased significantly over the last few years. Providers particularly note increases in the cost of delivering accredited training, given that it represents a high proportion of servicing costs. There have been five years of Consumer Price Index (CPI) increases of 2.5-3.0%, an approximate 15% increase since the last fee adjustment pre-2009. Future increases in costs over the 5 year contract period can reasonably be expected to be of a similar magnitude

While we believe that an increase in the level of funding to address these cost increases is warranted, the decision to leave funding where it is now would have been mitigated if a mid-contract price adjustment had been built into the model. However, the proposed model does not provide for a mid-contract price adjustment for fees and it does not provide for a regional loading for payments.

MID-C0NTRACT PRICE ADJUSTMENT

The introduction of the mid-contract price adjustment into the proposed ES 2015-2020 programme model provides a critical mechanism for responding to normal and inevitable price increases over the contract’s five year term. These include overall rises in the range of costs incurred by NEIS providers such as wage increases and superannuation guarantee increases. By introducing the mid-contract price adjustment into that programme the Government has recognised a significant deficiencyin the current funding arrangements for Jobs Services Australia (JSA). The Exposure Draft states that the measure has been introduced in order to ensure that they (providers) can continue to deliver the same level of service over the life of the contract (Exposure Draft, p3).

The rationale for the mid-contract price adjustment applies equally to the ongoing viability of the NEIS programme.

RECOMMENDATION

Jobs Australia recommends that the mid-contract price adjustment is extended to include NEIS 2015-2020.

REGIONAL LOADING

The introduction of the regional loading is something that Jobs Australia has argued for over several years. We applaud its introduction into ES 2015-2020, and note that the proposed introduction of the new and larger Employment Regions makes it even more necessary.

Logic and consistency indicate that this measure should also apply to NEIS funding. The NEISProgramme will be delivered in tandem with other employment services across the new Employment Regions and for the same contract period of five years. In addition, the arguments for the need for a regional loading particularly apply to NEIS service delivery given the Programme’s requirements relating to the provision of face-to-face training, on-site mentoring visits and the associated travel these require.

There appears to be no valid reason why the NEIS funding model should not contain the provision for a regional loading.

RECOMMENDATION

Jobs Australia recommends that the regional loading be extended to include NEIS 2015-2020.

POST-PROGRAMME OUTCOME POINT

As already outlined above, the new model proposes that providers receive 80% of the NEIS fee on achievement of a Commencement and that they won’t receive the remaining 20% until the achievement of a post-programme outcome 13 weeks after the participant has exited NEIS.

By comparison, the current fee structure is timed to place most importance on participants commencing their NEIS businesses:

25% ($1,025) on commencement of a suitable job seeker in the NEIS course;
50% ($2,050) on the job seeker’s successful completion of the course (i.e. certificate issued); and
25% ($1,025) if that job seeker commences NEIS Assistance.

In addition, there is the NEIS panel fee of $1,480 paid when the job seeker commences in NEIS Assistance.

While currently all fees are paid to providers once a participant starts their NEIS business/starts receiving NEIS Allowance, the new fee structure would move 20% of those fees to three months after the end of NEIS Assistance, that is up to 12 months + three months (i.e.15 months later).

It is worth noting two points here:

The longest an employment services provider has to wait for outcome fees is six months from placement (or as short as four weeks from placement), while NEIS providers will have to wait up to 15 months from ‘placement’, i.e. commencement of the business. This is not equitable.
There are no commercial training organisations that are prepared to deliver training first and get paid later. It is standard RTO practice to require some form of payment before training commences. Given this, it is hard to see why an RTO providing training for NEIS would be prepared to provide the training with no guarantee of a fee. In the case of NEIS the fee is only guaranteed if the trainee continues into the NEIS programme.

We propose that the current timing of payments is retained. Not only does the proposed change add a modest level of servicing which is unfunded, it is also unlikely to contribute to any significant strengthening of the Programme or the fledgling businesses that participants are establishing.

While the evidence that new micro-businesses are difficult to establish and sustain is well known,NEIS’s strengths in addressing this problem lie in the rigorous nature of its assessment and support processes. These include marketing, participant screening and selection, arranging and providing accredited training, assessing and approving a business plan, and a regime over the programme period of sustained professional mentoring support.

None of these, alone or jointly, can guarantee business success. However, well-implemented they are more likely to underpin success than an additional period tacked on at the end of the Programme when the participant no longer has the commitment to the Programme that is ensured when he or she is receiving NEIS Assistance. We believe that the current suite of supports is well conceived, targeted and timed, and that extending it in the way proposed will not significantly improve the Programme’s outcomes but will put significant pressure on provider viability.

RECOMMENDATION

Jobs Australia recommends that the current timing and structure of payments is retained.

ADMINISTRATION FEE

Consideration should be given to providing an additional up-front Administration Fee due to the considerable amount of servicing providers must undertake in the start-up phase of commencing a participant into NEIS during the referral and assessment phase. The Administration Fee would be in addition to the existing funding and would not be a redistribution of the existing resources available to providers.

However, it would be counterproductive if funding for such a fee was at the expense of the number of places currently available in the Programme. NEIS is not a large programme and experience to date has not indicated significant levels of unmet capacity.

RECOMMENDATON

Jobs Australia recommends that consideration be given to the introduction of an up-front Administration Fee to support the continued high quality of NEIS’s rigorous initial referral and selection processes. An alternative would be to restructure the timing of payments. For example, the first payment could be split so that half or some is paid on enrolment in training and the balance on business commencement.

TRAINING DELVIERY MODES

The proposed arrangements stipulate that providers must provide face-to-face training unless circumstances require mixed mode delivery (Exposure Draft, p66). No further clarification about the nature of the circumstances in such a situation is provided in the Exposure Draft.

While providers recognise and agree that the Programme needs to ensure that the quality of the training is maintained at a high level, this requirement does seem to run counter to the overall thrust of the broader employment services programme which seeks to reduce the level of prescription for providers.

However, since the release of the Exposure Draft a response to a question on the Department’s website has provided some clarification about the circumstances that might require mixed mode delivery: The Department’s preference is for NEIS Providers to deliver face-to-face NEIS Training unless circumstances exist where mixed mode delivery is more appropriate and cost-effective, such as in rural and regional areas (Q&As, 4.2). The proviso is that appropriate supervision and monitoring of such training would still be required.

We endorse this approach and note the proposals to use E-servicing extensively in ES 2015-2020. We also note the increasingly prevalent use by higher education institutions and vocational training providers of technologies such as Skype and online intranet software such as Blackboard. However, we recommend that the Department does not prescribe any particular levels or types of these teaching modes and leaves it to the NEIS providers and RTOs to decide the best combination of face-to-face and mixed mode service delivery given their knowledge and understanding of the Employment Regions they service and the location of job seekers and NEIS and training sites. In this context, it would be reasonable for tenderers to be required to detail in their proposed service delivery model their proposed delivery mode for NEIS Training for the Employment Regions they wish to service, and how they will ensure appropriate supervision and monitoring of such training.

This overall approach would provide sufficient clarity about the circumstances in which mixed mode delivery can be used and the stipulations for the provision for supervision and monitoring are reasonable and balanced. Furthermore, these settings are generally in line with the provisions under the Government’s Skills for Education and Employment (SEE) programme where combinations of face-to-face and mixed mode delivery have been available for many years and have worked well.

RECOMMENDATION

We recommend that the Request for Tender for NEIS includes the clarification as outlined here and does not introduce any further stipulations about the way that the accredited training for NEIS must be delivered.

NEIS AND THE EMPLOYMENT FUND

Under the current NEIS contract, NEIS providers can request to have Employment Pathway funds made available for additional support to NEIS participants. For some NEIS participants, finding the necessary funds to pay all necessary start-up costs can be a significant barrier to commencing their businesses. The Employment Fund could be used to assist in overcoming this barrier in the same way that the Employment Pathway fund is now used.

We recommend that this arrangement continues to be available in the next contract and that it is explicitly stated in both the NEIS Statement of Requirements and the requirements for acceptable purchases under the Employment Fund for ES 2015-2020. This would ensure that employment services providers and their staff have a clear understanding of this provision and are confident of their capacity to legitimately use the Employment Fund for this activity if they choose to do so.

In relation to the Employment Fund, we recommend that Employment Services Providers should:

still be able to use this fund at their discretion to assist NEIS participants with some business start-up costs such insurance, business name registration etc; and
be able to spend up to purchase additional mentoring at their discretion from NEIS Providers for Stream C and Indigenous participants.

RECOMMENDATION

We recommend that resources from the Employment Fund continue to be available to provide the support outlined above to NEIS participants, and that this be explicitly stated in both the Statement of Requirements for NEIS 2015-2020 and for Employment Fund purchases in Employment Services 2015-2020.