A key component of the Government’s initiative to help more young people into work is riddled with abuse by both employers and welfare-to-work companies a report quietly released this week has revealed.
The Wage Incentive is the only one of the flagship youth employment measures within the Youth Contract which isn’t workfare, although participants are only paid minimum wage. The scheme pays out £2,275 (or £1,137.50 for part time positions) to employers who employ someone on the Work Programme between the ages of 18 to 24 for a minimum of six months. 160,000 places are to be funded over the next three years.
The scheme, which even the DWP admit may be illegal under age discrimination laws, will cost up to £350 million in total. If the current shambles continues then a third of that, over £100 million pounds, could be handed out to companies claiming for jobs which are not eligible under the rules.
The DWP had attempted to avoid this simply becoming a free pay cheque every time a company employs someone under the age of 25 by forbidding employers from claiming the subsidy for people they have already employed. The Q&A for employers using the Wage Incentive says:
“I’ve recently filled a vacancy with a young person who might qualify for a wage incentive. Can I claim retrospectively?
No. The aim of the wage incentive scheme is to incentivise employers into giving young jobless people a chance in a weaker market by encouraging them to fill vacancies with young people. If the young person is already in work the Wage Incentive should not be necessary.”
But this week’s report, which is based on a survey of employers who have received the payments, reveals they are doing just that, and in huge numbers. The report shows that 27% of employers surveyed claimed the payment after the person was already employed by the company and 15% during the recruitment process.
This means almost half of the payments are going to employers who haven’t created a single new job. In fact, just 9% of employers said that they had created a new vacancy due to the scheme.
The DWP are aware of this abuse but don’t seem interested in asking for tax payer’s money back. Instead the: “DWP are exploring ways to strengthen the message to Work Programme providers and Jobcentre Plus staff that employers should be informed about the wage incentive scheme prior to, or during, the recruitment process”.
As things stand, when an employer hears about the Wage Incentive for the first time, then all they need to do is look over their books to see if they’ve employed anyone under 25 who was on the Work Programme recently and they can then claim a whopping £2,275 subsidy.
The report also tells how some Work Programme providers are encouraging young people on the scheme to use the payment to bribe potential employers into giving them a job at interviews. Candidates have also been encouraged to add details of the scheme to their CVs ‘in order to give them an edge over other candidates’ – casting further doubt on the legality of the Wage Incentive under the Equalities Act.
The scandalous abuse of the scheme doesn’t end there. Whilst the Wage Incentive is supposed to be directed at long term jobs which last at least six months, only 63% of the survey respondents said the positions they had offered had been permanent or open-ended. 14% of jobs subsidised on the scheme were described by employers as temporary or casual.
There is even evidence that some employers are simply sacking young people after six months to take on a new placement, or using the scheme to raise capital. Here the report can speak for itself:
“There was some indication that on occasion medium-sized employers were using wage incentives for multiple recruitment to fixed-term positions as a way of injecting capital into the business. For example, this could entail recruiting six labourers on six-month contracts and using the funding from wage incentives to buy vans or other equipment.
There were also instances of employers applying for wage incentives for a series of temporary contracts within the same post, meaning that employees would only be employed for a maximum of six months. The employed individual may then be regarded as being less attractive as a recruit, in comparison with other applicants who were still eligible for wage incentives. Work programme providers felt this practice was more likely to occur for unskilled jobs as replacing employees every six months would not significantly impact efficiency.
Both of these scenarios are in breach of the terms and conditions of the scheme to which all employers must sign up to when applying for the wage incentive. DWP are exploring ways of strengthening the messaging about the rules of eligibility “
It is little wonder that employers are abusing the scheme when it is being run by the fraud riddled welfare-to-work sector who are currently using every trick in the book to improve their dreadful performance figures.
The Wage Incentive is good business for everyone concerned, except for the young people paid a pittance for six months and then thrown back on the dole. Work Programme providers get paid a job outcome fee, the employer gets a bung themselves and the DWP get to pretend that the scheme is working. There is barely any criticism of this appalling abuse of public money in the report which even hints that the subsidy to employers should be increased.
The good news for the DWP is that employers think the scheme is a fairly straightforward way of stealing tax payers money. 80% of employers thought there would be ‘a small amount of work or not much at all’ when making a claim and most respondents said they would be all to happy to do it again. At over two grand a pop simply for employing someone who would have been offered a job anyway, this is hardly surprising.
The report, which has to be read to be believed, can be found at: http://research.dwp.gov.uk/asd/asd5/report_abstracts/rr_abstracts/rra_828.asp
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