Welfare to work "fat cats" thrive whilst many face redundancy

I am getting a bit sick of the “fat cats” in the welfare to work sector taking huge salaries whilst so many of their frontline staff face redundancy as a result of recent bidding announcements for Work programme. Take the case of Emma Harrison, the head of A4e.

The woman appointed by David Cameron to help troubled families get off benefits and into work has a joint income with her husband estimated at more than £1.4m after building a business empire based on lucrative "welfare to work" contracts with government.

A4e's latest accounts show that Harrison, who lives with her husband in Thornbridge Hall, a 12th-century stately home in the heart of the Peak District, has an 85.5% shareholding in the Sheffield-based company. She receives a salary of £365,000 a year. On top of this, last year she and her husband received an additional £462,000 from A4e for the company's use of her home for conferences and administrative work. From what I hear this ‘administrative’ work includes inviting staff members over to her place for a cuppa. I guess this is to show the oiks how the rich live. After all, one really must keep the working class in their place.

Her husband received an additional £626,856 for the lease of another property to A4e. Nice for some – I guess money breeds money.

Last December Cameron offered Harrison a role championing government efforts to help troubled families get back on their feet. "Emma and others will be helping to pioneer a new way of doing things: less bureaucratic, less impersonal, more human, more effective," the prime minister said. "Above all, treating the whole family as a unit, not just a collection of individuals.

What does Emma know about hardship, other than the fact she was born in Jaywick, now recorded as being the most deprived town in the UK? I’ll bet Emma didn’t see too much if it when she was growing up.. Indeed, she openly admits that as a child she moved to Sheffield and lived in a ‘big’ house. From details of her life, I doubt she ever experienced hardship, or living off welfare benefits.

Today she heads up a company reputedly worth £100 million.

All this at a time when A4e have placed all their staff on redundancy notice, though admittedly a proportion of them will be re-employed (albeit on lower salaries) as a result of the company winning in five areas in the UK.

It emerged last week another major player in the welfare to work industry, Serco, which has won two more contracts, had awarded its top executives bumper pay packets. Chris Hyman, Serco's chief executive, enjoyed an 18% rise to £1.86m, while Andrew Jennings, the finance director, received an increase of 7% to £948,295. The company's diverse range of contracts includes running several prisons, London's bicycle hire scheme and the Docklands Light Railway.

Serco have yet to publicise the extent of any redundancies within their organisation, but logically it is unlikely they will be able to maintain the same level of staffing. Large sections of the country were served by Serco employees and with the ending of Flexible New Deal on 1st June we can anticipate many of them will be consigned to the dole queues.

Working Links, one of the successful contractors of the new work programme, is from today sending redundancy letters to almost 600 of its 2,000 workforce, with the threat that more could follow if staff numbers for the new contracts are lower than existing levels. Meanwhile, their managing director, Breege Burke enjoys a handsome salary of over £220, 000 a year

The news about the Harrisons, Burke, Hyman and Jennings’ ' income will fuel a growing row over the extent to which the private sector is set to benefit increasingly from Citizen Dave, the people’s toff’s determination to widen its role in the provision of public services.

In a recently published report for the government, Will Hutton called for a fair pay code to be extended into the public services industry. He also called for details on justification of an executive's annual salary to be published and for more employees to become involved in companies' remuneration committees. The report, which is being considered at the highest levels of government, said remuneration "must be brought back into the context of the pay of the rest of the workforce through the disclosure of the ratio of top to median pay".

It seems the “fat cats” in the sector never read that part of the report.

Union leaders have described the salaries earned by private entrepreneurs whose businesses were taking on government contracts as "obscene". They said private firms were queuing up to reap massive rewards from plans to open up the National Health Service to "any willing provider".

Once again, it’s another example of how Citizen Dave looks after the rich whilst the rest of us scrabble around for any spare pickings as pushes us day by day to become an “alright for some” society.

Piggies in the trough

Over the last two days I have examined some of the discrepancies between the higher paid elite in the welfare to work sector and the average frontline staff member. In this analysis I have been highly critical of some of the attitudes of these companies. Organisations that profit from government money that we originally gave through our taxes.

Indeed, there is a rather ludicrous cycle that occurs amongst those working in the sector where staff pay the taxes that pay for the contracts that give the providers the profits that give the directors the huge salaries, whilst either keeping them on very low incomes, or force them into redundancy. Now don’t get me wrong, I am not against anyone, individual or company, getting ahead and I am enough of a realist to recognise how companies need to make profits in order to survive.

Where I have a problem is when companies make substantial profits, pretend they are making losses and don’t pass on any of their gains onto the workforce. Without doubt, this argument can be thrown at the welfare to work sector.

Let’s take a few examples of some of the bigger companies:

A4e:
Annual turnover: £190,990,000.00
Annual profit: £9,877,000.00
Turnover per employee: £58,693.92
Profit per employee: £3,035.34

EAGA
Annual turnover: £762,179,000.00
Annual profit: £41,471,000.00
Turnover per employee: £162,719.68
Profit per employee: £8,853.76

PeopleServe
Annual turnover: £9,252,000.00
Annual profit: £1,672,000.00
Turnover per employee: £36,860.56
Profit per employee: £6,661.35

Working Links
Annual turnover: £85,737,000.00
Annual profit: £1,353,000.00
Turnover per employee: £66,617.72
Profit per employee: £1,051.2

Reed in Partnership
Annual turnover: £57,460,000.00
Annual profit: £-237,000.00
Turnover per employee: £82,439.02
Profit per employee: £-340.03
(Before you feel sorry for them, this year was far from typical and normally they make large profits)

Remploy
Annual turnover: £267,951,000.00
Annual profit: £9,543,000.00
Turnover per employee: £52,611.62
Profit per employee: £1,873.75

Shaw Trust
Annual profit: £5,424,000.00
Profit per employee: £2,125.39

Seetec
Founded in 1984, Seetec, based in Essex, has become one of the largest and most experienced providers of government-funded welfare to work and skills-training programmes. The company employs more than 500 people across a national network of 50 employment and training centres, and works with thousands of people each year to find work or gain qualifications through a diverse portfolio of employability or skills contracts. Last year, Seetec pulled in £21.2m in sales and profits of £2.112m. This enabled the company, which is 56 per cent owned by founder Peter Cooper, to pay total dividends of £990,608.

JHP
Founded in 1983, it operates a national network of 117 centres and also delivers training in employees’ workplaces. Under chief executive, Jim Chambers, profits grew 52% a year, from £4.4m in 2008 to £10.2m in 2010

Maximus
Its profits in the first nine months of 2010 shot up by 19.4 percent—to £131 million. And its top boss, Richard A Montoni, grabbed a pay package worth £2 million last year.
• CEO Richard A Montoni sold 10,000 shares of MMS stock on 07/15/2010 at the average price of £59.44
• CEO Richard A Montoni sold 5,233 shares of MMS stock on 08/11/2010 at the average price of $58.59.
• CEO Richard A Montoni sold 4,767 shares of MMS stock on 08/17/2010 at the average price of $58.06
• CEO Richard A Montoni sells 10,000 shares of MMS on 09/20/2010 at an average price of $58 a share.

As a result of these transactions, Montoni earned in excess of £4m over a 3-month period. Nice for some!

It is clear many companies in the sector are making huge profits from welfare to work contracts. Their justification for discarding hundreds of people now is obscene as many of them could have been redeployed in a couple of months under the new Work Programme. The only reason companies like A4e have chosen to make their NDDP and pathways to Work staff redundant is because they are too tight to pay a couple of months salary and see if these people could be reintegrated into the company under new contracts. They chose not to do this, favouring the ‘cheaper’ route of saving a few quid from not having to pay a couple of month’s salary.

It is an absolute disgrace and it will come back to bite them.

Staff working in the sector desperately need to unionise and protect their interests. They can no longer rely on the artificial bonhomie offered by senior management – as 1,500 staff now on redundancy notice can testify. If workers join trade unions they can be protected when the results of the Work Programme are announced. Some of these staff are likely to find themselves joining their colleagues on redundancy notice. They should not assume their employer will look after them – they will not – as many can confirm.

I call upon workers in the sector – join the trade unions. Mobilise to protect your jobs before it is too late.

Rich man, Poor man - the two face of Welfare to Work

Yesterday I talked about the 460 redundancies at A4e and today, I would like to continue along the same theme. You see, if all we were talking about were those jobs, it would be sad, but not a disaster. Regrettably, the position is far, far worse.

In a recent survey of training providers, ERSA (the trade association for all providers working in the welfare to work sector) identified that amongst a third surveyed there were 1,500 anticipated job losses as a result of the closure of Pathways to Work and New Deal programmes. Now, this was only the amount identified from those who responded to the survey. If you add to this the number from those who failed to respond, then conservatively you could easily be looking at over 2,000 redundancies within the sector.

But even this is not the end. In a few weeks, DWP will announce who has been successful in bidding for delivery of the Work Programme. Over the days that follow, those selected primes will advise subcontractors of the extent of delivery they will be offered and in which regions. Logically, not everyone will be successful and though more optimistic forecasts predict most frontline staff will be absorbed into the new delivery companies, this seems far from reality.

The hard facts are that due to the funding arrangements, companies will be forced to keep costs to a minimum. Add to this the fact that transition to a new programme is always slow and you compound the problem. Take Flexible New Deal as a previous example – many anticipated a large flow of referrals from Jobcentre Plus right from the start, but the reality was that it took over six months for numbers to even approach expected targets. For some weeks many staff were ‘hanging around’ waiting for the work to come in.

This time round, companies will be less inclined to make the same mistakes.

Many frontline staff will thankfully be subject to TUPE arrangements and, as a result, will find themselves transferred over to new deliverers. But what about those currently employed as administrators, HR staff, training teams, health and safety personnel, cleaning and maintenance departments, business development teams and, in some instances, employer engagement teams? All these people will find themselves vulnerable, especially if the new prime is already established in that area and has an existing solid infrastructure within the region.

If only 35 companies found themselves without any work as a result of the new contract, and these organisations were forced to ‘let go’ of 15 staff, this would add another 500 people to the overall seepage in the sector – and making a total of over 2,500 job losses in just over 3 months.

There is a clear divide in the Welfare to Work sector. You seldom if ever see any senior management volunteering to be the first to accept redundancy when the axe falls, it is always the grunt, the oik who has to graft whilst ‘management’ squeeze out more money for their advantage. It is seldom the managing director who says to his workforce “It’s not fair and as a gesture I will be the first to leave this company – see you on the dole queue!”

Today, Will Hutton reported on Fairer Pay and in line with some of his “recommendations” I am publishing some of the pay differentials between directors and frontline workers. Take a look at the following. In 2009, Reed in Partnership paid out £844,00 in director’s remuneration, with the highest paid director earning £238,000 – an increase of 40.83% over the last four years. Or EAGA, whose directors earned a massive £1,538, 000 (an increase of over 68%) over the last 7 years – and the salary of their highest paid director? Would you believe a meagre £457,000 – an increase of (wait for it) over 96% over the last 7 years. Or, how about Working Links, where their directors have earned a mighty £354,000 (an increase of 139% over 6 years) and their highest paid director earned £222,000.

Compare this with PeopleServe, where the last recorded average salary for employees (2009 figures) was £16,338.65. Now accepted PeopleServe are low payers, so let’s look at Working Links again – their average wage is about £25,941, a big differential between the two companies. In the latter case, staff at Working Links might like to reflect on the size of any pay rise they had over the last two years, because the highest paid director in that company allowed himself an enormous 20% increase.

G4S is a widely known public limited company with interests in a variety of sectors, including welfare to work. Last year, its 23 directors enjoyed the rewards of the company’s success by enjoying £4,460,000 between them.. Their highest paid director earned a staggering £1,656,000 … and the average salary within the company? Would you believe - £6,846.62!!!

How about Pertemps? Their directors shared out £415,000 between the 15 of them and their highest paid director earned £289,000. Meanwhile the average pay of a member of staff was £26,631,64.

If you aren’t angry by now, let’s go back to those 460 staff at A4e who are now on redundancy notice. The 15 directors of that company shared £2,128,000 between them last year, an increase overt the last 7 years of over 189.52%. Their highest paid director earned £640,000, but we should feel sorry for them, because during the same period, their salary only went up 99.38%. Unsurprisingly, the average salry of a member of staff within the company is not in the public domain, but you can bet their income hasn’t gone up as much during the same period!!!

I could bore you with many more figures. Suffice to say, there is a division between the experience of frontline staff, who are paid poorly for a highly stressful job and face the risk of redundancy every five years and the directors who manage them, most of whom have been sneakily sucking off all the cream from the milk for years.

It is time the sector started to clean up its act. It is run by ‘fat cats’ who, despite their feeble protestations, only want to feather their own nests and do not care about the thousands who, in a few weeks time, will face redundancy. Remember that patronising letter to A4e staff yesterday? It does the sector no good when directors, earning such huge salaries rely on the devotion staff have to their jobs whilst they fleece they system to fill their greedy pockets.

It is a disgrace and it is time employees in the sector started to vocalize their anger.