Employers To Take The Lead!

Is it time for employers to take the lead and have more influence to get what they want from the welfare to work industry?

Entry level recruitment is big business and for companies who rely on it, it can have a significant effect on their business and its performance. It is not always the easiest marketplace to recruit in, especially when companies are dependant upon elements of the public sector and its supply chain to deliver the people required.

Whilst many organisations have been able to streamline their recruitment processes and agree preferred supplier agreements and managed vendor arrangements for senior, professional and temporary staff, a satisfactory solution at entry level still eludes them or proves challenging. With increasing pressures on resources in HR, we ask what is the cost to the business and how can this be done better? Couple this with the much publicised welfare bill in the UK which is now higher than the tax take, link it to the social problems this causes and the stakes are raised: especially when we see the alarming unemployment figures for young people, our future.

Many organisations either currently have a moral or corporate social responsibility policy to help address worklessness, and many more could be persuaded to if the business case was made. Organisations such as John Lewis, Sainsbury’s, Tesco, McDonalds, Travelodge and M&S are all committed. Sector skills councils are working with industry and public sector partners including colleges to develop new models including specific training. Here we ask what more can be done, how and why?

The Cost

London First (the inward promotion agency) estimates that worklessness costs London’s economy alone £12bn per year. A council we are currently working with in inner London estimates that the cost to the public purse of someone unemployed is £58k per year. A family of four, including criminal justice interventions is £178k per year. Ultimately this is taxpayers money being spent. We all know cuts in public sector spending are on the agenda but the figures above show that there is some serious money to be saved and we can all help do something about this given the right opportunity.

The Background

The welfare to work industry has grown at an electric pace in the UK over the last 20 years and is now exported to some countries around the world. Other countries such as America, Holland and Australia have grown their own solutions and some of this thinking has now been taken on board by government in the UK. Figures from the LSEB (London Sills and Employment Board) prior to the recession showed that there were 600,000 workless in London, £600m spent on adult skills with a 30% success rate whilst two thirds of employers struggled to find the skills they needed.

There have been a whole variety of schemes over the years but lets use a generic and common example. Providers used to get about £4,000 per head to work with someone unemployed and get them back into work. Up to £3,500 would be paid for the person “signing up” and starting a programme, a job outcome for 13 weeks of work may be £500. Now, it is not difficult to see why organisations may have been incentivised to take on as many people as possible, place those easiest to back into work and forget about the rest, pocketing significant reward for relatively little effort.

As a response to this, commissioning organisations such as the DWP have drastically slashed the payment per head and heavily weighted payment for a sustained job outcome to 26 weeks. So an organisation may get £500 up front and then bank on themselves being able to place said person into sustainable employment to get a £1,000 bonus. And just to complicate this further, the latest trend is the “prime contractor” model. The DWP et al will only work with huge organisations with significant cash flow and able to bear the risk of the upfront expense on the basis that they will be able to place the majority of people. Many of these then sub contract the actual delivery to much smaller voluntary and private sector providers having top sliced a payment. In reality, with so little money to play with, the options to help those really in need of specific help are severely limited. This then results in job brokerages doing the old recruitment trick of “throwing enough mud against the wall in the hope that some of it sticks”, or this case, pressuring employers to take people promising that they are “job ready” when they are often anything but. Understandably the employer is reticent next time around but often, needs must.

In practice, those closest to the labour market will undoubtedly be placed into employment. But what about the significant proportion of others who need some real personal development and bespoke help before they are motivated, have some genuine aspiration or are willing to train, learn and able to hold down a job? Not to mention the necessary communication, attitudinal and behavioural work that needs to be done with them. Surely it can only be a matter of time before the commissioning levers are adjusted to respond accordingly? That will depend on how successful the current system is, which will ultimately depend on how it meets the needs of employers.

So what about you?

Businesses are often quite straight forward when looking for a solution but it is when they have to rely on other partners and providers including the public sector that things can get complicated, especially when they haven’t got as much leverage as they would like. There is a genuine business case for having motivated employees and giving those who need an opportunity or hand up into employment from both an economic and CSR perspective. The rules, targets and drivers of the other parties involved are not always

fully aligned and it is this that can cause the disconnect and dissatisfaction often experienced.

Funding models, payment clauses and the rules governing who is eligible for what often lead to a situation whereby the employer and person looking for a job are forgotten whilst different organisations do battle to see who can claim for what or even block people from accessing jobs. We have recently seen an example of a provider pulling 25 unemployed people from a training course which would lead to guaranteed employment because they would not get paid an outcome payment. What sort of organisation whose business is getting people back into work would behave like that? Unfortunately, the intricacies of public sector funding can lead to similar lack of cooperation and disconnects, all of which impact employers and job seekers alike.

Employer should be king.

As difficult as it is to believe, employers are often almost an afterthought when a lot of these schemes are designed. Businesses who either want to or have to recruit from this candidate pool supplied by Job Centre Plus, colleges and job brokerages can often find themselves having to conform to a system that does not really serve them and for all it is advertised at no cost to them, the actual costs ratchet up pretty quickly. Without undermining the good work done by some, there are training providers getting money for old rope and some providers who are much more adept at playing the system and ticking the right criteria boxes than getting people into work. Now is a good time to consider the drivers behind outsourcing, preferred supplier agreements and managed vendor models and ask – could these be adapted to our needs for entry level recruitment?

To do this effectively, one needs specialist skills or knowledge to influence and enable those potential suppliers and their funders to change the way they operate.

Changes to funding mechanisms now mean that many training providers including colleges can only access 50% of their fee for providing the training. The remaining 50% is paid after 26 weeks of sustainable employment. This looks like it could be a challenge and this in a sector where 30% into employment is considered a success. Surely there is a way to increase this and do more to help those who need it? The balance may be swinging back to the employer and with changes on the horizon, now is an opportune time for employers to press for more operationally effective and realistic programmes and drivers to make it easier to recruit from this pool of potential labour whilst helping play a part in the economic recovery.

How we can help

Recro was established to improve the efficiency, effectiveness and experience between the workless, employers and providers. We utilise an employer audit which measures the real cost of entry level recruitment including time and cost per hire, retention ratios and the supply chain. The report produced highlights possible improvements, savings, changes to supply chain and access to public training and other budgets where appropriate. With the business case made, we work with employers to help negotiate the system and get the supply chain delivering what is best for the organisation.