Guidance

Chapter 13: Funding Model

Updated 4 April 2024

Please note: Please follow the processes outlined for both WHP Core and WHP Pioneer. Elements that are exempt from this can be found in Chapter 2b WHP Pioneer eligibility and entry points.

ESF Requirement Changes

1. When referring to ESF Requirements within this chapter please note the following changes to ESF Requirements effective from 24 July 2023 (England)

• providers no longer need to submit or process ESF 14-20 Initial or ESF 14-20 End forms for Participants
• products can be updated to remove ESF logos. Changes to existing products and any new marketing and publicity materials should be sent to WHP.ENQUIRIES@DWP.GOV.UK for approval.
• providers should continue to use the current template for Good News Stories, until notified of amendment.
• participants you have already submitted ESF 14-20 Initial and ESF 14-20 End forms for over the lifetime of your WHP contract continue to be subject to ESF obligations. This includes Audit requirements and the ESF Document Retention Policy which at present is expected to be 2034.

In addition to the above, ESF requirements do not apply to participants started on or after 1 November 2022’

Please note: You are expected to continue to complete and to share Good News Stories with your Performance Manager as part of your contract with DWP.

Overview

2. The WHP is predominantly based on Payment by Results (PbR) to drive sustained work outcomes.

3. There is no price differentiation for outcomes between Participant groups nor the employed or self-employed.

4. There are two distinct elements to the WHP payments:

• Delivery Fee
• Outcome Payment

The Delivery Fee

5. The Delivery Fee will be:

• 30% of the Estimated Possible Total Contract Value (EPTCV), as estimated by DWP in its absolute discretion, divided by Estimated Possible Number of Months (EPNM) in which services are to be provided, as estimated by DWP in its absolute discretion
• paid (without the need to claim) monthly in arrears, at the same level each month, at a date to be agreed
• paid for each month throughout the period between the Call-Off Service Start Date and the Referral End Date up to a maximum of 60 months (see- paragraph 1.30 of the WHP Call-Off Specification for Contract Duration and Implementation and see paragraph 4.25 of the WHP Call-Off Specification for conditions attached to the payment of the Delivery Fee)
• DWP may defer Delivery Fee payments if formal performance improvement action is taken as a result of failing to meet service standards. Further information can be found in Chapter 16 - Performance Management and Compliance Monitoring.

6. The delivery fee supports you in delivering your service to Participants and you are not expected to submit a monthly invoice for this fee.

7. DWP will agree a common date with you so that the delivery fees will be paid monthly in arrears. Any part period for the first month at start-up will be paid on a pro-rata basis.

8. Each delivery fee payment would be generated for payment on the same calendar day each month.

Outcome Payments

9. For the employed, an outcome payment will be triggered when a Participant earns in the (456 + 182) day period from the Participant’s Start Date on WHP, the equivalent of someone working for 16 hours per week for 182 days, earning the adult rate (aged 25 or over) of the National Living Wage (NLW).

10. Earnings data will be provided by His Majesty’s Revenue and Customs (HMRC). You will not be required to make a claim for employed outcomes (with the exception of Special Customer Records, further details can be found in Chapter 14 – Validation).

11. Self-Employed outcomes will be measured through duration in self-employment. You will be expected to keep evidence of all Participant self-employment and claim appropriately after the required period has been achieved.

12. For the self-employed an entitlement to an outcome would be triggered when a Participant achieves a cumulative period of not less than 182 days (26 weeks) in self-employment. Any period of self-employment can only be counted once regardless of whether the Participant has one or multiple occupations during that period.

13. A price acceleration cohort model also exists when the number of outcomes achieved by you exceeds the volume of outcomes specified by DWP. This is to allow an increased outcome payment to be paid in respect of each outcome achieved above the volume specified by DWP. Please see the Accelerator Payment Mechanism section further in this Chapter.

Self-Employed Outcome Definition

14. Self-Employed outcomes (The Work and Health Programme) will be measured through duration in self-employment. You will be expected to keep evidence of all Participant self-employment and claim appropriately after the required period has been achieved.

15. For the self-employed an entitlement to an outcome would be triggered when a Participant achieves a cumulative period of not less than 182 days (26 weeks) in self-employment. Any period of self-employment can only be counted once regardless of whether the Participant has one or multiple occupations during that period.

16. If a participant is in receipt of the ‘Self-Employment Income Support Scheme’ grant which they received to enable them to continue the self-employment that the Participant started whilst on provision, the duration may count as evidence towards the Self-employed outcome, provided the participant is unable to trade (temporarily due to coronavirus) or trading for a minimum of one day a week and all other Self-employed job outcome criteria are met.

Please note: only one validated outcome can be achieved per Participant and must be wholly achieved in either employment or self-employment. Self-employed earnings cannot be combined with direct employment earnings for the purpose of achieving an outcome. The first job outcome to be successfully achieved will be reflected in DWP MI. Also, for self-employment validation purposes, a week is defined as a seven-day period where a minimum of one day meets the criteria

The Job Outcome Definition

17. Participants moving into employed work whilst on The Work and Health Programme will be identified by DWP solely using HMRC (PAYE) on-line data submitted each time an employee is paid by an employer, on or before their pay date. No separate evidence will be accepted.

18. For The Work and Health Programme, DWP will monitor Participant earnings via HMRC (PAYE) on-line data from the first ‘payment date’ for a maximum period of 639 calendar days from (and including) the Start Date. We will continue to look for earnings received within the 639 calendar days.

19. The HMRC PAYE information will feed into our Provider Referral and Payment (PRaP) system and will automatically reflect an outcome in the DWP MI Pack. Please note, to ensure system effectiveness, DWP may undertake tests as necessary of the automated payment system to confirm it is delivering the requirements. Remedial action may be undertaken where appropriate.

20. Prior to starting the Participant on the programme, you must ensure the Participant is not in any form of employment or has had a job offer The Jobcentre Plus Work Coach / Prime Provider will determine if a Participant is in employment or has a job offer, prior to the referral/self-referral. DWP will not make a referral if it is identified the Participant is in any form of employment at that point in time.

Please note: Between referral and starting the programme there may be some Participants who move into employment/self-employment or have had a job offer. In these cases you should follow the processes outlined in Work and Health Programme Provider Guidance Chapter 3 - Acknowledging Referrals, Initial Participant Engagement and Registering a Start.

21. Any taxable income defined in your contract as Non-Qualifying Earnings will not count towards an employed outcome.

22. Any earnings from furloughed employment (for employment which started whilst on provision) will count towards outcomes as participants are in contracted employment. Participants furloughed will still be in contracted employment and will receive income whilst on the Coronavirus Job Retention Scheme via their employer. These earnings will count towards RTE/RTI (Real Time Earnings/Real Time Information) Job Outcome performance.

23. DWP will share the following information with you, related to the validation of earning based outcomes:

• when a Participant’s earnings are first declared to HMRC, following a confirmed start on the programme.
• when a Participant on The Work and Health Programme has achieved income milestones of £1,000 and £2,000 during their employment.
• an automatic outcome payment once the earning threshold is reached.
• the outcome of the end of cohort reconciliation exercise using HMRC Real Time Information (RTI) data.

24. Occasionally income milestones or earnings thresholds may have been achieved through the participant having received Non-Qualifying Earnings, as defined in your contract.

25. Non-Qualifying Earnings will not be counted towards an outcome. It could however result in the outcome line being claimed and the closure of the HMRC RTE line following payment of the final earnings threshold.

26. Where you identify that income milestones or an earnings threshold has been achieved due to Non-Qualifying earnings as defined in your contract, you must notify DWP of this immediately. Note the relevant information on form Work and Health Programme England and Wales – Non-Qualifying Earnings Notification Details and return it to: whp.enquiries@dwp.gov.uk.

27. In these circumstances, when you have notified DWP of the Non-Qualifying earnings, DWP will notify you of any subsequent validated employed outcomes as part of the End of Cohort Reconciliation (EoCR) exercise.

Accelerator Payment Mechanism

28. The WHP uses a price acceleration model. Price Acceleration takes place when the number of outcomes achieved by you exceeds the volume of outcomes based on the performance offer as set out in the contract. This allows an increased outcome payment to be paid in respect of each outcome achieved above the volume specified by DWP.

29. For each calendar month cohort of Participants starting on the programme (all customer groups to be included in the monthly calculation of the number of starts for accelerator payment purposes), a standard outcome payment will be paid for the first 75% of the contracted outcome volumes (75% of the performance offer) at aggregated Participant group level. All further outcomes achieved (above and beyond) will be paid at a higher rate. This higher rate is set 40% higher than the lower rate.

30. For example - A provider is contracted to achieve outcomes for 60% of Participants who start on the programme. Within the price acceleration mechanism, this would mean that within any particular cohort, the first 75% of the performance bid will be paid at the standard rate. In this instance, this would equate to the first 45% of the cohort who achieve an outcome (75% * 60%).

31. Any outcomes achieved above the 45% point will be paid at the higher rate. This is the remaining 25% of the performance bid (i.e. 15% of the cohort), plus any outcomes over and above the bid. For example, if the provider achieves 65% of starts resulting in an outcome within a particular cohort, the first 45% will be paid at the standard price and the residual 20 percentage points (15% remainder of the cohort plus 5% performance above the target) will be paid at the higher rate.

Qualifying Period

32. A qualifying period of 182 calendar days exists immediately after the maximum time on WHP. Therefore, an eligible employment or self -employment outcome may start within the period on programme or during the following 182 calendar day period. Any outcome must be achieved within the total 639 calendar days qualifying period to be included in the DWP MI Pack.

Participant moving Contract Package Area

33. Where a Participant moves outside a provider contract delivery area, you are still entitled to any eligible outcome relating to that Participant within the eligible earnings window, provided these earnings derive from within the UK. Further information relating to Participants moving to another geographical area can be found in Work and Health Programme Provider Guidance Chapter 10 - Change of Circumstances and Notifications

Payments to Suppliers

34. All payments will be made through the appropriate IT System/PRAP in line with the amounts set out in your WHP contracts. Please note that DWP can only make direct payments to United Kingdom (UK) bank accounts.

Payment Control Measures

35. To protect public funds and DWP’s reputation the Department has introduced additional controls to the Work and Health Programme Funding Model.

Providers and Supply Chains Employing WHP Participants

36. Where you or your supply chain partners employ WHP Participants within a part of your employment business directly relating to WHP contracted provision, any income during the earnings period relating to this employment will not contribute to the cumulative calculation of earnings for the purposes of paying an outcome. We refer to this as a non-qualifying period. Where the employment is on a self-employed basis, this period of employment will not contribute to the achievement of a self-employment outcome/ self-employment performance.

37. You must notify DWP at least five working days before first salary payment that you or a supply chain partner have employed a WHP Participant within a part of your business directly relating to WHP contracted provision by completing a Work and Health Programme Provider Guidance WHP Employment Business Customer Form. This is a vital requirement. You should complete all details on the form including date started and date of first earnings.

38. The completed WHP Employment Business Customer Form must be sent via unencrypted email, at least five working days before first salary payment is made to the Department’s PRaP Operational Support Team (POST) Central Inbox at: PRAP.SUPPORT@DWP.GOV.UK You will receive a receipt notification.

39. You must complete Part 2 of the WHP Employment Business Customer Form and send via unencrypted email to the PRaP Operational Support Team (POST) Central Inbox when the Participant leaves employment with you (or a member of your supply chain). This should be sent as soon as the information is available. This should include the date the employment ceased and date of last earnings.

40. Any forms received after the 639 calendar day period from the date the Participant started on The Work and Health Programme will not be accepted.

41. To submit a self-employed outcome, where the Participant has been contracted to work for you or a supply chain partner on a self-employed basis, DWP will require you to complete a clerical – PRaP11 form and send to the Department’s Provider Payment Validation Team (PPVT) Central Inbox by unencrypted email at PPVT.LEEDS@DWP.GOV.UK

42. On receipt of the WHP Employment Business Customer Form, the payment line will be suspended. DWP will review HMRC PAYE data (and any other information it deems appropriate), at the end of the validation period to establish if the criteria has been achieved from employment or self-employment excluding the period of earnings from the non-qualifying period. If the criteria are satisfied, the outcome will be included in the DWP MI Pack.

Financial Incentives

43. You must not provide any financial incentive (for example funding and / or payment) to support the employment of Participants. You may provide appropriate services and support to employers to help with the engagement and employment of Participants. A Participant in self-employment to whom you have provided, whether directly or indirectly, financial incentives other than any allowed working capital/equipment payment, cannot qualify as a self-employed outcome or count towards a self-employed outcome.

44. For Participants in self-employment, where the Participant has a clear business plan which would benefit from financial support through either working capital and or equipment, you may provide up to a maximum of £1,000 for working capital and or equipment per Participant for the purpose of the self-employed business. You must retain evidence of the Business Plan and any payments related to the working capital and or equipment.

45. If you decide to provide working capital and or equipment to the Participant to support their self-employed business, this cannot be in the form of a loan to the Participant.

ESF Compliance and Evidence Retention Requirements

46. As this programme is ESF match funded, it will be subject to stringent audit by DWP and EC Auditors. They may require evidence that the programme is being delivered in accordance with the contract and all payments are clearly and appropriately evidenced. Failure to meet these audit requirements can result in financial penalties or withdrawal of funding.

47. You must keep sufficient, relevant evidence and key documentation in support of programme delivery and payments. It is your responsibility to ensure that documents and data can be relied on for possible ESF audit purposes. You must have robust systems in place to ensure that documentation (paper or electronic) is securely held and is easily retrievable and accessible throughout the retention period.

48. Further information regarding ESF requirements can be found in the Generic Provider Guidance Chapter 11b – ESF requirements 2014 – 2020 (England Only) and in the appropriate Work and Health Programme Provider Guidance:

• chapter 3
• chapter 11

VAT

49. Your VAT obligations are covered in the Terms and Conditions of the contract.

Additional VAT requirements for self-billing contracts

50. The following guidance should be read in conjunction with the HMRC guidance VAT Notice 700/62: Self-Billing.

51. HMRC guidance states that under a self-billing contract both parties are responsible for ensuring that the VAT is charged correctly on invoices. As part of your bid, you were asked to provide the VAT rate(s) that should be charged for the funding model.

Important

52. You will be asked to confirm that the VAT rate(s) quoted as part of your bid are still correct prior to commencement date of the contract.

Please note: that the onus is with you to provide the VAT rate for this contract as per HMRC guidelines. DWP will however, assist in this matter by providing an annual self-billing contract and requesting confirmation of the VAT rate(s). If the self-billing agreement process is delayed for any reason, you are still responsible for notifying the VAT rate(s) to the Authority on an annual basis.

DWP’s responsibilities

53. DWP is responsible for ensuring that:

• VAT rates are sent to the supplier
• an annual self-billing agreement is in place; and VAT rate(s) are changed on the PRaP system if you notify a change in VAT status.

54. DWP will seek agreement from you to the self-billing arrangement on an annual basis and request that you confirm the VAT rate(s) to be applied to all aspects of the funding model.

Provider’s responsibilities

55. You are responsible for:

• providing a signed self-billing agreement promptly on an annual basis when requested by DWP.
• ensuring that DWP is immediately notified of a change in the VAT rate(s) should they change during an agreement term.
• ensuring that duplicate invoices are not sent to DWP for a supply which is self-billed, and
• ensuring that you fully understand and comply with VAT Notice 700/62.

Provider Referrals and Payments

56. The PRaP system enables secure, automated exchanges of information about Participants referred to programme and payments from DWP to Providers.

57. Providers access PRaP via DWP Authenticate; providers can download information to manage on their individual systems and update information about Participants progress into PRaP; payment claims, and calculations are generated automatically. Provider security requirements can be found on the contract Terms and Conditions page. This functionality is currently suspended under cost.

58. The PRaP system also provides DWP and Providers with transparent data about the cost and performance of Contracted Employment Programmes (CEP), supporting contract and performance management.

59. You should also refer to UPK/Tutor PRaP on-line Guidance, and DWP Generic Provider Guidance Chapter 5.

60. For further information about PRaP, please see our PRaP Questions and Answers.

61. More information on the PRaP system can be found at Provider Referrals and Payments (PRaP) system for DWP.

Should you require a copy of any of the forms mentioned in this chapter, please email: WHP.ENQUIRIES@DWP.GOV.UK