Introduction

1.1 Wage subsidies are a discretionary financial incentive to encourage employers to hire eligible job seekers by contributing to the initial costs of hiring a new employee. Wage subsidies can help overcome employers’ reluctance to hire certain groups by compensating employers for real or perceived lower levels of productivity², can increase employment opportunities for disadvantaged job seekers, and lower their reliance on income support. Wage subsidies also contribute to the broader employment program objectives to promote stronger workforce participation and help job seekers move from welfare to work.³

1.2 Wage subsidies in various forms have formed part of Australian Government employment programs since 1976.⁴ The current wage subsidies were introduced progressively, beginning with the introduction of the Restart wage subsidy in 2014–15, and the implementation of the jobactive employment program in 2015–16. Figure 1.1 provides a timeline of the introduction of the employment programs associated with wage subsidies.

Figure 1.1: Timeline of employment programs

Note: Program names are set out in full in Table 1.1, with the exception of NEST that is the New Employment Services Trial, and NESM that is the New Employment Services Model.

Source: ANAO analysis.

1.3 In 2020–21 and 2021–22 the Department of Education, Skills and Employment (DESE) administered wage subsidies under a number of employment programs that includes the programs set out in Table 1.1⁵:

Table 1.1: Employment programs that offer wage subsidies

Source: DESE Employment Programs.

Wage subsidy types and eligibility

1.4 A range of wage subsidies are available to eligible employers hiring eligible job seekers/participants.⁶ In 2020–21, the wage subsidy payment amount depended on which employment services cohort a participant was categorised under. The employment services cohorts are targeted at specific groups of job seekers, as set out in Table 1.2.

Table 1.2: Wage subsidy cohort types, employment program and eligibility 2020–21

Note a: Mutual obligation requirements are tasks or activities that job seekers must undertake in order to receive income support through JobSeeker, Youth Allowance, Parenting Payment or Special Benefit.

Note b: The DES program is administered by the Department of Social Services, and CDP is administered by the National Indigenous Australians Agency.

Note c: Prior to 1 July 2021, only ParentsNext Intensive stream participants were eligible for wage subsidies. From 1 July 2021, the two streams of ParentsNext (Intensive and Targeted) were combined and all ParentsNext participants became eligible for wage subsidies if they met the relevant eligibility criteria.

Note d: A Youth Bonus Wage Subsidy of up to $6,500 could be paid for a participant in Stream A (the most job-ready participants). A subsidy of up to $10,000 could be paid for a participant in Stream B (some barriers to employment) or Stream C (multiple and complex barriers to employment), a Transition to Work participant in receipt of an income support payment, or a participant in ParentsNext.

Source: ANAO analysis.

1.5 As shown in Table 1.2, in 2020–21 wage subsidies provided a higher level of funding support to job seekers identified by DESE as having greater barriers to employment. In the 2021–22 DESE Portfolio Budget Statements, employment services programs were delivered under the outcome to foster a productive and competitive labour market through policies and programs that assist job seekers into work and meet employer needs.⁷

1.6 Under policy changes announced in the 2021–22 Budget, the jobactive, TtW and ParentsNext program cohorts are able to access a wage subsidy of up to $10,000 from 1 July 2021.⁸ The aim is to increase the incentives for employers to hire disadvantaged job seekers, streamline the administration of wage subsidies and simplify arrangements for employers.

Administration of wage subsidies

1.7 To receive a wage subsidy in 2020–21, an eligible employer must offer an employment placement⁹ to a job seeker who has been a participant in one of the employment programs in Table 1.1 above. The placement must average at least 20 hours of work per week over a 26-week wage subsidy period, with an expectation that the employment will extend beyond the 26-week period; and can be casual, part-time or full-time. The wage subsidy paid to the employer cannot be more than 100 per cent of the participant’s wage. Based on the July 2021 national minimum wage rate of $20.33 per hour¹⁰, the wage for an average of at least 20 hours of work per week over a 26-week wage subsidy period is $406.66 per week, and $10,571.60 in the 26-week period.

1.8 Employment services providers¹¹ are not required to offer a wage subsidy even if all eligibility criteria are satisfied. Whether a subsidy is offered depends on the needs and preferences of the participant and the employer, and whether the provider considers that a wage subsidy would be an effective incentive.

1.9 The employer enters into a wage subsidy head agreement with an employment services provider, with a schedule agreement attached for each participant being offered a wage subsidised placement. The provider then makes instalment payments to the employer at agreed intervals (fortnightly, monthly, quarterly, or at the end of the wage subsidy period for the total amount), after the employer has provided documentary evidence that the participant was employed in line with the wage subsidy agreement conditions and the claim does not exceed 100 per cent of the participant’s wages.

1.10 Providers manage the administration (including payment) of wage subsidies using the Employment Services System (ESSWeb), DESE’s system for managing employment programs. Providers make wage subsidy payments to employers from the provider’s funds and then claim reimbursement from DESE after making wage subsidy payments to employers.

1.11 Any employer is eligible to receive a wage subsidy if they are a legal entity with a valid ABN unless they:

• have been suspended or excluded from receiving wage subsidies;
• are the provider’s own organisation; or
• are an Australian, state or territory government entity.

1.12 An employer cannot receive a wage subsidy for a participant who has previously been employed by that employer, if they are a family member of the employer, or if they displace an existing employee, and a participant can only attract one wage subsidy at any given time.

1.13 DESE’s Incentives and Investments Branch is responsible for wage subsidies operational policy, supported by the Assurance Coordination Branch, the Economics and Employment Services Reporting Branch, and the Employment Research and Evaluation Branch that are respectively responsible for compliance, performance reporting and evaluation. Account and contract managers in DESE’s state and territory offices are responsible for liaising with employment services providers, including in respect of wage subsidies.

1.14 From April 2020, job seekers were referred to Online Employment Services (OES), an online employment services webpage introduced in response to the increase in demand for employment services resulting from the COVID-19 pandemic, and can seek additional support from the Digital Services Contact Centre (DSCC). The OES and DSCC, in some form, will continue to operate under the New Employment Services Model (NESM) when it is introduced on 1 July 2022.

Changes to wage subsidies from 1 July 2022

1.15 Following the NEST that commenced from 1 July 2019 in Adelaide South in South Australia, and the Mid North Coast in New South Wales, NESM is being developed and is due to commence on 1 July 2022.

1.16 In the NESM, wage subsidies will only be available to participants who have been registered with an Enhanced Services¹² provider for six months. Indigenous job seekers in Enhanced Services (and job seekers who have been in Digital Services for 12 months or more who have moved to Enhanced Services) will have immediate access to a wage subsidy upon commencement in Enhanced Services. The aim is to target wage subsidies to the most disadvantaged job seeker cohort. Additionally, the minimum average hours a participant needs to work will be reduced from 20 hours per week to 15 hours per week, and the duration of the wage subsidy placement will be negotiable between providers and employers to allow the maximum amount offered to be up to $10,000, and the length of the wage subsidy agreement to vary.

Wage subsidies use and expenditure

1.17 Figure 1.2 sets out the number of DESE administered employment program annual placements made with a wage subsidy since 2014–15, broken down by program.

Figure 1.2: Wage subsidy placements by year and program

Source: DESE wage subsidy program dashboard.

Rationale for undertaking the audit

1.18 Job seekers who have been unemployed for a long time generally experience greater difficulty finding subsequent work, as their paid work prospects decline.¹³ This audit is an opportunity to examine the effectiveness of the administration of wage subsidies, and the extent to which DESE monitored and evaluated if wage subsidies improved employment opportunities for employment program participants, by assisting job seekers into work and meeting employer needs. This audit also has the potential to inform any changes to wage subsidies that could be considered as part of the DESE’s reforms to employment programs, currently in the development and piloting phase and due for implementation in July 2022.

Audit approach

Audit objective and criteria

1.19 The objective of the audit was to assess the effectiveness of DESE’s arrangements in administering wage subsidies linked to employment programs.

1.20 To form a conclusion against the audit objective, the following criteria were applied:

• Are wage subsidies assessed, processed and paid in accordance with program requirements and contractual obligations?
• Is the application and use of wage subsidies effectively monitored, evaluated and reported to ensure policy objectives are being achieved?

1.21 The focus of the audit was on wage subsidies available in 2020–21 and 2021–22, across the employment programs and associated cohorts set out in Table 1.1 and Table 1.2. The administration of wage subsidies for all employment programs were not examined under the audit sub-criteria as the associated eligibility criteria, wage subsidy payment amounts, and the required length of employment were largely consistent across the employment programs and cohorts, regardless of which cohort or program the wage subsidy is applied under.

1.22 The performance of the employment programs that wage subsidies are attached to — jobactive, Youth Job PaTH, Transition to Work, Disability Employment Services, ParentsNext and the Community Development Programme — is not in scope for the audit.

Audit methodology

1.23 The audit involved:

• reviewing the policies, procedural guidelines and processes used to administer wage subsidies across employment programs;
• analysing service provider performance information and any participant outcome information relating to wage subsidies;
• reviewing system controls;
• reviewing compliance and assurance activities;
• examining documentation provided for the budget process; and
• discussions with key staff.

1.24 The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of approximately $295,000.

1.25 The team members for this audit were Renina Boyd, Evan Lee, Sonya Carter and Peta Martyn.

3.1 The use of wage subsidies should be monitored on an ongoing basis to ensure that they are contributing to the intended policy objective of promoting stronger workforce participation and helping job seekers move from welfare to work.

3.2 To examine whether the application and use of wage subsidies is effectively monitored, reported, evaluated and funded, the ANAO assessed the wage subsidy:

• performance measures and reporting;
• evaluation arrangements; and
• funding arrangements.

Are there sound performance measures and reporting to monitor wage subsidy performance?

3.3 To assist an entity in determining whether program objectives are being met, sound performance measures should be developed along with regular monitoring and reporting arrangements.²⁵

Measuring the performance of wage subsidies

3.4 The objective of wage subsidies (as a discretionary financial incentive) is to encourage employers to hire eligible participants, primarily by contributing to the initial costs of hiring a new employee. DESE has a responsibility to demonstrate that wage subsidies are effective in achieving the objective of improving employment outcomes for eligible participants.

3.5 DESE measures the utilisation rate of wage subsidies, as outlined in Table 3.1. This shows the number of job placements that were eligible to attract a wage subsidy and the actual wage subsidy placements that occurred from the eligible group. The relative uptake of wage subsidies could be used as an internal measure to monitor the use of this program which aims to help more participants move from welfare to work.

Table 3.1: Utilisation rates of wage subsidies

Source: DESE documentation.

3.6 DESE’s key performance measure for wage subsidies is the outcome rate where a participant remains employed for 26 weeks and exits income support. The extent that wage subsidies assisted participants into sustainable employment can be measured by comparing the outcome rate for participants in receipt of wage subsidy to those participants that were not. The Senate Education and Employment References Committee February 2019 inquiry report Jobactive: failing those it is intended to serve considered submissions from providers that supported the use of wage subsidies:

Evidence proves that one of the single, most effective ways to improve employment outcomes is wage subsidies—certainly in our experience. Our experience at Joblink Plus shows that, with a wage subsidy, 72 per cent of placed jobseekers achieve a 26-week outcome—in answer to your question. Without a wage subsidy, that conversion rate reduces to 66 per cent. That is significant across the whole of the program.²⁶

3.7 The comparative outcome rate was measured and reported in DESE’s draft Evaluation of jobactive Final Report and included in the briefing packs for DESE officials’ appearances at Senate Estimates including for October 2020 and March 2021. The comparative 26 week outcome measure was developed for the jobactive evaluation (discussed from paragraph 3.33). While a wage subsidies outcome rate — the percentage of eligible wage subsidy placements that were still employed at their placement at either 12 or 26 weeks — is included in DESE dashboard reports (see paragraph 3.23), there was no evidence that a comparative outcome performance measure was in place prior to the evaluation, and no intention to continue to report this performance measure on an ongoing basis outside of the evaluation.

3.8 Table 3.2 shows the relative outcome of those participants remaining in an employment placement at 26 weeks with a wage subsidy, and those without.

Table 3.2: 26-week outcome rates for participants eligible to receive a wage subsidy (per cent)

Note: As discussed in Table 1.2, the streams refer to the most job-ready participants (Stream A) to those with the most complex barriers to employment (Stream C).

Source: Draft evaluation of jobactive final report.

3.9 These results indicate that a wage subsidy improves the 26-week outcome rate across all streams by at least 45 per cent. For a Stream C participant, the use of a wage subsidy almost doubles the 26-week outcome, and is more than double for an Indigenous Stream C participant, showing that there is an improvement in employment outcomes as participants disadvantage increases.

3.10 The draft Evaluation of jobactive Final Report also outlines wage subsidy outcomes by participant cohort, as set out in Table 3.3.

Table 3.3: Percentage difference that wage subsidies made to whether a participant achieved an outcome, by participant cohort (percentage points)

Note a: The Job Seeker Classification Instrument (JSCI) is a questionnaire used in the employment program to identify an individual’s risk of becoming long-term unemployed. It examines barriers to employment to work out an individual’s level of labour market disadvantage.

Source: Draft evaluation of jobactive final report

3.11 Table 3.3 shows that the evaluation also reports on two other wage subsidy related performance measures. The first is leaving income support within 12 months of commencing a job.²⁷ Across all participant cohorts that were placed in a position supported by a wage subsidy, around five to 13 per cent (averaging eight per cent) were more likely to leave income support within 12 months, compared to participants that were not in receipt of a wage subsidy. The second is leaving income support at 12 months after commencing a placement.²⁸ Across all participant cohorts that were placed in a position supported by a wage subsidy, around four to nine per cent (averaging six per cent) were more likely to be off income support at 12 months, compared to participants that were not in receipt of a wage subsidy. As with the 26 week outcomes, there was evidence of greater impact on employment outcomes as disadvantage increases, such as for Stream C participants. However, the DESE evaluation did not explore the causal factors for why wage subsidies increase the 26 week outcome rate.

Corporate Plan performance measures

3.12 There are no specific performance measures for wage subsidies in DESE Portfolio Budget Statements, Corporate Plan or Annual Report. Instead, the performance of wage subsidies contributes to the broader jobactive outcomes outlined in Appendix 4. DESE advised that it is unable to determine the extent to which wage subsidies contributes to the overall program outcomes.

Provider performance star ratings

3.13 Provider star ratings were an external-facing indicator which provided the public with information on the performance of providers to inform participant and employer choice. The star rating system also informed DESE’s provider performance review and reallocation processes, as outlined in the jobactive Performance Framework Guideline.²⁹

3.14 The star ratings are based on employment providers’ outcomes on six performance measures which are related to achieving participant 12 and 26 week employment outcomes, and are standardised and weighted by participant stream. Provider compliance results (discussed earlier from paragraph 2.88) can also affect the star ratings.

3.15 Wage subsidies contribute to four of the six provider performance measures (26 Week Outcomes – All Participants; 26 Week Outcomes – Indigenous Participants; 26 Week Outcomes – Time to Placement; and 12 Week Outcomes). However, DESE advised the contribution that wage subsidies make to the overall results of these jobactive provider performance measures cannot be determined. This is similar to other programs under jobactive, where any job placements achieved contribute towards these four performance measures.

3.16 The jobactive star rating system was suspended indefinitely from December 2020 as one of the key components used to calculate the rating, the state final demand trend series³⁰, was no longer being published by the Australian Bureau of Statistics due to volatile economic conditions resulting from COVID-19. DESE advised that providers have since used other sources of information to assess their performance, such as the six performance measures that contributed to the star ratings. However, since this system has been inactive, there has been and will continue to be no way for participants and employers to compare the performance of providers until the New Employment Services Model is introduced in July 2022.

Governance and reporting

Governance committees

3.17 The governance arrangements that DESE has in place for the ongoing management and monitoring of employment programs, including wage subsidies, are at Appendix 5.

3.18 Wage subsidies are not regularly discussed at the employment program committees, and are instead raised on an ‘as needed’ basis. Wage subsidy related papers were provided to the Employment Steering Committee (ESC) and the Employment Branch Manager Committee (EBMC) in 2019 on: data analytics and wage subsidy expected value analysis; kickstart and amending the pre-employment definition; the operation of wage subsidies under the New Employment Services Trial; targeting and simplifying wage subsidies; and evaluation of wage subsidies. Wage subsidies specific items discussed at PISCES in 2021 related to risk alerts (discussed at paragraph 2.80), kickstart as a targeted assurance outcome, and a fraud investigation. No wage subsidy specific papers have been provided to the committees since 2019.

3.19 DESE advised that wage subsidies have been discussed in governance committees more broadly as part of changes under the New Employment Services Model and the Labour Market and Employment Policy Update, but this level of detail is not included in the minutes. There is no regular review or discussion of wage subsidy performance through these committees.

Reporting

3.20 Reporting for wage subsidies is through the employment program dashboards. DESE has provided program dashboards to the Minister’s Office monthly since the commencement of jobactive in 2015 and dashboards were also previously provided under the Restart program. These dashboards include an overarching key employment facts dashboard³¹ and a key program highlights narrative.

3.21 The key program highlights narrative provides a summary of each of the dashboards. For wage subsidies, the key program highlights describes each category of wage subsidies, provides a narrative on the placements to date, increases in placements for the month, achievement of 12 week and 26 week outcome and cost for each of the wage subsidy cohorts.

3.22 The wage subsidies program dashboards primarily report on placements in the program since July 2014. Placements are broken down by cohort: Restart, Youth (including Youth Bonus), Long Term Unemployed and Indigenous, and Parents. The dashboards report on completed, active, and terminated placements in each cohort, and on placement by demographic, such as gender, age, disability, and ex-offender status. Also included are variation on placement figures since the last month and cumulative totals. Budget and expenditure for wage subsidies are also outlined. Graphs describing placements by year, demographic, wage subsidy type and agreement status are also provided in the dashboards.

3.23 The dashboards contain some performance-related information, although this information relates to outputs only. Cumulative 12 and 26 week employment outcomes over the life of the program are shown, as are variations since the previous month. The dashboards also present outcome conversion rates, which are the percentage of eligible wage subsidy placements that remained employed in their placement at either 12 or 26 weeks for each category of participant. DESE is able to measure the comparative outcome rate (discussed at paragraph 3.6 and 3.7), but this information is not included in the program dashboards.

3.24 The dashboards are not presented to the ESC or EBMC for review or information, but they are available on the DESE intranet and provided to DESE’s Employment and Workforce Group executive via email. DESE advised that the dashboards are used by departmental staff for briefings and during Senate Estimates.

3.25 The amount of information presented in the wage subsidies dashboard is dense and primarily descriptive in nature. There has been minimal substantive change in the content of the dashboards over time. It comprises a large table of figures and numerous graphs on one page. Some of the other employment services dashboards included in the pack emphasise key data such as outcomes with infographics, or present key risks and highlights of the program. Other dashboards include program performance measures that demonstrate their effectiveness. The implementation of the New Employment Services Model (NESM) provides an opportunity for DESE to revise and simplify its wage subsidies program dashboard to emphasise the key performance and financial information.

3.26 As discussed in paragraph 1.15, the NESM that will be introduced in July 2022, will target wage subsidies at the least job-ready participants. In order to monitor if this approach is effective in improving employment outcomes for more disadvantaged job seekers, DESE should set relevant measures and targets for monitoring the effectiveness of the performance for wage subsidies in promoting stronger workforce participation and helping job seekers move from welfare to work.

Are suitable evaluation arrangements in place?

3.29 Entities should develop an evaluation strategy during the design and implementation phase of a program so that baseline performance measures can be established to provide useful information on program performance on an ongoing basis, and to also ensure that an appropriate evaluation is conducted at the required point in time.

Evaluation strategy for jobactive

3.30 DESE’s evaluation strategy for jobactive was developed when the jobactive program was designed in 2014-15. The Evaluation Strategy for jobactive set out DESE’s strategy and was published in 2016.

3.31 DESE’s evaluation strategy aims to ‘determine how effectively and efficiently jobactive meets its aims’. DESE does not have a separate approach for evaluating wage subsidies specifically but the evaluation strategy for jobactive identifies that the Employment Fund³² and wage subsidies are among the ‘core programme elements of jobactive which will be evaluated in detail’.

3.32 The evaluation strategy sets out DESE’s analytical approach and data sources. It acknowledges the limitations of the chosen approach and the risks which could arise during the evaluation.

jobactive evaluation

3.33 DESE planned for the evaluation of jobactive to complete three reports: an Interim Report³³ by December 2016; a Meeting Employer Needs Report by March 2018; and a Final Report by July 2019. The Meeting Employer Needs Report was presented to the Employment Services Committee³⁴ in July 2019³⁵, the Interim Report was published in January 2020, and the Final Report had not been finalised as at September 2021. DESE advised the reason for the delay was due to policy changes to jobactive during the course of the evaluation process that required revisions to the evaluation approach. An additional report, Wage subsidies in jobactive, was completed in March 2019, noting this report was not required under the evaluation strategy but was intended to contribute to the evaluation.

3.34 The Meeting Employer Needs Report focusses on employer attitudes and perceptions of jobactive in the first two years of the contract. Key findings in relation to wage subsidies include:

• there was a high awareness of wage subsidies among employers, but awareness was not universal and could be improved;
• employers regarded wage subsidies as an incentive, but not a strong incentive, to engage a participant;
• employers considered that wage subsidies imposed a reasonable administrative burden but reported issues associated with meeting documentary evidence requirements; and
• kickstart payments³⁶ were regarded by providers as being a ‘useful tool for securing employment’ in some circumstances, but fewer than half (45 per cent) of employers who had received a kickstart payment reported that it was an important factor in their decision to hire a participant and providers expressed concern that employment outcomes achieved through kickstart payments were not sustainable.

3.35 The key findings of DESE’s March 2019 research report, Wage subsidies in jobactive, are set out below:

• there were a number of operational factors which increased the administrative burden associated with wage subsidies, including documentary evidence requirements, difficulties in assisting employers with online agreements, ambiguity of the guidelines surrounding attendance and leave, and the perceived lack of flexibility around the management of wage subsidies;
• providers often offered subsidies after a placement had been secured, suggesting that the policy intent behind subsidies — encouraging the employment of eligible participants — was not being met;
• the requirement that participants work for an average of at least 20 hours per week is less than most participants’ annual activity requirement and is generally insufficient to reduce participants’ income support rate to zero;
• kickstart sometimes encouraged employers to employ a participant but did not necessarily lead to ongoing employment outcomes; and
• over half of employers (59 per cent) were unaware of kickstart and fewer than half (45 per cent) who had received a kickstart payment reported that it was an important factor in their decision to employ a participant.

3.36 The Wage subsidies in jobactive report also sets out a number of recommendations to address the above findings:

• wage subsidy policy could be better aligned with other labour market policies such as mutual obligation requirements, the effect of income support status on outcome payments and evidentiary requirements;
• wage subsidy requirements could be more flexible to allow tailored and targeted delivery of wage subsidies, and should facilitate administrative efficiencies;
• the IT system could be improved to assist providers to manage subsidies and to reduce administrative burden;
• providers could be provided with greater exposure to how employers interact with the jobactive website so that they can provide technical support to employers;
• departmental communications could better align across the communication channels and IT systems used by DESE;
• DESE could consider whether providers offering wage subsidies by default or after a placement is secured meets the policy intent behind wage subsidies, and whether wage subsidies are appropriately targeted; and
• the use of wage subsidies by labour hire companies could be further investigated.

3.37 The draft Evaluation of jobactive Final Report findings in relation to wage subsidies were:

• some providers offered subsidies by default instead of targeting the most disadvantaged participants, for whom wage subsidies have a greater effect on employment outcomes;
• the 2018 Employer Wage Subsidy Survey (discussed further at paragraph 3.43) showed that 56 per cent of employers would have hired the participant anyway³⁷;
• although wage subsidies improved employment outcomes, wage subsidy requirements were not necessarily aligned with other employment program requirements (for instance, wage subsidy agreements require an average of 20 work hours per week, which is less than the annual activity requirement for some participants subject to mutual obligation requirements); and
• feedback from providers indicated they found administrative requirements for wage subsidies burdensome, although they accepted that administrative processes had been streamlined since the introduction of jobactive, whereas employers were more satisfied with administrative requirements.³⁸

jobactive wage subsidy surveys

3.38 DESE’s Evaluation, Research and Evidence Branch surveyed providers and employers for the jobactive evaluation.

Provider surveys

3.39 DESE conducted provider surveys in 2016, 2017 and 2019. These surveys sought providers’ views on jobactive generally, and some questions were directly relevant to wage subsidies. These questions related to: whether providers used wage subsidies to facilitate placements and to support employers; provider awareness of wage subsidies; and the administrative burden and the effectiveness of wage subsidies.

3.40 For each survey, DESE advised that around a thousand provider sites³⁹ were invited to respond. Response rates ranged from 84 per cent (870 site responses in 2019), to 92 per cent (985 site responses in 2017).

3.41 Key findings from the provider surveys included:

• almost all providers surveyed often or always informed employers about wage subsidies (97 per cent in 2016, and 98 per cent in 2017);
• 90 per cent of providers surveyed in 2019 offered employers access to wage subsidies before and after matching a participant to a vacancy;
• providers surveyed in 2016 considered that the Restart wage subsidy:
  • made employers more likely to hire a mature age participant (57 per cent agreed or strongly agreed);
  • helped mature age participants overcome employment barriers (59 per cent agreed or strongly agreed); conversely around a quarter of providers considered (32 per cent agreed or strongly agreed) that employers would hire mature age participants irrespective of whether a subsidy was offered;
  • involved a high administrative workload for providers (27 per cent agreed or strongly agreed), and a high administrative workload for employers (41 per cent agreed or strongly agreed); and
• providers surveyed in 2017 considered that the Youth Bonus Wage Subsidy;
  • was known by job seekers and employers (providers agreed or strongly agreed for 48 per cent of employers, and 44 per cent for participants);
  • was valued as a tool to help secure employment outcomes for young people by case managers and employment consultants (86 percent of agreed or strongly agreed); and
  • involved a high administrative workload for providers (24 per cent agreed or strongly agreed).

3.42 DESE conducted wage subsidy fieldwork in 2018 that involved in-person and telephone interviews with staff from ten jobactive providers. A summary of feedback from jobactive staff consulted through this process was largely consistent with the Wage subsidies in jobactive research discussed earlier at paragraph 3.35.

Employer surveys

3.43 DESE conducted employer surveys in 2017 and 2018 to solicit employers’ views about their experiences of jobactive. While the 2017 survey sought employers’ views on jobactive generally, the 2018 survey related to wage subsidies specifically. Questions asked in 2018 related, among other things, to awareness and use of wage subsidies, administrative requirements, employment outcomes, and willingness to use wage subsidies in future.

3.44 Invitations to respond to the 2018 survey were sent to 20,331 employers. Of these, 2,110 (10.4 per cent) completed the survey and 495 (2.4 per cent) partially completed the survey.

3.45 Key findings from the 2018 employer survey included:

• a majority of employers who received wage subsidies considered that their subsidised employee was suitable in most respects⁴⁰, with the exception that only 46 per cent believed that the participant had the appropriate qualifications;
• 31 per cent of employers used the wage subsidy to tailor employment conditions;
• 57 per cent of employers found out about wage subsidies through their employment service provider, and 62 per cent found out after they had already decided to employ the participant (in some cases, after the participant had already started work);
• 63 per cent of businesses considered that employing the participant was extremely or somewhat easy and seven per cent considered that it was extremely or somewhat difficult;
• on average, employers spent 11 hours on the process of receiving and signing the head agreement and payment schedules and 5 hours on providing evidence to receive wage subsidy payments;
• 76 per cent of employers still employed the participant at the time of the survey; and
• approximately three-quarters of employers who had used wage subsidies were willing to use wage subsidies again, and a further tenth reported a conditional willingness to use wage subsidies again.

Youth Jobs PaTH evaluation report

3.46 Participants in the Youth Jobs PaTH (PaTH) program⁴¹ may attract the Youth Bonus Wage Subsidy. As PaTH is a separate program from jobactive (although jobactive and Transition to Work (TtW) participants are eligible to participate in PaTH), PaTH was not covered by the evaluation strategy for jobactive and was separately evaluated.

3.47 In 2017, DESE commissioned the Social Research Centre, a subsidiary of the Australian National University, to conduct an evaluation of PaTH. The Youth Jobs PaTH Evaluation Report was published in 2020. Chapter 6 of the report discusses the Youth Bonus Wage Subsidy (Youth Bonus). Key findings included:

• relative to the eligible caseload, PaTH participants in a wage subsidised placement were less likely to be female, disabled, Indigenous, a parent, or lacking a stable residence⁴²;
• there was a high level of awareness of Youth Bonus among providers (99 per cent for jobactive providers and 100 per cent for TtW providers) and a variable level of awareness among participants (45 per cent of jobactive participants and 72 per cent of TtW participants) and employers (49 per cent of jobactive respondents and 69 per cent of TtW respondents);
• 86 per cent of jobactive respondents and 91 per cent of TtW provider respondents reported that case managers and employment consultants regarded Youth Bonus as useful in helping participants into employment;
• 73 per cent of employers responding to the 2018 PaTH Host Business Survey reported that Youth Bonus influenced their decision to hire a participant and 93 per cent agreed that wage subsidies were a useful incentive to hire;
• most young people valued wage subsidies as an incentive for employers to consider employing a young person; and
• 25 per cent of jobactive providers and 37 per cent of TtW providers expressed concerns about the administration burden of managing wage subsidies, 88 per cent of employers considered that the administrative burden was reasonable.

Reporting of evaluation findings

3.48 On 21 May 2019 EBMC reviewed the findings of the wage subsidy fieldwork (see paragraph 3.42 for discussion of the fieldwork) and discussed the administration of wage subsidies, providers’ use of subsidies, kickstart, the quality and retention of subsidised participants, employer satisfaction with subsidies, labour hire companies’ use of subsidies and the interaction between subsidies and other aspects of jobactive. On 4 July 2019, EBMC reported the findings to ESC, which endorsed the decision to brief the Secretary, however as at September 2021 this had yet to occur.

Policy changes influenced by evaluation findings

3.49 There is some evidence that evaluation findings are taken into account when changes to wage subsidy policy are considered. For example, in April 2019 a paper was submitted to ESC that recommended the removal of kickstart on the grounds that DESE’s evaluators had found kickstart did not significantly contribute to ongoing employment outcomes (as set out in paragraphs 3.34 and 3.35 above), that kickstart was associated with a high level of non-compliance, and that the departmental resources required to assure compliance with kickstart requirements were excessive.

3.50 In June 2019, ESC endorsed the recommendation to remove kickstart, effective October 2019. DESE advised that as kickstart was considered a ‘micro policy’, the decision to remove it was made on the authority of the Deputy Secretary Employment in consultation with the Department of the Prime Minister and Cabinet, and the Department of Finance.

Changes to wage subsidies in the 2021–22 Budget

3.51 The Australian Government announced in the 2021–22 Budget that NESM will replace jobactive from July 2022. TtW will continue to operate as the specialist youth employment service under NESM, and ParentsNext will continue to operate under a separate contract.

3.52 Changes to wage subsidies policy were announced in the 2021–22 Budget. Changes under jobactive commenced in July 2021, and changes as part of the rollout of NESM will commence in July 2022. Some of these changes were informed by DESE’s draft evaluation of jobactive. Table 3.4 sets out ANAO analysis of key changes to wage subsidies and any related findings from the draft evaluation and recommendations made in the Wage subsidies in jobactive report, suggesting that there is some relationship between evaluation findings and related recommendations and changes made to wage subsidy policy.

Table 3.4: Proposed changes to wage subsidies and related evaluation findings

Note a: Under NESM, the Job Seeker Classification Instrument, currently used to allocate participants to streams within jobactive, will continue to be used to determine participants’ servicing needs. The most job-ready participants will self-manage their job search online with support from the Digital Services Contact Centre managed by DESE. Participants facing the highest barriers to employment will receive Enhanced Services through employment services providers.

Source: ANAO analysis

3.53 DESE’s 2021–22 funding proposal recommending these policy changes made reference to the jobactive evaluation, noting that the evaluation evidence supported targeting wage subsidies to participants who faced the greatest barriers to employment.

Does the design of the funding arrangements for wage subsidies support the achievement of program objectives?

3.54 Funding arrangements should be appropriate and align with the intended objectives of a program. In addition, budget decisions need to be informed by a sound evidence base to ensure that funds are allocated appropriately and can meet demand.

3.55 The jobactive program is funded through an annual appropriation. The jobactive appropriation funds the providers outcome payments⁴³, and other jobactive program components including wage subsidies. Wage subsidies have been categorised into three funding pools by DESE for administrative purposes:

• demand-driven pool — funds Youth Bonus wage subsidies only;
• capped wage subsidy pool — funded most wage subsidies from 1 January 2017 to 1 January 2019, and has since been used to fund wage subsidies for ParentsNext, TtW, DES and CDP participants; and
• Employment Fund — funds a range of eligible purchase that can be made to support a job seeker, ranging from accredited training, relocation assistance, to wage subsidies.

3.56 Table 3.5 sets out the funding pool budgets and the wage subsidy expenditure from the three pools. Due to the design of the Employment Fund (see paragraph 3.65), the budget line in this instance is for all eligible purchases, and not only wage subsidies. DESE advised that funding re-allocation occurs between the funding pools within the jobactive appropriation, where overspend can be absorbed by underspends.

Table 3.5: Budget and expenditure for wage subsidy funding pools ($m)

Note a: DESE budget figures reflect estimates leading into the relevant financial period, and do not include any subsequent adjustments.

Source: DESE documentation

Demand-driven pool

3.57 In the 2016–17 Budget, the Australian Government announced Youth Jobs PaTH as part of the Youth Employment Package and committed $762.6 million over four years. PaTH aims to improve young people’s employability skills and provide them with practical work experience. The Youth Bonus Wage Subsidy was introduced as part of the PaTH package.

3.58 The Youth Bonus Wage Subsidy is demand-driven and the level of associated expenditure is therefore determined by the number of participants and the degree of disadvantage experienced by young people at risk of unemployment. Providers access the demand-driven Youth Bonus Wage Subsidy pool on a reimbursement basis.

3.59 In order to ensure that there is sufficient funding for the Youth Bonus Wage Subsidy to cover the level of demand, DESE and the Department of Finance review actual expenditure on the subsidies and adjust expenditure estimates for the Mid-Year Economic and Fiscal Outlook, prior to the Expenditure Review Committee consideration of budget proposals, and at the Budget.

Capped wage subsidy pool

3.60 From 1 January 2017 to 1 January 2019, wage subsidies (other than the Youth Bonus wage subsidy) were funded from the Capped wage subsidy pool (Capped Pool).

3.61 A DESE November 2017 briefing outlined that the Capped Pool had a fixed budget of $218.6 million for the period 2017–18 to 2020–21. Wage subsidy expenditure exceeded expectations due to a range of policy changes implemented in January 2017, including:

• the introduction of kickstart;
• reducing the wage subsidy period from 12 months to six months;
• allowing employers to average the 20 hours of work per week requirement over the 26 week age subsidy period; and
• enabling employers to back-date agreements up to 84 days after the start of an employment placement and submitting reimbursement claims up to 56 days after the agreement ends.

3.62 In November 2017, DESE alerted the Minister for Employment to the risk that the high take-up of wage subsidies could prematurely exhaust funding for the Capped Pool, which could have resulted in limited availability of wage subsidies. To alleviate financial pressure on the Capped Pool, jobactive providers were directed to seek reimbursement for wage subsidies (other than for the Youth Bonus Wage Subsidy) from the Employment Fund instead of the Capped Pool for placements beginning from 1 January 2019.^, DESE’s decision to move the reimbursement of wage subsidies to the Employment Fund was also partly informed by evaluation evidence which indicated that providers were not offering subsidies in a targeted manner (see paragraph 3.37 for discussion of relevant evaluation findings).

3.63 ParentsNext, TtW, DES and CDP providers do not have access to the Employment Fund (a pool of funds available to jobactive providers). As a result, an amount in the Capped Pool was retained from January 2019 to allow these programs to continue accessing funding for wage subsidies excluding Youth Bonus wage subsidy. The Capped Pool is expected to cease on 30 June 2022. However, DESE advised that wage subsidies will continue to be available as part of ParentsNext and TtW under other funding arrangements from 1 July 2022.

Employment Fund

3.64 As discussed in paragraph 3.62, from January 2019 jobactive providers have been required to claim wage subsidy (other than the Youth Bonus wage subsidy) reimbursement from the Employment Fund due to financial pressures on the Capped Pool.

3.65 The Employment Fund is a flexible pool of funds that jobactive providers can claim reimbursement from after providing employment program support to participants. In addition to wage subsidies, this support may include providing participants with work-related equipment, licences or training. The Employment Fund is designed to allow providers flexibility, to allocate funding support according to participant need and across different regional areas.

3.66 Under the Employment Fund, a once-only credit is made to a provider’s notional bank balance when a job seeker commences with a jobactive provider.⁴⁴ Credits are paid into the Employment Fund as a notional bank balance for a provider site (location).⁴⁵ Credits can be transferred between a provider’s site locations and when a participant transfers to another provider.

3.67 When providers create a Wage Subsidy Agreement for a participant, the total wage subsidy amount will be committed out of the provider site’s credit balance. At the end of the Wage Subsidy Agreement period, any unclaimed wage subsidy credits return to the provider’s site credit balance. Providers must claim reimbursement within 56 days from the end of wage subsidy period, and documentary evidence must be retained in order to claim any reimbursements.

3.68 Total wage subsidy expenditure from the Employment Fund is monitored monthly by the ESC and reported in the monthly wage subsidies dashboards to the Minister.

Wage subsidies under NESM

3.69 Under NESM, Enhanced Services providers will continue to be reimbursed through the Employment Fund after making wage subsidy payments to employers. Enhanced Services and TtW providers will continue to access Youth Bonus wage subsidies through separate demand-driven funding. Due to the abolition of the Capped Pool, ParentsNext providers will be reimbursed through the ParentsNext Participation Fund.⁴⁶

3.70 As set out in Table 3.6 expenditure on the Youth Bonus Wage Subsidy is projected to be lower under NESM than would have been the case if the current jobactive program was extended. This is because the most job-ready job seekers, who currently account for the majority of Youth Bonus Wage Subsidy expenditure, will not be eligible for wage subsidies under NESM.

Table 3.6: Youth Bonus Wage Subsidy budget forward estimates — NESM vs jobactive ($m)

Note a: DESE budget forward estimate figures immediately prior to the 2021–22 Budget.

Note b: DESE budget forward estimate figures immediately prior to the 2020–21 Budget.

Source: DESE information

3.71 DESE was unable to provide a forecast of overall wage subsidy expenditure under NESM as it only forecasts total Employment Fund expenditure and does not split Employment Fund expenditure into program subcategories. Forward estimates for the Employment Fund over the period 2022–23 to 2024–25 are set out in the Table 3.7.

Table 3.7: Budget forward estimates for the Employment Fund ($m)

Source: DESE information

3.72 DESE has monitored wage subsidy expenditure against budget and adjusted funding methods to better align over time with policy changes and objectives. There is some limited evidence that changes have also been informed by evaluation findings and lessons learned.