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Despite being warned in 2018 that jobseekers were being exposed to unfair and excessive decisions, the Department of Employment and Workplace Relations ‘chose to continue with the status quo’. By Rick Morton.

Exclusive: Government warned over ‘legal basis’ of welfare system

Employment and Workplace Relations Minister Amanda Rishworth.

Credit: AAP Image / Joel Carrett

Australia’s $6 billion system of outsourced employment services is on the brink of collapse due to policy, leadership and technology failures that new documents, obtained by The Saturday Paper, reveal were flagged years ago.

Senior officials at the Department of Employment and Workplace Relations and ministers were first made aware of the flaws when the Coalition created the Targeted Compliance Framework (TCF) in 2018.

There is also increasing evidence of subterfuge and coercion among private contractors who earn money by “compelling” welfare recipients into mutual obligation requirements.

A report commissioned from Deloitte last year, sat on by the federal government until late Thursday after it was obtained by The Saturday Paper, says the consultancy could not provide any assurances about the quality of the IT system that underpins the TCF.

It warned the system leaves people exposed to unjust and excessive processes.

The review determined there was no way to be sure of the link between the actual law and what the system was doing, and this was “overwhelmingly the significant root cause impacting the integrity, manageability, and operational effectiveness of the TCF”.

“The legal and factual basis for compliance action, particularly when initiated and administered by the IT system, cannot be readily documented or evidenced,” Deloitte says. “Decisions affecting individuals’ rights, including the withholding of income support, cannot be readily explained, justified or audited with reference to the relevant legislation, lawful delegation and supporting evidence.

“The current rules risk subjecting participants to unjust or excessive processes or obligations and degrade direct comparison to legislation and policy.

“The Review found that, overwhelmingly, the TCF’s operational delivery, including its underpinning IT system, does not demonstrably align with legislative and ministerial intent. Current practices risk generating ultra vires outcomes and increase risks associated with external scrutiny.”

Deloitte went further, in fact, and wrote that the department would be “significantly constrained” in trying to defend individual decisions made under the current system before a court, tribunal or indeed the Commonwealth Ombudsman.

“The current TCF model is structured around a punitive assumption of non-compliance, applies uniform escalation of compliance action irrespective of participant history or context, and lacks procedural protections or alternate pathways for vulnerable participants,” it says.

Earlier this month, the Commonwealth Ombudsman released the first in a series of excoriating reports examining the role of the Department of Employment and Workplace Relations (DEWR) in administering the TCF. It showed the department had failed to update its own processes and policies when the law changed to introduce more discretion for the secretary in deciding whether a welfare recipient’s payment should be cancelled for a “mutual obligation failure”.

The Saturday Paper first reported this story in November last year and the Ombudsman’s investigation now shows that the department didn’t bother to inform the Commonwealth Ombudsman of the issue until November 27, the day after it received questions from this publication about a leaked draft document prepared for Senate estimates but never released.

Despite the law change in April 2022, the department did not wish to update its processes and left the automated compliance system unchanged. This meant that some 964 welfare recipients had their payments “unlawfully” cancelled and another 45 had them terminated after DEWR Secretary Natalie James moved to belatedly pause the first practice and then realised there were also issues with cancellations under a different part of the Social Security (Administration) Act.

“It is unclear whether DEWR should have acted to pause cancellations in September 2023 when it first became aware there was risk that it was not exercising a lawful discretion to cancel a job seeker’s income support,” Commonwealth Ombudsman Iain Anderson wrote.

“However, we consider that once this risk assumed a high level of certainty following the provision to DEWR of draft advice in March 2024, DEWR was then armed with enough knowledge to act without delay and well before July 2024.

“Instead, against the interests of those affected, DEWR chose to continue the status quo. It appears DEWR chose to pass the risk of the consequences for cancellation decisions to job seekers rather than assuming the risk for itself.”

For years now welfare rights groups including the Antipoverty Centre, Economic Justice Australia and the Australian Council of Social Service have documented casual and systemic abuses that have been overlooked or deliberately encouraged by the federal government in order to prop up the financial viability of the employment service sector.

One way they do this is by giving private providers the keys to the compliance machine and having the “employment consultants” issue jobseekers with breaches for allegedly not attending appointments or failing to adhere to mutual obligations.

Jobseekers can earn some points by enrolling in courses run by subsidiaries of the private job provider and they can be penalised for saying no. Work for the Dole is no longer compulsory, but job providers often pretend it is. They get paid for placements.

None of these issues are new and they are well known to the federal government. All of this, and much more, is funded by taxpayers.

Despite these inherent design flaws, and the litany of bugs and errors now coming to light around payment cancellations, the DEWR’s Natalie James, and her minister, Amanda Rishworth, have declined to turn off or pause the suspension of welfare payments.

Rishworth declined to answer specific questions about the elaborate and ongoing system of payment suspensions, keeping her comments to The Saturday Paper to the issue of cancellations that are currently paused.

“I am reassured that the Department of Employment and Workplace Relations has accepted all seven of the recommendations in the [Ombudsman’s] report and will work with Services Australia to implement them. I expect the recommendations to be implemented in a timely manner,” she said.

“The government understands the importance of ensuring government systems operate correctly, particularly when interacting with vulnerable people.”

Advocacy groups have privately been told by both the department and ministerial offices that stopping payment suspensions would threaten the “financial viability” of the employment services sector.

Antipoverty Centre spokesperson Jay Coonan said the release of the Commonwealth Ombudsman’s report is “a significant moment for every person who has been subjected to compulsory activities while on a Centrelink payment”.

“Welfare recipients have been documenting the extreme harm caused by compulsory activities for years and consistently pushed for the government to stop harm by abolishing the cruel and infantilising rules they call ‘mutual’ obligations,” he said in a statement.

“It has never been more obvious that this must happen. Amid this scandal, outsourced employment services are still wielding payment suspensions as a weapon against welfare recipients, threatening and penalising people who can’t even afford to live.”

The Saturday Paper has obtained freedom of information documents that reveal the level of “error” in the payment suspension side of the system that remains in place while cancellations have been paused.

Between 2018-19 and 2022-23 there were 2687 instances in which a jobseeker had “accepted” a mutual obligation failure raised by an employment service provider despite having a reasonable excuse or not being subject to obligations at the time. These figures are for people already in the “penalty zone” of the compliance framework. The actual numbers across the system are much higher.

Across the employment services ecosystem there were more than two million instances of payment suspensions – sometimes multiple times for a single person – in the year to March 2025. In the most recent quarter, more than one third of those subject to the Targeted Compliance Framework had a payment suspension recorded, and for those in Workforce Australia Services, administered by private non-profit and for-profit providers, there were about 350,000 payment suspensions.

Almost three quarters of these suspensions were triggered by providers declaring a jobseeker had “missed” a scheduled appointment.

These scheduled appointments are a source of particular frustration for jobseekers, who often find they have been accused of failing to turn up for an appointment they were never told about or had not agreed to attend.

Take, for example, the case of a woman with a disability who had her payment suspended twice and then cancelled while fulfilling her mutual obligations in a program offered by the Commonwealth specifically for people setting up their own business.

WISE Employment, a non-profit charity that has government contracts worth hundreds of millions of dollars, used the power it was given by the Commonwealth to register demerits against the woman for apparently failing to turn up for her appointments.

According to emails obtained by The Saturday Paper, officials in the department were suspicious about the provider’s behaviour.

“Job seeker had an initial [appointment] scheduled for 24 November 2020 at midday, which was marked DNA [did not attend] at 12.01pm (as the job seeker was not compellable at the time of booking),” an official in the then Department of Education, Skills and Employment wrote while examining the case.

“Apparently the jsk [jobseeker] was notified by script at 12:03pm to attend the following day. It is not plausible that it took the provider just two minutes to record DNA, successfully contact the jsk, find a time for the following day, and issue the script notification and record that the job seeker agreed to attend.”

The WISE Employment consultant repeatedly noted they were unable to contact the jobseeker but also lodged two demerits against her, leading to payment suspensions, despite this being against policy.

“This comment explicitly states they are unable to contact the jobseeker, yet have confirmed the demerit (should only confirm demerit after discussing with jobseeker),” the department official wrote in an email.

“Reengagement was not set by the provider, which is more evidence they were not in contact when confirming the demerit. As no re-engagement was set the job seekers payment suspension was automatically lifted by the IT system.

“If this was a jobactive job seeker we would be removing the demerits.”

A spokesperson for the Department of Employment and Workplace Relations told The Saturday Paper both the DEWR and the Department of Social Services, which has carriage of Disability Employment Services, “closely monitor the performance and quality of providers, including through the review of participant records”.

“Where an issue with a provider’s behaviour/practices is raised through either the complaints mechanism (established in October 2024) or through assurance activities, this is raised directly with the provider,” the spokesperson said.

“Any suspensions or demerits resulting from such a misapplication are reversed and any money owing repaid to the jobseeker.”

Commonwealth Ombudsman Iain Anderson is not convinced these payment suspensions are being handled “fairly or reasonably” and took the unusual step of widening the scope of his investigation to now scrutinise the system itself and the government’s oversight of the private market of providers.

Even Deloitte, the accounting firm brought in to provide an “assurance” of the IT system that underpins the Targeted Compliance Framework, concedes the problem.

It cited research from the Australian Council of Social Service that shows “more than 85% of all compliance actions (demerit points, payment suspension or cancellation) were initiated by provider-led services”.

The Deloitte report notes that the fact private providers begin the majority of compliance actions shows “the level of discretion available to employment service providers in the application of compliance penalties but also the degree to which the TCF could be applied inconsistently between participants”.

“Consequently, the integrity of TCF outcomes relies heavily on accurate system design, robust and clearly documented governance, effective quality assurance, and alignment with legislative and policy intent,” the report says. “Any flaws or gaps in these foundational components introduce the risk of systemic failures, inappropriate compliance decisions, and adverse participant impacts.”

Despite this, Deloitte says the TCF is too important to discontinue and therefore must be the subject of “urgent, interim risk mitigations, tangible actions and strengthened assurance processes”.

“These measures are required to uphold the integrity of the framework while more substantive reforms are progressed to embed legal alignment, fairness, and responsiveness in its design and delivery,” it says.

“These changes, along with a series of longer-term recommendations for continued framework development and enhancement, are essential to re-establish the veracity of the TCF and restore public confidence in this important welfare system integrity measure.”

Greens spokesperson for social services Senator Penny Allman-Payne said in a statement that the federal government has learnt nothing from robodebt if it clings to this crumbling system.

“If Labor continues to allow welfare payment suspensions now, it shows they don’t really care about what happens to people on welfare, and they’ve learned nothing from robodebt,” she said.

“It is clear that the TCF is an expensive hangover from a conservative government which has been heartlessly prolonged by this Labor government for far too long.”

This article was first published in the print edition of The Saturday Paper on August 16, 2025 as "Exclusive: Government warned over ‘legal basis’ of welfare system".

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