Improving Outcomes for Workers by Expanding Pay-for-Performance Contracts and Grants
By Celeste Richie
In December, the U.S. Department of Labor (DOL) released guidance for the Pay-for-Performance provisions (PFP) under the Workforce Innovation and Opportunity Act (WIOA). While releasing this guidance is a big step, and one that the workforce system has been waiting for since WIOA was authorized in 2014, the guidance comes with opportunities and challenges.
While performance-based contracts and grants were already allowable, and even encouraged, under WIOA (and its precursor, WIA), one of the exciting components of PFP is the ability that Workforce Development Boards (WDB) have to set aside up to ten percent of WIOA funding to be used on any timeframe until expended, or “funds available for extended disbursement.” Meaning that a board would have more than the normal two years to spend the funds, allowing them to incentivize and pay for outcomes like employment three years after completing a training program, wage gains after four years, or placing job seekers into high-quality jobs. Additionally, if those payments are not made because the provider does not hit the targets, those funds can stay with the local WDB to be used in a future PFP initiative.
This type of flexibility has the potential to help alleviate some long-standing challenges faced by the public workforce system. By focusing on longer-term outcomes, WDBs can reduce the churn often seen when job seekers are placed into the first available job which may not be a great fit or may be low-wage, landing that individual right back at the WDB’s doorstep for additional services.
Workforce boards may be excited to learn of the ability provided by this guidance to begin to accumulate each year’s ten percent set-aside of “extended disbursement” funding until they have sufficient funds to launch their PFP initiative. However, the guidance limits the outcomes workforce boards can target in their PFP initiatives, and even what services can be provided; missing the mark by not allowing local areas to select the outcomes most meaningful to their communities and populations.
RFA is hopeful about the opportunity PFP offers the public workforce system and has developed these suggestions for additional guidance that could help WDBs successfully implement PFP.
For more information on evidence- and outcomes-based workforce strategies, visit RFA’s Workforce Policy page.
Celeste Richie is the Vice President for Workforce Development for Results for America.
