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The Guardian - AU
The Guardian - AU
Luke Henriques-Gomes Social affairs and inequality editor

Workforce Australia job agencies rake in millions more from training contracts

woman working at laptop
Workforce Australia job agencies lobbied against a proposed rule change which would have prevented them from referring jobseekers to their own training courses. Photograph: Vichien Petchmai/Getty Images

The employment services industry successfully lobbied to stop a proposed rule banning providers from referring jobseekers to their own training courses under the new $1.5bn-a-year Workforce Australia model.

In a potential windfall for providers, Guardian Australia can reveal the department of employment last year intended to ban the practice before reversing course after “strong feedback” from the industry.

That included claims from providers that the ban would be “counterproductive” to the “viability” of the Employability Skills Training program (EST), through which $500m will flow to private providers over the next five years.

A massive shake-up of Australia’s privatised employment services program has seen 43 providers awarded contracts under Workforce Australia, which replaced Jobactive this month and has faced some early criticisms from jobseekers and welfare advocates.

A Guardian Australia analysis of the new Workforce Australia contracts found 19 job agencies or related entities were also awarded contracts in the EST scheme or the similar, older worker-focused Career Transition Assistance (CTA) program. This includes major for-profit companies such as APM, Max Solutions and Sarina Russo.

The department confirmed there were 21 in total, but noted some contracts were for different regions, meaning not all could refer clients to their own courses.

The big winner of the new contracts was the ASX-listed health services giant APM, which capped off its $330m Workforce Australia contract with an extra $67m over five years to run EST courses.

Non-profit Workskil Australia, which was awarded a $266m Workforce Australia contract, also won a $1m CTA contract. Max Solutions, a subsidiary of the multinational human services giant Maximus, was handed an extra $16m in EST contracts on top of the $148m it will get for Workforce Australia.

Among the top five Workforce Australia providers, only AtWork ($226m over three years) and the Salvation Army’s Employment Plus ($190m) did not also win a training contract.

The training contracts will see as much as $301m in additional revenue flow to companies and non-profits also designated as Workforce Australia providers. The figure covers all fees EST and CTA providers could expect to make from payments. It is unclear how much providers might specifically earn from referrals from their own organisation.

But tender documents circulated among potential bidders in June last year show the Department of Employment proposed a ban on so-called “own entity referrals” in order to “foster market diversity and quality of course content”.

Three months later, the department confirmed that after “feedback” from the industry on the exposure draft, it would instead cap so-called “own entity referrals” at 50%. The same cap applies in the CTA scheme.

The decision followed a submission from the National Employment Services Association, which argued the “restriction of referral of job seekers to their own entity EST program is counterproductive to the viability of the program and is likely to result in reduced diversity of the provider pool”.

“Concerns around conflict of interest and own entity referrals should be dealt with in other ways,” Nesa said in a submission.

Max Solutions, which held a $1bn contract under Jobactive, also opposed the referral cap, according to its submission to the department.

Experts have argued job agencies are able to bolster their bottom lines by referring job seekers to their own courses, while some jobseekers have told of being made to do such training under the threat of having their welfare payments stopped.

Employment providers have noted they will be expected to cover the cost of the EST “soft skills” training on a $1,250 “fee-for-service” basis, meaning the ability to rake in more revenue is more limited in these cases. These “soft skills” include training with job applications, communication, problem solving and office technology, which the department views as “within scope of the core service” for providers.

But in the case of the EST’s “industry specific training”, providers can refer jobseekers to their own courses, with the organisation’s training arm getting a $950 fee from the government.

Providers can also claim a $700 “progress payment” if a jobseeker completes one of their own CTA programs or EST soft-skills or industry specific training courses, in conjunction with another activity.

A Department of Employment and Workplace Relations spokesperson said the decision to allow “own entity” referrals was in response to “strong stakeholder feedback”.

The move would increase choice for jobseekers and “decrease an individual’s barriers to access a suitable EST course, especially in regional areas”. It would also “build upon the provider’s established relationships with the individual to provide high quality services”.

The department “specifically invited stakeholder feedback” on the issue during the consultation process, the spokesperson said.

The department “continuously monitors provider performance, with IT systems in place to track each provider’s referrals, commencements, payments and participant attendance rates”.

The Nesa chief executive, Sally Sinclair, said the department had received feedback about the proposed ban on “own entity” referrals from “many stakeholders in addition to Nesa”.

Sinclair argued EST providers offered a unique program for the “industry specialist courses”, meaning a ban on “own entity referrals” might block people doing the most appropriate course.

The ban on these referrals could also worsen an existing issue around “course cancellations which inconvenienced job seekers and diminished the efficiency of the program”, she said.

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