Case Study: the Australian PES System

The Australian employment services industry is unique. No other country in the world has managed to build a Public Employment Services sector in which the front-line work is entirely carried out by non-government organizations contracted by government. Australia’s innovative system was praised by the OECD and incites the interest of government organizations around the world.

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Australia’s innovative outsourcing of Public Employment Services in the late 1990s initially attracted some criticism. Were the Australians converting the plight of the unemployed into a private money-making opportunity? Was their government abdicating responsibility? Such fears proved unfounded and unjustified.

Australian employment services are one of the most closely monitored industries in the world, with market competition forces simulated by stringent and relative performance standards upon which the continuance of an individual provider’s contract entirely depends. 

Contracted employment services providers are held accountable to a strict compliance framework. Contract cycles are short, with under-performing companies losing the right to re-tender. In the first 20 years, the market condensed from over 300 providers to under 50. A ‘Star Ratings’ system determines the relative success of providers in achieving employment outcomes through a complex calculation that takes into account size and geographical location of allocated sites, characteristics of the local job markets, and characteristics of the provider’s jobseeker case load. Providers scoring 2 or less out of 5 are deemed ‘under-performing’.

Remuneration for the provider also mostly depends upon successfully placing jobseekers in work, and in most cases the placed client must remain in employment for at least 26 weeks. The administrative burden for providers is considerable, and the rewards are hard-earned.

An advantage of this system design is that it focuses provider efforts at a local level on achieving successful employment outcomes. It is responsive to changing labor market conditions and attracts a mix of innovative service models delivered by small and large organizations, not-for-profit and private companies, and specialist and broad-based services. The system’s effectiveness depends on information conduits between government and providers, as well as  on sophisticated data and analysis of labor markets.

Read more about the unique Australian PES system in this free chapter of Managing Workforce Development:

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