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EXCLUSIVE: A system glitch has wrongly punished more than 1300 jobseekers by cutting off their income in an IT disaster that is a potent reminder of the dark days of robodebt. By Rick Morton.

Jobseeker glitch cuts more than 1300 incomes

Former Coalition government employment minister Michaelia Cash.

Credit: AAP Image / Lukas Coch

A Coalition-era redesign of the employment services system has sparked a major bid for compensation, with the federal government paying back more than half a million dollars so far. The redesign introduced a computer error that wrongly punished more than 1300 jobseekers, cutting them off welfare payments and leaving them without income for weeks.

The coding glitch failed to properly translate a new set of rules introduced as a legislative instrument by then employment minister Michaelia Cash, known as the Targeted Compliance Framework (TCF), and had been present since the new compliance regime came into effect on July 1, 2018. The error persisted until late last year.

As the current Labor government ponders piecemeal reform of the privatised $7 billion employment-services sector, which has nevertheless spooked the outsourced network of job providers who fear losing access to a pipeline of unemployed clients, the conditionality of the welfare system that costs so much to enforce and introduces harmful unintended consequences will largely remain intact.

It is this underlying web of obligations that combined with a poorly audited IT system to harm 1326 jobseekers who should never have been penalised.

Under the employment services model, known as Workforce Australia, the TCF was designed as a new version of the enforcement arm for mutual obligations that apply to jobseekers: the requirement to look for work, enrol in training or study, volunteer or otherwise earn “points” each month to avoid having payments suspended or cancelled.

This TCF is even more administratively complex, however, than the system of mutual obligations it polices. Under a series of three “penalty zones” it introduced, jobseekers who failed mutual obligations without a “reasonable excuse” and in certain timeframes had their welfare payments cut for one or two weeks or cancelled and were forbidden from reapplying for a month.

Under instruction from the Department of Employment, which owns the IT system, Services Australia has now made “remediation” payments of about $573,000 to 909 participants who should have received this money as income. At least another 417 people attracted the most serious penalties and had their payments erroneously cancelled for a minimum of four weeks, but the government is unable to make a traditional repayment of owed funds under the current law.

“The department is instead using the Compensation for Detriment caused by Defective Administration scheme in order to facilitate payments to these people. Services Australia is currently in the process of making these payments,” a spokesperson for the department told The Saturday Paper.

Economic Justice Australia, the peak body for community legal centres that advise people on social security issues and their rights under law, has spent half a year analysing the problem and seeking answers from the Department of Employment and Workplace Relations.

The most severe financial penalties were wrongly applied to those who could least afford them and represented 7 per cent of every so-called “third penalty” under the Targeted Compliance Framework and 3 per cent of every penalty issued since 2018.

“We do not believe the impact these penalties had on the wellbeing of the people affected has been adequately considered,” the chief executive of the peak body, Kate Allingham, tells The Saturday Paper.

“It is unacceptable that this issue was not identified through complaints processes, and that it was in fact only identified by complete accident. It is also unacceptable that the legality of the payment penalty was not assessed by a Services Australia officer before it was applied.”

The comparisons to robodebt are immediate and compelling.

“Complex systems designed to enforce welfare conditionality can create harms that are not visible until significant harm has already been inflicted,” Allingham says.

“The people who are on the receiving end of this harm have no way of knowing whether the IT system is applying the rules lawfully or not. The obvious previous example of this was robodebt. It is ironic that robodebt ended up being much more costly for government, despite it being designed as a cost-cutting tool.

“Proactive consideration and investment in humane policies can prevent immense downstream financial costs.”

After the last election, the Albanese government launched a parliamentary inquiry into the entire Workforce Australia employment services system. It quickly recommended the ParentsNext service for unemployed mothers and fathers be abolished as it was actually making their lives worse. Other reforms have been slower and the government released a tepid response to the final report earlier this month.

“The Select Committee found current settings in the employment services system place an overemphasis on mutual obligations and compliance,” the government response says.

“This creates situations where some people experience mutual obligations that are inappropriate for their circumstances and a disproportionate response to non-compliance, resulting in unnecessary stress and administration for those impacted.”

A new analysis of all TCF warnings and “breaches” in the system between January and the end of March, conducted by the Australian Council of Social Service, shows 49 per cent of all people on the books of Workforce Australia were issued with compliance threats, forcing them to prove they had reasonable excuses to miss certain milestones.

Threats can be converted to demerit points that become payment suspensions and then cancellations. In the same three-month period assessed, 38 per cent of people on the WA caseload had their payments put on hold.

For those in the provider service, more than half were threatened for simply missing scheduled appointments with their provider although just one-quarter of this group were converted to a demerit point, indicating they had a reasonable excuse or were never at fault.

This kind of make-busy work has been routinely criticised as a key harm of the system, and ACOSS says the government must “urgently remove automation of payment suspensions and alleviate other harms caused by the unemployment payment compliance system”.

“Suspensions impact some groups more than others, with significant numbers applied to people with lower qualifications, people with a disability and First Nations people,” it says.

Calls to abolish the often-arbitrary system of mutual obligations have been ignored, however.

“The Government will develop a mutual obligation and compliance framework which balances individual needs and circumstances with the broader aim across the employment services system,” it says.

“While coherence will be sought across the system, this framework would aim to ensure mutual obligation requirements better reflect individual circumstances, and local labour market conditions, and do not result in inappropriate, ‘one size fits all’ arrangements.”

One reason the government has been reluctant to move swiftly on even a moderate overhaul of the system of jobseeker “activation” is the billions of dollars in contracts it has with outsourced job providers, who represent their own powerful ecosystem and have also been largely responsible for policing jobseekers.

Providers are paid bonuses and additional fees for certain activities, including running training programs of dubious benefit, and flag breaches that can lead to payment suspensions even when a jobseeker has done nothing wrong.

With fewer obligations and fewer conditions, there is less scope for industry profit. The sector is already bleeding clients from the main Workforce Australia system to the online stream where certain people are allowed to self-service.

While the total caseload across both the traditional and online services has fallen from 650,620 people in October 2022 to 637,545 people at the end of June 2024, the drop has been significant in the more lucrative traditional service where numbers have plunged from 485,000 to 426,410 over the same period.

A change in government policy saw 64,000 people leave the system at the end of June because they had been meeting their mutual obligation requirements for 13 weeks without fail and “will now be supported by Services Australia”. This number will continue to grow and represents an existential threat to the provider industry.

Now, as the government flags more direct involvement of the Australian Public Service in stewardship of the system and also by “trialling APS delivery in a small number of regions”, the provider lobby is growing desperate.

The National Employment Services Association has argued against any attempt to involve the public service in running services. Earlier this month, its chief executive, Kathryn Mandla, featured in a front-page Canberra Times article, arguing the sector could deliver services cheaper because they paid staff less.

“If the Australian government is serious about insourcing, it must be honest about the ‘real cost’ of delivering face-to-face, place-based employment services,” she said.

“The vastly higher rates of pay in the APS means providers regularly lose staff to government jobs with greater benefits, receiving thousands of dollars more per annum, leading to the inability to retain staff, and ongoing recruitment.”

In one respect, the lobby is right. Administering employment services is head-spinningly complex and the government hasn’t run any service since the Commonwealth Employment Service was privatised under John Howard. It is spending $100,000 just to come up with a “brand and name” for a new voluntary program to replace ParentsNext.

Caught in the middle are jobseekers. The more rules there are in place for receiving a welfare payment, the more monitoring there has to be to uphold them. When officials are taken out of the equation to streamline the checking, Kate Allingham says, more problems arise.

“The Targeted Compliance Framework introduced a series of complex rules that had to be codified into the IT system. This subsequently increased the risk of coding errors. All decisions under the previous JobSeeker compliance model were based on human assessment of noncompliance, undertaken by Services Australia,” she says.

This is just one element of a sprawling program, but it illustrates the false economy of bolt-on solutions to “activate” jobseekers whose personal circumstances are marked by poverty level payments, trauma, family breakdown and sundry crises. Economic Justice Australia estimates the vast majority of people wrongly cut off from welfare under the TCF coding “glitch” were Aboriginal and Torres Strait Islander people, or people released from prison, and were most likely living in regional Australia.

“The department believes it has identified everyone affected but continues to closely monitor the IT system to ensure it is functioning correctly,” a spokesperson for the Department of Employment and Workplace Relations tells The Saturday Paper.

“We are also undertaking an end-to-end review of the IT system supporting the Targeted Compliance Framework.”

In the May budget the government provided $10.9 million over four years for “critical improvements” to the Workforce Australia IT system.

This article was first published in the print edition of The Saturday Paper on July 20, 2024 as "Does not compute".

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