Guidance

Chapter 13: Funding model

Updated 1 April 2020

This guidance was withdrawn on 14 April 2022

This guidance is no longer current and is not being updated. Find the latest Work and Health Programme (including JETS) provider guidance.

Overview

1. The Work and Health Programme (WHP) is predominantly based on Payment by Results (PbR) to drive sustained work outcomes.

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

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

• Delivery Fee
• Outcome Payment

The Delivery Fee

4. The Delivery Fee will be:

• 30% of the Estimated Possible Total Contract Value (EPTCV), as estimated by the Department for Work and Pensions (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

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

6. 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.

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

Outcome payments

8. 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). Earnings data will be provided by Her 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 – initial activity).

9. 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. 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) 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.

10. 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.

Please note: only one 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 trigger payment.

The job outcome payment

Employed outcomes

11. An employed outcome payment would 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 NLW.

12. An outcome will be achieved when gross earnings become equal to, or surpass the NLW adjusted threshold appropriate on the date of the payment which caused cumulative earnings to trigger. Cumulative earnings, below the threshold which are paid prior to the uprate will count towards the increased threshold – their value will remain and contribute towards the new threshold which must be met in full.

13. Participants moving into employed work will be identified by DWP solely using HMRC (PAYE) online data submitted each time an employee is paid by an employer, on or before their pay date. DWP already use this information to pay Universal Credit (UC) and to validate outcomes claimed by suppliers holding contracts for the Work Programme. You will be paid based on the outcomes observed in this data. No separate evidence will be accepted.

14. DWP will monitor Participant earnings via HMRC (PAYE) online 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.

15. The HMRC PAYE information will feed into our Provider Referral and Payment (PRaP) system and will automatically pay for employment outcomes. Please note, to ensure system effectiveness, DWP may undertake tests as necessary of the automated payment system to confirm it is delivering the requirements. Should underpayments or overpayments be identified through these checks, remedial action may be undertaken where appropriate.

16. 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 will determine if a Participant is in employment or has a job offer, prior to the 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 however, between referral and starting the programme there may be some Participants who move into employment or self-employment, or have had a job offer. If this is the case, you must enter a Did Not Attend (DNA) on PRaP and return the Participant to Jobcentre Plus. Further information can be found in Work and Health Programme Provider Guidance Chapter 3: Acknowledging Referrals, Initial Participant Engagement and Registering a Start.

17. Any earnings that the Participant has accumulated prior to starting on the programme will not count towards an employed outcome.

18. 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 has achieved income milestones of £1,000 and £2,000 during their employment
• an automatic outcome payment once the earning threshold is reached

Accelerator payment mechanism

19. 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.

20. 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.

21. 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%).

22. 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

23. A qualifying period of 182 calendar days exists immediately after the maximum time on programme. Therefore, an eligible employment or self -employment outcome payment 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 eligible for a payment.

Participant moving Contract Package Area

24. Where a Participant moves outside a provider contract delivery area, you are still entitled to any eligible outcome payment 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

25. All payments will be made through the appropriate IT system or PRaP in line with the amounts set out in the contract. Please note that DWP can only make direct payments to United Kingdom (UK) bank accounts.

Payment control measures

26. To protect public funds and DWP’s reputation the Department has introduced additional controls to the WHP Funding Model.

Providers and supply chains employing WHP Participants

27. Where you or supply chain partners employ WHP Participants within a part of your employment business directly relating to DWP employment contracts, 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.

28. You must notify DWP at least 5 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 DWP employment contracts by completing a 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.

29. The completed WHP Employment Business Customer Form must be sent via unencrypted email, at least 5 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.

30. You must complete Part 2 of the WHP Employment Business Customer Form and send via unencrypted email to the 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. Any forms received after the 639 calendar day period from the date the Participant started on the programme will not be accepted.

Please note – To submit a self-employed outcome claim where the WHP 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 PRaP 11 clerical form and send to The Department’s Provider Payment Validation Team (PPVT) Central Inbox by unencrypted email at PPVT.LEEDS@DWP.GOV.UK

31. 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 outcome criteria has been achieved from employment or self-employment excluding the period of earnings from the non-qualifying period. If the outcome criteria are satisfied, the appropriate payment will be made.

Financial incentives

32. You must not provide any financial incentive (for example funding 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 or equipment payment, cannot qualify as a self-employed outcome or count towards a self-employed outcome payment.

33. 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.

34. 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.

European Social Fund (ESF) compliance and evidence retention requirements

35. 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.

36. 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.

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

VAT

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

Additional VAT requirements for self-billing contracts

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

40. 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 or rates that should be charged for each part of the funding model (Delivery Fee or relevant Job Outcome Payment).

Important

You will be asked to confirm that the VAT rate or rates 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 or rates. If the self-billing agreement process is delayed for any reason, you are still responsible for notifying the VAT rate or rates to the Authority on an annual basis.

DWP’s responsibilities

41. DWP is responsible for ensuring that:

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

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

Provider’s responsibilities

43. 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

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

45. 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.

46. 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.

47. You should also refer to UPK/Tutor PRaP online Guidance, and DWP Generic Provider Guidance Chapter 5.

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

49. 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