DETAILED RESPONSES TO THE REPORT'S CONCLUSIONS
1. We recommend that the Government should commission
a national survey of employers' recruitment practices.
Existing research has provided a valuable insight
into employers' recruitment practices. Work by the Institute for
Employment Studies, funded by the Department for Education and
Employment and published in 1996, used a sample of 800 employers
across the UK. It asked in detail about how, and how often, employers
recruited and their experiences of and attitudes towards the unemployed,
especially those who have been out of work for long periods. It
also surveyed a range of other research work on employers' recruitment
practices. Among its findings were:
- three fifths of employers had standard practices
for recruitment to all jobs. Standard procedures were more common
in public sector and larger establishments. Relatively few jobs
were exclusively available to internal candidates;
- most employers did not state any minimum educational
or vocational qualifications; relevant experience was a far more
common minimum requirement;
- the most common methods used to attract suitable
recruits were open advertising, word of mouth, and Jobcentres
and these were also stated to be the most effective channels;
- recruitment from the unemployed was widespreadhalf
had done so in the previous year. The likelihood of recruiting
from the unemployed was much higher than average among larger
establishments and higher than average among public sector respondents;
- nearly one third usually or fairly often took
on short-term unemployed people, while a fifth rarely or never
did so. These proportions changed to one fifth usually or fairly
often when hiring long-term unemployed people and one third rarely
or never doing so;
- of those who had recruited unemployed people,
half said they would do so for any occupation. Within the rest
there was some tendency to cite less skilled occupations;
- two thirds of those who had recruited unemployed
people saw no great difference between them and other recruits
in their performance as employees. Nevertheless, half of employers
saw a history of unemployment as a relevant selection criterion.
A quarter thought duration of unemployment mattered in assessing
job applications and among these the mean duration at which they
would think twice about recruiting them was just over 9 months.
Both the incidence of "thinking twice", and the extent
to which it might lead to rejection, increase with the duration
- employers showed little evidence of believing
that the unemployed were in that position because they were inherently
less valuable. Commonly reported attitudes were that anyone could
be unemployed, recruiting an unemployed person is no more risky
than recruiting an employed one, and unemployed people do offer
skills that employers need. At the same time there was strong
attachment to the view that experience of unemployment itself
can render individuals less attractive through its affect on motivation
and human capital.
The researchers concluded, "our findings strongly
support the tiered or phased. ... [approach to] active labour
market programmes. That is to say ... the normal workings of the
labour market will generally cope adequately with most short-term
unemployment. There seem to be no qualitative reasons why many
or indeed most unemployed people should be significantly disadvantaged
in both finding and securing work early in a spell of unemployment.
Those who do not succeed, however, face multiple disadvantage
that is acquired and intensified as the duration of their unemployment
extends. Whatever factors prevent them securing work early in
a spell of unemployment are significantly amplified and supplemented
in employers' eyes."
This argued for an approach in which new entrants
to unemployment should be encouraged and assisted in effective
jobsearch as quickly as possible, and where the administrative
system they encounter should make this their most important early
priority. The timing of subsequent more focused assistance was
crucialtoo soon and deadweight will be high, too late and
individuals may get stuck in an extended spell of unemployment.
At six months on the register a significant proportion of employers
have begun to take this into account. The longer the spell of
unemployment the more significant is the action required.
These conclusions are very much in line with the
Government's approach, built around the Jobseeker's Allowance
regime for all unemployed people, more significant help available
for all claimants from 6 months of unemployment, and the New Deals
focused on those who face the most significant disadvantage in
the labour market such as young people and very long-term unemployed
However, while this and other research has proved
very useful in guiding the development of policies towards the
unemployed, it is now several years old. In addition, the Government
has increasingly recognised that to be successful in helping people
back into work, policies must more fully involve and be bettered
tailored to the needs of the employers who take part. Finally,
active labour market policy is increasingly focused on helping
not just the unemployed but other jobless people, particularly
those on other benefits such as Income Support and disability
benefits. This suggests further work on the recruitment practices
of employers and their attitudes to jobless people as a whole
may be useful.
During the current financial year the Department
for Education and Employment has funded a survey of employer attitudes
towards and recruitment of people aged over 50. New Deal related
research has also provided insightssuch as the quantitative
survey of employers who have recruited people through New Deal
for Young People or New Deal for the Long-term Unemployed. Published
in September 2000, this covered over 3,000 establishments and
almost 5,000 engagements. Several projects in the DfEE or Employment
Service research programmes for 2001-02, which are still under
consideration, are relevant to this area and the Committee's recommendation
will also be considered in the research programmes for 2002-03.
2. The crucial challenge remains to improve the
employment opportunities for long-term unemployed people. We strongly
urge the Employment Service to improve links between employers
and this group of job seekers in order to meet this crucial challenge.
The Employment Service is continually striving to
enhance its relationships with employers in order to best meet
the needs of long term unemployed people. Wherever possible, the
Employment Service looks to enhance New Deal provision and to
help engage the support and participation of employers to improve
their links with jobseekers. Working on a national basis, it has
- introduced Sector Based Gateways that offer short
courses aimed at both preparing long term unemployed people for
the industry in which they want to work and matching clients to
employers in industries where there are skill shortages. These
include the Construction, Retail and Hospitality sectors as well
as cross-industry call centre schemes;
- established a national 'Consultative Group' of
major employers, to advise on all aspects of Employment Service
- influenced the recruitment strategies of employers,
through the Large Organisation Unit National Account Management
- sought to establish excellent working relationships
with employers through the delivery of various employment routeways
for long term unemployed jobseekers in industries which include
Transport, Automotive, NHS, Security and Retail. It is currently
developing a routeway for the Gas industry;
- established a Financial Services Sector initiative
with high profile employers.
On a regional basis, it has;
- worked closely with a number of NHS Trusts to
prepare New Deal candidates for employment both in nursing and
- used regional Employer Coalitions to ensure employer
participation in the promotion, design and delivery of New Deal;
- run a variety of automotive industry based schemes,
moving long term unemployed people into well paid sustainable
employment in previously inaccessible areas;
- worked in partnership with City Wide Construction,
a specialised department within Nottingham City Council, providing
an employment and training initiative for unemployed people who
want to gain work and achieve a nationally recognised qualification
within the construction industry.
- developed a package of training and work experience
with the West Midlands Police.
The Employment Service will enhance links with employers
further through the new demand-led approach, which will focus
on what employers want and how workless clients can supply it.
3. We recommend that the Government and the Employment
Service should seek to expand the opportunities for work placements
and trials for unemployed people.
We agree that this type of good practice is essential
in order to improve the employability of jobless people and we
are piloting such approaches through the Innovation Fund and Action
Teams for Jobs.
4. We welcome this emphasis on the use of subsidies
as a means of risk reduction for employers and as a job-broking
tool. We agree that employee subsidies, as they operate under
New Deal, are not, nor should they be seen as, a means of increasing
The subsidies are not and have never been a means
of increasing employment. They do act as a first step towards
employers' acceptance of jobless people through New Deal.
5. We welcome the two experimental projects, one
in Yorkshire and the Humber and one in Scotland, which will test
whether the provision of more intensive after care has a positive
impact on retention or progression.
We welcome the support of the Employment Sub-committee
for these initiatives, which are firmly based on our experience
that even short periods of employment for long term unemployed
people can help them become more job ready in the longer term.
The effectiveness of these projects will be evaluated,
the findings shared and then the best practice implemented in
the Employment Service delivery, as appropriate.
The Yorkshire and the Humber project external provider
faced major problems in attracting local employer participation
and as a result the Employment Service withdrew Innovation Fund
support. However, in a similar project in the Yorkshire area,
38 people have so far received support whilst in work but have
yet to be tracked over 13 weeks to assess the impact of the project.
The Innovation Fund continues to provide the opportunity
for new ideas to be tested and tried out in different circumstances.
6. We welcome the reduction of the threshold period
from two years to eighteen months which is due to take place in
April 2001. It is a step in the right direction. We recommend
that the Government should reduce further the period for which
unemployed people over the age of 25 are required to claim job
seekers' allowance before entering New Deal.
We believe that the package of help available to
unemployed people aged 25 and over strikes the right balance,
and gives the appropriate help at the right time. While the New
Deal itself is generally focused on those who have been out of
work for 18 months or more, individuals can take advantage of
training, work trials and help with motivation and job search
much earlier. These forms of intensive help are, of course, in
addition to the supporting structure of advisory interventions,
which help to ensure that people are kept constantly in touch
with the labour market.
We believe that there is strong evidence that this
approach of providing active support to all jobseekers
has proved particularly effective in preventing the build-up of
long-term unemployment. Since the mid-1980s, when a more active
regime began to be implemented, the improvement in employment
has been disproportionately amongst the long-term unemployed
long-term unemployment has fallen from over a million to just
over 200 thousand. It is interesting that the UK approach is,
as an OECD conference in Prague last year showed, being taken
up, in varying forms, in a number of countries, particularly in
Scandinavia but also in France.
The Employment Sub-committee may like to know that
the detailed eligibility rules for the New Deal 25 plus will mean
that people who have undertaken short spells of employment, but
have otherwise been unemployed, will still be eligible for New
Deal help. It is also the case that people in certain disadvantaged
groups can be considered for early entry to New Deal from day
one of unemployment.
7. We congratulate the Employment Service on the
Employment Service-plus On-line pilot. We encourage it to investigate
further means of attracting more professional and managerial vacancies
and more clients seeking jobs in those fields.
The Employment Service recognises the need to obtain
a richer mix of vacancies whilst ensuring a high level of service
to employers without artificially raising their expectations.
The initial indications of the On-line pilot are encouraging and
are leading the Employment Service to explore the possibility
of extending the experiment.
The Employment Service is preparing to test on-line
"banks" of job applicants, one of which will exclusively
relate to professional and executive jobseekers. The applicant
bank will be open to searches from our employer customers.
Employment Service recruitment consultants will shortly
begin to pilot the use of "specialisms" within the sector
specific account management framework. This will allow individual
consultants to develop sector specific expertise.
The Employment Service is now making available some
ten thousand vacancies from other European public employment services,
which contain a significant proportion of jobs at higher levels.
8. We support fully the Employment Service's efforts
to become a demand-led service, which is able to promote new job
opportunities and assist unemployed people to meet those opportunities
if both employers and job seekers are treated with equal importance.
The Employment Service will continue to move towards
becoming a demand led service within the context of the new Working
Age Agency. The development of Employment Zones and Action Teams,
alongside the test bed of the Innovation Fund, will support the
transition, informing the Employment Service about best practice
in helping the unemployed. Balancing and matching the needs of
employers with the skills and abilities of the unemployed will
be a key task for the new agency.
9. To focus on employers alone as principal customers
would risk losing the Employment Service's distinctive role in
helping the most disadvantaged job seekers. Moreover, a narrow
focus on the needs of employers would be increasingly difficult
to sustain as the cohort of people for whom the Working Age Agency
provides a work-focussed service becomes more diverse. We recommend
that the Employment Service should continue to improve the services
it provides to employers both now and as it evolves into the Working
Age Agency. It should not be diverted from its gradual evolution
to a demand-led organisation. We recommend that Government should
ensure that, in the approaching merger, the needs of employers
are considered to be as important as the needs of job seekers
and other claimants. The attractiveness of a demand-led approach
is that the closer the Employment Service is to understanding
and targeting employers' needs, the better it will be able to
serve those seeking employment.
The Employment Service has a clear commitment to
improve the services it offers to employers, which in turn provides
access to quality jobs for unemployed jobseekers. An increasing
amount of its provision is work based and therefore automatically
involves employers. The New Deal Task Force endorses the Committee's
recommendation and believes that a dual customer approach, which
focuses on the needs of employers and disadvantaged jobseekers,
will deliver better results for those seeking employment. In line
with the evidence which it gave to the Committee, and with the
Committee's recommendations, the Employment Service believes that
it should continue to treat employers and jobseekers as equally
10. We acknowledge the important role that temporary
work can play in moving people closer to sustained employment.
We recommend that the Government should consider carefully the
potential impact of abolishing temp-to-perm fees for PEAs on encouraging
PEAs to provide this service. We also recognise that the benefit
reforms suggested by the Policy Action Team on Jobs would encourage
more benefit recipients to contemplate this route into employment,
potentially increasing the role of PEAs in placing the unemployed.
The Government, on 1 February, issued revised proposals
for measures to limit the circumstances when private employment
agencies can charge temptoperm fees. These measures
ensure employers are not discouraged from offering temporary workers
permanent work opportunities. The Government has at no stage advocated
the outright abolition of these fees. The Recruitment and Employment
Confederation, the industry's leading trade association, said
it considers the revised proposals are a reasonable compromise
that enables agencies to protect their interest whilst recognising
that the Government has protected those of temporary workers.
We expect our proposals to improve labour market flexibility by
removing barriers to entry into the permanent employment market.
The Government is considering the benefit reforms
recommended by the Policy Action Team on Jobs. Whilst the recommendation
on benefit disregards was rejected because of cost implications
and administrative complexities, much is being done to develop
measures to encourage more people to take up temporary work. For
example, from Autumn this year we are introducing a rapid reclaim
mechanism so that people on Jobseeker's Allowance and Income Support
who move into a job that only lasts a short period can claim benefits
again much more easily. We are also allowing claimants who have
become entitled to any benefit payments that only become due after
6, 9 or 12 months to re-gain entitlement of these after a period
of work without having to serve a fresh qualifying period if they
reclaim within 1 or 2 years.
11. The selective nature of the US welfare system
provides a stark contrast to the inclusiveness of the benefits
system in the UK.
The universal nature of the UK benefits system is
one of its greatest strengths and plays a central role in the
success of the UK's system that is distinct from the more selective
nature of the US welfare system. Unemployment is currently low
in the UK and the US and there are fears that the current tightness
of labour markets in both countries will generate inflationary
pressures and so undermine the sustainability of growth. One necessary
response is to expand the supply of labour.
In the UK, this is being tackled by improving the
way unemployed claimants are helped into work, through New Deal
for example, and by widening this help to include those on other
benefits. Almost 4 million people are on other benefits, mainly
disability-related benefits: this represents an enormous potential
supply of labour that is currently wasted. The universal nature
of benefits in the UK provides a link to these people that can
be used to help and encourage them to consider work. It is important
to remember, however, that many of these people have been out
of work for some years and so require different help to return
to work than those claiming unemployment benefit. This is reflected
in the range and voluntary nature of the help offered to these
By contrast, the lack of a comprehensive welfare
system in the US may mean that, over time (as benefit entitlement
runs outs, for example), people drift away from the world of work
because there is no system to keep them in touch with the labour
market. It is interesting, for example, that the activity rates
in the US and UK are very similar (78 and 77 per cent respectively
in 1999), despite the much stronger financial incentives in the
US to get a job.
If this is true, then the ability of the US to expand
labour supply by bringing these people back into the labour market
may be very limited. There may be no levers to pull to bring them
closer to the world of work because they are not in the welfare
system. In the UK, on the other hand, the universal welfare system
means that many more people who are economically inactive are
on benefits and hence have some attachment with society that can
be used to promote labour market participation. This would suggest
that there is greater opportunity, through the welfare system,
to expand labour supply in the UK than there is in the US.
12. Although it cannot be assumed that labour
market programmes and models for intermediaries developed in the
US will be directly applicable to circumstances in the United
Kingdom, we recommend that the Government should examine whether
there are lessons that could be applied to those areas, where
there are high levels of vacancies alongside substantial pockets
of unemployment such as in inner London.
We have already identified some lessons from the
US intermediary models that could have some impact in the UK,
where appropriate, and we are continuing to look at the role of
labour market intermediaries through the test bed projects of
the Innovations Fund and through the brokering role of Action
Teams for Jobs, many of which are active in areas of high unemployment
in close proximity to areas with high levels of vacancies.
13. We welcome Wildcat's willingness to share
its expertise and the establishment of the NEWTEC PIP programme.
We are also adamant that the Government should be aware of developments
on the part of domestic intermediaries so that their experiences
and innovative ideas can also be recognised and exploited. There
has been a failure to recognise fully the good work that is already
taking place in the UK. We recommend that the Employment Service,
through its network of local offices, should ensure that it identifies
and maintains a dialogue with all labour market intermediaries
and that procedures are in place for the information gathered
to be shared across the Service and with Government as appropriate.
The Innovation Fund will be supporting a number of
high quality projects that aim to improve the numbers of disadvantaged
clients entering and being retained in good quality jobs. In particular
it will support projects that operate as demand-led intermediaries.
The bidding and assessment round is still in progress. To date
Ministers have approved five projects, eight are under consideration
and the National Panel will assess 7 in March. A further 7 organisations,
who have been invited to tender, have still to submit proposals.
Proposals have come from a range of public, private
and not-for-profit organisations and from all parts of the country.
The projects will be subject to on-going monitoring and evaluation
and there will be a strong emphasis on identifying the ways in
which providers develop and operate as successful, demand-led
Organisations have also had the opportunity to bid
for financial support aimed specifically at capacity building
New contract management arrangements in the Employment
Service are now coming into effect. As part of the assessment
and contract award process providers have to give evidence, of
their links with employers, how they will gain an understanding
of the labour market and what their proposals are to meet those
needs. Quality management systems, including the new ES Quality
Framework of self-assessment and the inspection framework of the
Adult Learning Inspectorate, will identify good practice and exemplar
Information will be disseminated through a range
- the Innovation Fund Steering Group comprising
the Employment Service, the Department for Education and Employment
and Task Force Officials will receive and review reports and evaluation
data from Innovation Fund projects and will be best placed to
ensure that on-going learning is fed into policy and operational
- the Employment Service, through its National
Providers Network, will share good practice with key organisations
across the provider base and support them in disseminating ideas
through their own networks;
- the Employment Service holds regular workshops
for its direct contract holders enabling providers to share good
- the Employment Service is working jointly with
the Centre for Social Inclusion and the Unemployment Unit and
Youth Aid to organise a summer convention on innovation. One of
the themes for this event is 'providers as intermediaries'. The
Employment Service is asking successful and innovative providers
to deliver workshops and share their experience. It is anticipated
that some 600-700 delegates will attend this event.
14. We commend the Government for its commitment
to achieving quality employment outcomes for programme participants,
but the salary floor set out in the Innovation Fund prospectus
is too blunt a tool. We recommend that the salary levels attracting
outcome-related payments should be based on salary levels in regional
We believe it is important to send out signals to
providers and agencies working with jobless people that they should
be thinking beyond entry level jobs and low starting salaries
for their clients. Experience with programmes in the United States
has shown that where clients and their advisers are ambitious,
job quality, starting salary and progression routes can all be
considerably enhanced. The £15,000 job entry figure was an
initial attempt to quantify the salary level we believe would
send out the right signals to advisers and others on the levels
they should be aiming for. It is inevitably crude as there will
be large regional and sectoral variations but we believe jobless
people have great, unrealised potential and it is important that
our funding systems aim to help providers unlock it.
15. We recommend a strengthening in the role of
employers in the development and management of labour market intermediation
at the local level. This could involve the expansion of the role
of New Deal partnerships or an increased role for Employers' Coalitions.
It can be difficult to get employers involved in
the development and management of labour market intermediation.
The Employment Service has made great efforts to have employer
representatives both in New Deal partnerships and working closely
with Employer Coalitions. Indeed the Employment Service and Learning
& Skills Councils are working hard to get employers involved
in partnerships at delivery and strategic level.
Employer Coalitions can make a vital contribution
to ensuring that the delivery of the New Deal programme is responsive
to the needs of local employers and that intermediary organisations
develop an in-depth understanding of employer requirements. They
have helped to bring together employers across a range of industries
to look at innovative ways of recruiting and supporting long term
unemployed jobseekers. The promotion and development of intermediary
organisations has been one of the key features of recent bids
to the Innovation Fund.
The Employment Service has markedly improved its
position as an influencer and agent in the local labour market
as a result of partnership working. We continue to look at more
creative and effective ways of achieving this.