A feature in the welfare system is allowing private businesses to suspend hundreds of thousands of welfare payments. By Rick Morton.

Exclusive: Private companies halting welfare payments

A politician speaks in Parliament House.
Employment Minister Tony Burke in Parliament House, Canberra.
Credit: AAP Image / Lukas Coch

The government is refusing to halt a part of the welfare system that allows private employment service providers to decide when to suspend welfare payments for jobseekers, essentially outsourcing compliance to private companies that profit from the scheme.

The system has negatively affected more than 230,000 people and leads to the suspension of more than 35,000 payments a week.

Employment Minister Tony Burke wrote to Australian Council of Social Service (ACOSS) chief executive Cassandra Goldie early last month, warning there could be “substantial negative effects” if changes were made to the employment services system without due consideration.

“Changes that have not been properly considered can have significant unintended and unexpected consequences, which can have substantial negative effects,” Burke said in the letter, seen by The Saturday Paper.

“The government remains committed to ensuring safeguards continue to apply for vulnerable people, while effectively helping people into sustainable employment.

“Policies regarding the design of employment services including mutual obligation requirements for people receiving unemployment payments are very complex, and interwoven with other government tax and social security systems.”

Under the current $6.3 billion Workforce Australia system, the network of non-government and for-profit job service providers are given the power to automatically suspend or cancel welfare payments where a jobseeker has not turned up for a mandatory appointment or failed to meet other requirements of “mutual obligations”, such as applying for a certain number of jobs a month.

Jobseekers are given two days to “re-engage” or correct any errors that may have led to the payment suspension in the first place.

In just three months to the end of June, 239,805 payment recipients had their benefits suspended a total of 436,635 times. That’s almost half – 45 per cent – of all jobseekers in the Workforce Australia system.

More than 25 per cent of these suspensions were for Aboriginal and Torres Strait Islander people, who make up about one seventh of the entire system caseload.

Antipoverty activists call the network arrangements a “shadow bureaucracy” with a notable vested interest: the job providers use the threat of payment suspensions to ensure engagement and, in turn, their own income stream from lucrative government contracts and bonuses that are pegged to particular types of required activity.

A wider push to abolish mutual obligations altogether is gaining momentum but, at the very least, advocates argue there is no reason to outsource the compliance functions of Centrelink to an unaccountable industry that makes money from them.

Labor MP Julian Hill, who chairs the House of Representatives’ select committee inquiry into Workforce Australia employment services, told an industry conference last week the committee had formed a “unanimous view that social security compliance functions must be taken away from outsourced providers and brought back to the public sector”.

“Suspending or cancelling payments are not decisions that should be automated or ever taken lightly,” he said in a speech at the National Employment Services Association (NESA) conference in Brisbane last Wednesday.

“The data on payment suspensions and cancellations is frankly shocking.”

It was this data that prompted Goldie to write to Burke in late August, begging for a halt to suspensions in the middle of a cost-of-living crisis where people on welfare were already living below the poverty line.

The number of people being targeted was “intolerably high”, Goldie wrote.

“ACOSS writes to set out again our grave concern about the high rates of payment suspensions confirmed by the data for the period 1 April 2023–30 June 2023 published last Friday,” she wrote.

“As was the case with Robodebt, the widespread use of unfair and automated payment suspensions in employment services is administratively unjust and is causing harm and acute distress to people, many of whom are in vulnerable circumstances.

“Urgent action is required.”

Julian Hill also mentioned the spectre of robodebt, noting that bringing “compliance functions back in-house and reducing automation post-robodebt will mean more friction and require additional public servants”.

“But the current situation is self-defeating – a major false economy,” he said.

Under the current system, if a payment suspension coincides with the ordinary payment date, the welfare recipient has to go without critical support while they attempt to “re-engage”. Even where the suspension happens with enough time to stop it before the payment date, this often requires time and expense for people who have little of either.

The system is also prone to error. The Saturday Paper spoke to one recipient, a single mother with osteogenesis imperfecta, who we will call Jennifer. On all but one of the occasions her payment was suspended, it happened because the phone application glitched and did not update the office of her job service provider regarding appointments.

“Basically you get a text message saying your payments have been suspended for whatever they call it, like, ‘You didn’t meet your requirements’,” she said.

“And I would then call them straight away and say, ‘What are you talking about? I’m employed. I’m at the only job you sent me to. I’ve got it. I’ve still got it. I’m working fucking Monday to Friday. What else am I supposed to do?’ ”

On another occasion, Jennifer was told she was in breach of the scheme for not meeting job search requirements. “But I was already working at the place they sent me to,” she said. “I mean, how many more jobs am I supposed to get?”

When Jennifer tried to impress upon her provider that she would prefer to conduct appointments by phone because the cost and time involved in getting to the office for face-to-face meetings was prohibitive, she was told she would have to attend a set number of in-person meetings.

“It adds a layer of stress that people can’t handle anymore,” she said.

“And because of where I work, I’m actually 45 minutes away from where I live, and the job agency, on a bad day, it can take me two hours to get there from work.

“But you can sit there and tell them hours and numbers all day, but unless they get what they want, they’re going to make your life miserable.”

The scheme also allows private providers to suspend payments under the Points Based Activation System (PBAS). ACOSS noted in its correspondence with Minister Burke that “overall, 44 per cent of the suspensions were for not being able to complete Points under the points-based activation model on time”.

This new employment services feature allows jobseekers to accrue points for different activities every month and use these to meet their mutual obligations. The number of points required varies between people. For example, Work for the Dole and Employability Skills Training, for which providers are paid bonus fees, are worth 20 points a week. Volunteer work is worth five points but up to a maximum of 10 a month.

Jobseekers who fail to meet their monthly targets will be required to earn even more points as a “re-engagement requirement”. Payment suspensions remain in force until these are completed.

“Too much time has already been lost, and too many people have been impacted, to ask people to wait for a comprehensive solution,” Goldie wrote to Burke.

“You will be aware that people affected by these payment suspensions are trying to deal with the cost-of-living crisis on a grossly inadequate income support payment. We again urge government to address the inadequate level of JobSeeker and related payments.”

ACOSS told the minister only “appropriate personnel” at Services Australia should be able to suspend welfare payments for obligation failures and only as a last resort.

“Proper administrative law processes, including human rights protections, should be adopted to ensure that the suspension is the least restrictive measure necessary, taking into account any personal vulnerabilities and the impact of a suspension on individual and their family financial circumstances (such as the risk of not being able to pay rent) and the seriousness of the breach,” Goldie wrote.

A spokesperson for Burke said the government was “aware of the high level of suspensions and the Department of Employment and Workplace Relations is investigating this”.

As Hill has pointed out, long-term unemployed people face extraordinary barriers to participation in life and work and it is an “irrational view” to suggest reality would change if only they were forced to apply for more and more jobs.

“It’s obvious that full privatisation has failed,” he said in his speech to the NESA conference. “The previous government implicitly admitted this when creating Workforce Australia by bringing those closest to the labour market back into digital services.

“Any country thinking of adopting the fully marketised system that Australia had for over two decades would be nuts to do so.”

Still, Hill’s hints about the final report from his inquiry indicate there will be no dismantling of the cumbersome system and, possibly, even an expansion to include people not on welfare. The report could loosen up some of the more punitive aspects of the system, which evolved out of welfare conditionality, but any hopes for radical change have dimmed.

“The system is being choked by compliance red tape and the impact overwhelmingly falls on the most vulnerable in society and we will make short- and longer-term recommendations about this,” Hill said.

“It is reasonable to express a principled view that the state should never contract out the power in effect to impact someone’s basic survival income to a private actor.”

There is no end date for this contracted power, however. Meanwhile, more than 35,000 welfare payments are suspended each and every week.

“And, you know, God forbid something happens like the car engine goes or you need new tyres – shit that people need to get to and from work,” Jennifer said. “What happens then? You’re shit out of luck. Your payments are suspended. What happened? You took a breath, buddy. You took a breath and the whole world fell apart. It makes me so angry.”

In the face of all of this, Jennifer says, the hardest thing is maintaining a sense of self.

“The one thing that will drive me to the point of exhaustion is this need to prove that I am worth it,” she said. “And it’s simply because people have the attitude of ‘You’re on Centrelink, you’re a heap of shit’. I still have to jump through all of these hoops just to get the $150 payment that I’m still eligible for.”

This article was first published in the print edition of The Saturday Paper on October 21, 2023 as "Too much obliged".

For almost a decade, The Saturday Paper has published Australia’s leading writers and thinkers. We have pursued stories that are ignored elsewhere, covering them with sensitivity and depth. We have done this on refugee policy, on government integrity, on robo-debt, on aged care, on climate change, on the pandemic.

All our journalism is fiercely independent. It relies on the support of readers. By subscribing to The Saturday Paper, you are ensuring that we can continue to produce essential, issue-defining coverage, to dig out stories that take time, to doggedly hold to account politicians and the political class.

There are very few titles that have the freedom and the space to produce journalism like this. In a country with a concentration of media ownership unlike anything else in the world, it is vitally important. Your subscription helps make it possible.

Select your digital subscription

Month selector

Use your Google account to create your subscription