Submission to the Department of Education, Employment and Workplace Relations regarding the Employment Services: Building on Success Issues Paper

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1 Submission to the Department of Education, Employment and Workplace Relations regarding the Employment Services: Building on Success Issues Paper MARCH 2013

2 Business Council of Australia March Contents EXECUTIVE SUMMARY 2 INTRODUCTION 4 WHAT ARE THE OPPORTUNITIES FOR FURTHER IMPROVEMENT OF EMPLOYMENT SERVICES? 4 WHAT NEEDS TO BE FIXED? 6 WHAT SHOULD BE DONE? 7 RECOMMENDATIONS 12

3 Business Council of Australia March EXECUTIVE SUMMARY The Commonwealth Government has asked for public comments on the Department of Education, Employment and Workplace Relations (DEEWR) Issues Paper titled Employment Services: Building on Success. The issues paper seeks suggestions to further improve Jobs Services Australia (JSA) and related labour market programs ahead of the expiry of current JSA contracts in The Business Council of Australia (BCA) is committed to ensuring that Australia s labour market programs are as effective as possible in placing Australians in sustainable employment because: employment plays a key role in contributing to the social and economic wellbeing of all Australians as Australia s population ages, it is critical that a large proportion of Australians are in productive employment. This is so we can maintain, and preferably increase, the level of income that all Australians are able to enjoy to maintain our competitiveness, we will need people to be able to move as quickly as possible to where the new jobs are. In many cases, this will require people to acquire new and different skills. Key points While JSA works well for most jobseekers who use their employment services, there are opportunities to further improve employment outcomes for disadvantaged jobseekers JSA arrangements are complex for employers to navigate Rewards and penalties could be better aligned with employment outcomes Unnecessary administrative and reporting costs should be removed to free up more JSA resources for job placement work. Recommendations Make employment placement services easier for employers and jobseekers to use by: lowering restrictions on JSA case loads or JSA provider market share, particularly for high-performing providers. This would make it easier for businesses to build partnerships with fewer providers encouraging more partnerships between employers and JSA providers by publicly acknowledging good practice examples of pre- and post-employment training and support linked to actual, ongoing jobs. Align incentives for JSA s employment placement services with successfully meeting the needs of employers and jobseekers by: replacing the current 144 outcomes payment options with a small number of targeted payments linked to job placements achieving 52 weeks improving complaints handling to help monitor JSA quality, as this would better inform jobseekers when choosing a provider.

4 Business Council of Australia March Remove unnecessary regulation by amending the JSA rules and the DEEWR contract/deed to: consider JSA contracts for more than three years for high-performing JSA providers introduce a risk-based approach to the scheduling of JSA provider audits, so high-performing providers are audited less frequently than lower-performing providers. Information on JSA provider performance could be used to improve compliance and remove requirements for detailed reporting by all JSA providers, including high-performing providers enable specialist providers to only support jobseekers for which they provide specialist expertise so providers can use their resources more efficiently reduce the number of JSA streams and further integrate disability employment services with the Jobs Services Network to reduce the number of payments and to lower transaction and reporting costs. Enabling providers to specialise in providing services to particular groups may remove the need for a separate disability employment services system.

5 Business Council of Australia March INTRODUCTION The Business Council of Australia is pleased to comment on the Department of Education, Employment and Workplace Relations (DEEWR) issues paper titled Employment Services: Building on Success. The issues paper seeks suggestions to further improve Australia s Jobs Services Australia (JSA) system and related labour market programs ahead of the expiry of current JSA contracts in As employers, many BCA member companies have experience of using JSA providers to meet their workforce needs. We also recognise the key role employment plays in contributing to the social and economic wellbeing of all Australians. Unemployed Australians are the least likely to report being satisfied with life, unsurprisingly given its impact on financial stress, reduced social connections and self-esteem. Maintaining a large proportion of Australians in productive employment is also critical to being able to maintain, and preferably increase, the level of income that all Australians are able to enjoy. This will become particularly challenging as Australia s population ages over the next few decades. Australia s economy also undergoes continuous structural adjustment as it adapts to changes in technology and our competitiveness relative to the rest of the world. Over the past few decades, these changes have led to greater shares of Australian jobs being in service industries for example, while the share of Australians working in manufacturing and agriculture fell. These long-term trends are expected to continue, and to maintain our competitiveness, we will need people to be able to move as quickly as possible to where the new jobs are. In many cases, this will require people to acquire new and different skills. An effective job placement system would reduce the personal and financial costs to individuals and the broader community of adapting to ongoing structural changes. For all of these reasons, the BCA is committed to ensuring that Australia s labour market programs are as effective as possible in placing Australians in sustainable employment. WHAT ARE THE OPPORTUNITIES FOR FURTHER IMPROVEMENT OF EMPLOYMENT SERVICES? While broad economic policies are essential to increase employment and lower unemployment rates, employment placement services play an important role in more quickly matching jobseekers to jobs than they would otherwise. These services are also able to provide additional support for those that face particular workforce disadvantages. Australia s employment services were outsourced to the private and community sectors in the 1990s. The contractual and regulatory frameworks that govern the outsourcing of employment services have been continuously refined to provide what is considered to be one of the world s most cost-effective publicly funded job placement services (OECD, 2012). While Australia has a relatively high proportion of its population in a job and a relatively low unemployment rate, the number of people that have been looking for work for long periods of time (for more than a year) has been steadily increasing over the past five years (Figure 1). The proportion of unemployed that are long-term unemployed also rose over this period. This suggests that a stronger focus on getting these people into work may be required.

6 Business Council of Australia March Figure 1: Number of long-term unemployed, trend '000's unemployed over 2 years unemployed 1-2 years Source: ABS. Opportunities to further improve Australia s employment services performance is also evident from examining recent trends in the employment outcomes from each JSA stream. To better match job placement resources with need, jobseekers are streamed according to their likely level of difficulty in finding a job, with JSA Stream 4 being comprised of jobseekers that face the greatest labour market disadvantages. Figure 2 shows that employment outcomes from Stream 1 remain relatively high at around 60 per cent, while employment outcomes for Stream 2 have slipped to around 50 per cent. While the employment outcomes of Stream 4 have recently improved, the employment outcomes of both Streams 3 and 4 remain at low levels of around 30 per cent. Figure 2: Percentage of jobseekers employed at year end, by Jobs Services Australia stream 70 % JSA Stream 1 JSA Stream 2 JSA Stream 3 JSA Stream Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Source: DEEWR.

7 Business Council of Australia March WHAT NEEDS TO BE FIXED? Improving the employment outcomes of JSA even further, particularly for the most disadvantaged jobseekers, requires employment services being more responsive to the needs of employers and the capabilities of jobseekers. As noted in the issues paper, only a small proportion (around 7 per cent) of employers directly approach JSA providers to recruit employees. BCA member companies that have used JSA providers have identified the following needs, particularly when they seek to recruit disadvantaged jobseekers: Making JSA services easier to use The JSA system is complex for business to navigate. For example, national employers that have centralised national or regionally based workforce recruitment processes cannot find a single regional point of contact within the employment services network, so are obliged to deal with a disparate array of local JSA providers. Better incentives to reward good JSA provider performance Employers are often referred unsuitable jobseekers. This is because JSA providers often do not take the time (because of inadequate incentives and/or resources) to develop a relationship with the employer so they understand the employer s needs. Jobseekers that are not work-ready are sent to apply for vacancies with insufficient pre-employment preparation. For this reason, companies such as Coles and Woolworths have developed their own (different) pre-employment programs where jobseekers earn the right to a job vacancy. Woolworths is committed to employing people from disadvantaged backgrounds however, our experience has been that the current system is complex and difficult to navigate. We believe there needs to be an increased focus on retention from JSA providers, including targeted employmentfocussed training and a better understanding from JSA providers on the needs of employers. (Comments provided by Woolworths Limited, March 2013) Employers are at times referred unsuitable jobseekers. This is inefficient for all parties and can damage the employers brand. ANZ would like to see providers demonstrating a greater understanding of the capabilities and experiences employers are looking for, as well as the right balance of training and work experience to get jobseekers job ready. Better communication between providers and employers could help to achieve this. (Comments provided by ANZ, March 2013) There are insufficient financial or other incentives to encourage JSA provider collaboration with other service providers. Better support for employers seeking to employ disadvantaged jobseekers Employers do not always have experience in working with disadvantaged jobseekers. For this reason, employers would value more assistance from JSA providers, such as the type of postrecruitment support (for example, mentoring) and physical and technological adjustments to the work environment (for people with disability) that may be required to achieve a successful placement. A best practice approach for attracting, hiring, supporting and developing disadvantaged jobseekers would be most helpful, that may include recruitment techniques, line manager up-skilling, mentoring, inclusive on-boarding, etc. This would enable employers to focus on providing the right level of support, rather than trying to work what that support should be. This would also help smaller employers. The large number of providers makes this challenging to achieve. Currently employers have to deal with lots of different providers, especially for national employers. (ANZ)

8 Business Council of Australia March WHAT SHOULD BE DONE? The current contract or Employment Services Deed (DEEWR, 2012a) and JSA rules aim to: reduce the time jobseekers spend unemployed demonstrate that government JSA expenditure provides value for money. In recent years, the Productivity Commission (PC), Organisation for Economic Co-operation and Development (OECD) and Advisory Panel for Employment Services Administration and Accountability (APESAA) have assessed Australia s employment services model and its performance. All have made suggestions designed to: further improve the capacity of employment services to help all jobseekers find sustainable jobs more quickly simplify the contractual arrangements and rules to lower JSA provider costs while maintaining the necessary accountability for government funds. It is disappointing that the government in its issues paper has not examined these recommendations as many have the potential to improve employment outcomes. Applying best practice regulatory principles would also help identify further JSA reform opportunities and manage the risk of poor provider performance at a lower cost. The regulatory principles set out in the BCA s report Policy Essentials: Standards for Rule Making (BCA, 2012a) suggests that when adopting these principles, DEEWR should examine: where better information on JSA provider performance would be a more effective and less costly way of improving performance and compliance than requiring detailed monitoring and reporting for all JSA providers, including the better-performing providers opportunities to apply a more risk-based approach to JSA provider monitoring and enforcement. Recent Australian employment services reviews suggest improvements The Productivity Commission recommends various improvements to Australia s employment services market design and tendering arrangements in its 2002 review of the job network. Several recommendations that have yet to be adopted are likely to reduce JSA provider costs and make it easier for employers to build partnerships with JSA providers. Productivity Commission suggestions for improvement To lower JSA administration costs, the PC suggests: removing regulated limits on caseloads, particularly for the more successful providers replacing the costly contractual and tender process with a licensing scheme, where only licensed providers would receive payments. New entrants would be allowed subject to their meeting specified standards. Poor performers would not have their licence renewed. The threat of new JSA providers (combined with licensing) would reduce the risk of continuing to fund poorly performing providers. Source: PC, The PC suggestion to remove restrictions on JSA provider caseloads would enable Australian businesses to work with a smaller number of JSA providers when seeking new employees. Rewarding high performing JSA providers with higher caseloads and longer contracts will reduce their tendering costs and increase the incentive to provide high-quality employment services.

9 Business Council of Australia March The 2012 OECD and APESAA reviews of the JSA suggest similar changes to employment services rules and contracts would improve incentives for high quality JSA performance, and remove unnecessary JSA administrative costs. The OECD review notes that: JSA outcome payments may be paid at 144 different rates a study that found that JSA providers were spending up to 50 per cent of their processing time on administration and compliance with JSA rules and that 30 per cent of administration time was duplicated by Centrelink. Organisation for Economic Co-operation and Development suggestions for improvement To lower JSA transactions, administration and reporting costs, so scarce provider time can be better spent on providing better services to jobseekers, the OECD suggests: limiting quality assessments to fewer measurable indicators and removing process measures and item-by-item accounting of expenditure paying outcome fees on actual rather than expected performance retaining existing employment service support for the long-term unemployed considering further integration of disability employment services with the Jobs Services Network. This would reduce the complexity of payments and lower transaction and monitoring costs. Source: OECD, The OECD considers that reducing the number of different outcome payment types, particularly by removing many input and expenditure payments and paying on the basis of actual rather than expected performance, would strengthen JSA provider incentives to match jobseekers with sustainable jobs. Reducing the number of different payment types, and integrating disability employment services more with the Jobs Services Network, would also reduce JSA provider reporting and administrative costs, while retaining sufficient accountability for government expenditure. The APESAA 2012 review made several recommendations to reduce JSA administrative costs and improve incentives, several of which the government indicated would be considered in this review of employment services.

10 Business Council of Australia March Advisory Panel for Employment Services Administration and Accountability suggestions for improvement To lower JSA administration and reporting costs, APESAA suggests: reducing the reporting requirements and administrative costs by combining Streams 2 and 3 extending the definition of employment to 52 weeks, and providing outcome payments when a job placement achieves 13, 26 and 52 weeks reducing input reporting costs and reducing the number of outcome payments introducing a risk-based approach to the scheduling of JSA provider audits, so highperforming providers are audited less frequently than lower-performing providers improving complaints handling as a quality control tool and to better inform jobseekers choice of provider encouraging greater innovation among providers by reviewing the employment services contract and other features of the JSA model considering services contracts longer than three years for high-performing employment services. introducing professional standards for employment service providers. Source: APESAA, Adopting many of APESAA s recommendations would further improve the performance of Australia s employment services and should be explicitly considered in this review. In addition to the APESAA recommendations listed above, APESAA also recommends that DEEWR introduce an employment services accreditation regime and have staff qualification standards. These recommendations are not supported by the BCA because: An accreditation system would duplicate the existing star ratings system that already monitors and reports on JSA provider performance. If performance falls below a specified standard, penalties could include terminating the relevant employment services contract, or failing to renew the contract. Requiring minimum staff qualifications is an unnecessary and potentially costly input control. If the payment incentives are effective, only employment services staff with the desired skills would be recruited by providers. Examining good practice Employer initiatives Several BCA member companies have developed a range of initiatives to increase the employment of disadvantaged jobseekers, including Indigenous Australians, those with disability, long-term unemployed and refugees. The experiences of companies that actively seek to employ disadvantaged jobseekers provide insights into how employment services can better help those that are willing and able to work to successfully secure long-term employment. A recent study of BCA companies working to increase the employment of Indigenous Australians found an effective way for organisations that seek to achieve shared objectives is to develop a partnership tailored to meet the specific needs of each organisation (BCA, 2012b).

11 Business Council of Australia March An example of such a partnership is the agreement made between Woolworths and the federal government that seeks to reduce the coordination difficulties faced by a national employer with the current JSA system. Partnerships with employers: Woolworths and Fresh Start In April 2012, Woolworths signed a Fresh Start Agreement with the federal government to create single points of contact across Australia for recruitment, pre-employment programs and skills enhancement. The aim of the Fresh Start Agreement is to help recruit for Woolworths plans for future growth, new stores and more staff. To help achieve this aim, the agreement seeks to increase the employment participation of Indigenous Australians, people with disability, older workers and long-term unemployed jobseekers. Source: Woolworths Limited, To further help disadvantaged jobseekers find ongoing employment, the BCA is working with ACOSS and ACTU to examine better demand-led approaches to employment placement for disadvantaged jobseekers, so we can learn from where this works best. As ANZ notes above, many employers would find information on best practice recruitment and supports for disadvantaged jobseekers useful to help increase employee retention. Community-based initiatives Designing the incentive structure (including payments, performance reporting and complaints handling) would encourage best practice behaviour for employment and training services that assist disadvantaged jobseekers. As set out in the exhibit below, the Asylum Seeker Resource Centre (ASRC) found that realistic information about employment outcomes and strong relationships with employers yields the best employment outcomes for disadvantaged jobseekers. The ASRC view is that employability skills are best obtained in an actual work environment. This view is supported by an OECD (2010) international review of vocational education and training systems.

12 Business Council of Australia March Good practice for agencies supporting disadvantaged jobseekers: learnings from placing asylum seekers in employment For employment services Provide unlimited and intensive initial career counselling and advice to enable jobseekers explore options before making a decision To provide useful advice, agencies need realistic information about employment outcomes and what constitutes quality training to compensate for the limited networks of disadvantaged jobseekers Develop close partnerships with training providers Support jobseekers applying for jobs, develop resumes and advice for job interviews, discuss concerns and refer to other services if required Support employers and training providers to address any challenges, such as interpersonal communication and role expectations. For training organisations: Training organisations should publish information about employment outcomes Provide industry placements as part of any training undertaken. To do this, develop relationships with employers to keep abreast of industry requirements and to prepare jobseekers. Source: Asylum Seeker Resource Centre, 2012.

13 Business Council of Australia March RECOMMENDATIONS Based on the concerns expressed by employers with the current employment services system, and the findings of recent reviews, the BCA makes the following recommendations. Make employment placement services easier for employers and jobseekers to use by: lowering restrictions on JSA case loads or JSA provider market share, particularly for high-performing providers. This would make it easier for businesses to build partnerships with fewer providers encouraging more partnerships between employers and JSA providers by publicly acknowledging good practice examples of pre- and post-employment training and support linked to actual, ongoing jobs. Align incentives for JSA s employment placement services with successfully meeting the needs of employers and jobseekers by: replacing the current 144 outcomes payment options with a small number of targeted payments linked to job placements achieving 52 weeks improving complaints handling to help monitor JSA quality, as this would better inform jobseekers when choosing a provider. Remove unnecessary regulation by amending the JSA rules and the DEEWR contract/deed to: consider JSA contracts for more than three years for high-performing JSA providers introduce a risk-based approach to the scheduling of JSA provider audits, so high-performing providers are audited less frequently than lower-performing providers. Information on JSA provider performance could be used to improve compliance and remove requirements for detailed reporting by all JSA providers, including high-performing providers enable specialist providers to only support jobseekers for which they provide specialist expertise so providers can use their resources more efficiently reduce the number of JSA streams and further integrate disability employment services with the Jobs Services Network to reduce the number of payments and to lower transaction and reporting costs. Enabling providers to specialise in providing services to particular groups may remove the need for a separate disability employment services system.

14 Business Council of Australia March Glossary ABS APESAA ASRC BCA DEEWR JSA NATSEM OECD PC Australian Bureau of Statistics Advisory Panel for Employment Services Administration and Accountability Asylum Seeker Resource Centre Business Council of Australia Department of Education, Employment and Workplace Relations Jobs Services Australia National Centre for Social and Economic Modelling, University of Canberra Organisation for Economic Co-operation and Development Productivity Commission References AMP & NATSEM, 2010, The Pursuit of Happiness: Life Satisfaction in Australia, AMP NATSEM Income and Wealth Report, Issue 26. ABS, 2013, Labour Force Australia, Detailed, cat. no APESAA, 2012, Advisory Panel on Employment Services Administration and Accountability Final Report, Department of Education, Employment and Workplace Relations. ASRC, 2012, Pathways to Participation: A Practice Guide for Agencies Supporting Asylum Seekers in Training and Employment. BCA, 2012a, Policy Essentials: Standards for Rule Making b, Improving Indigenous Economic and Employment Outcomes: Lessons from Business Experience. DEEWR, 2012a, Employment Services Deed b, Initial Government Response to the Advisory Panel on Employment Services Administration and Accountability (various dates), Labour Market Assistance Outcomes Reports. OECD, 2012, Activating Jobseekers: How Australia Does It , OECD Reviews of Vocational Education and Training: Learning for Jobs. PC, 2002, Independent Review of the Job Network, Report No. 21. Woolworths Limited, 2012, Federal Government and Woolworths Sign Landmark Employment Agreement, Press Release, 1 April. BUSINESS COUNCIL OF AUSTRALIA 42/120 Collins Street Melbourne 3000 T F Copyright March 2013 Business Council of Australia ABN All rights reserved. No part of this publication may be reproduced or used in any way without acknowledgement to the Business Council of Australia. The Business Council of Australia has taken reasonable care in publishing the information contained in this publication but does not guarantee that the information is complete, accurate or current. In particular, the BCA is not responsible for the accuracy of information that has been provided by other parties. The information in this publication is not intended to be used as the basis for making any investment decision and must not be relied upon as investment advice. To the maximum extent permitted by law, the BCA disclaims all liability (including liability in negligence) to any person arising out of use or reliance on the information contained in this publication including for loss or damage which you or anyone else might suffer as a result of that use or reliance.

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