Don't guarantee the service. Guarantee the staff.

In a very nice hotel in Cheshire last week, I was having a conversation with Caia Park Partnership — a fantastic charity in Wrexham.

They’re often struggling to keep staff, particularly youth workers. That wasn’t hugely surprising. The Government is now investing 1/6th of the money (in real terms) on youth clubs as it was 15 years ago, so wages and job opportunities have consistently seen little improvement, as local commissioners cut budgets. Though there was something interesting about the timing.

Youth workers were not leaving at the end of a contract, or in response to changes in the service, or other opportunities. They were leaving because there was no job security past the end of a commissioned contract. People with mortgages to pay, children to look after and lives to live, cannot afford to wait for a Local Government to make a decision on a contract renewal, so quite sensibly, they get other jobs before the service hits the cliff edge.

But the service did get renewed. The problem is, the staff have already left — forced away by the uncertainty. They can’t easily come back, and now the charity has to recruit and train new staff, and the commissioner expects young people to build new relationships with trusted adults: one of the most protective factors for a vulnerable child. As well as damaging relationships, this is obviously a terrible use of public funds, and for the Local Council, an entirely self-inflicted error. Exactly the same scenario plays out across the country, and not just for youth work, but for domestic violence support, mental health provision, and all kinds of other services delivered locally.

How do we solve it?

Most ideas for solutions focus on educating commissioners on the damage this is doing. But while it may be overly generous, I think most commissioners know full well. Some feel their hands feel tied, primarily by procurement. Many are actively fighting for stability, and some are winning.

Some commissioners have shifted to multi-year SLAs and actively defend renewals against budget pressure — Acton Community Council, Wrexham CBC and funders like the Steve Morgan Foundation are examples from Caia Park's own experience. But even where multi-year contracts exist, renewal decisions tend to land far too close to expiry. Staff retention pressure is a function of the gap between 'will it be renewed?' and 'when does the current contract end?' — not just contract length itself.

So we might need to try things that aren't reliant on waiting for changes in commissioning teams.

This is where philanthropy could come in. And to address the immediate objection: not for bridge funding. As soon as you talk about private philanthropy for publicly funded services, you need to think of the incentives. Any model that uses donations to fund services at risk of government cuts risks encouraging the austerity you’re trying to protect against.

But here’s a different idea for philanthropists: don’t guarantee the service, guarantee the staff.

The idea is fairly simple: a funder commits to pay the gardening leave of all the staff on a commissioned contract if it is not renewed. Say, 3 months. Crucially, the service still ends. The commissioner still faces the consequences of closing something valuable in the community. Explicitly, the philanthropic funder is paying for these workers to be able to sit around on their sofa all day and not work.

It sounds a little absurd, but this guarantees staff income. In the worst case scenario, the contract is not renewed, and everyone gets an extra 3 months to look for a new job full time, during which time, they are still getting full pay. It means no one is forced to leave early because of the uncertainty.

How it would work:

An individual charity would struggle to make this commitment. Agreeing to pay everyone hired on a 1 or 2 year contract for an additional 3 months, at a time when funding has just been lost because of the end of a contract, is incredibly financially challenging at a time when ~40% of charities are operating at breakeven or at negative margin. Reserves ought to be in place to provide this buffer, but after many years of contracts not being uprated for inflation, this has been extremely difficult. So the funding probably does need to be sourced from elsewhere.

But, this model is also much more efficient. It is essentially providing an insurance function. By spreading the risk across many individual services, the same amount of money held back to pay for this eventuality can go much further. This could be constructed so that this applies to services that will renew most of the time, e.g. those that have already been renewed previously, where the charity can demonstrate clear value. It could be structured as similar to a grant funding round, where you apply for “protection” for your existing commissioned service, and is then evaluated in the normal way by a grantmaker’s decision making process. Depending on the cancellation rate, you can therefore protect many more individual workers than each charity doing it individually.

For a £250k fund, and a £30,000 salary average:/

The other possibility is that the contract is renewed, but late. This is unfortunately extremely common. Having the team on gardening leave, rather than already gone into new jobs gives the possibility that they could restart when the contract lands. It also means the charity can have longer to try and search for alternative sources of funding, whether that’s an NHS contract instead of Local Authority, or from a grant funder separately. If this happened, some portion of the fund could be paid back to the pool, ready to be used elsewhere.

The wrinkles:

This idea definitely needs a test before anyone fully commits. There’s a lot of wrinkles that would need to be ironed out.

Firstly, TUPE (Transfer of Undertakings (Protection of Employment) Regulations). Simplified, when a contract is renewed, but the provider changes, people employed under the contract keep their employment and move organisations. This situation would need to be excluded from the funding arrangement, and the payment to be limited to entire cancellations of a service, though employees would still benefit from the peace of mind before the contract renewal. Overall, this significantly reduces the likely “cancellation rate”, as many contracts that look like they’ve ended in the stats, have actually moved provider.

Secondly, insolvency. The whole point of this proposal is that charities are running on thin margins, and are in an environment where building up reserves is extremely difficult. So in many cases, the end of a service contract may put a providing charity into insolvency. There may not be any employing infrastructure left to pay the gardening leave. The fund would have be constructed so that the gardening leave payments are ringfenced, or have the option to be routed through an anchor employer, perhaps through local infrastructure.

And then one more legal issue: redundancy. Statutory redundancy pay is owed independently of notice — anyone with two or more years of service is entitled to it whether or not the fund extends their pay, and the liability sits with the employing charity, not the fund. That means the scheme doesn't substitute for redundancy, it would have to sit on top of it.

Finally, like any insurance-like situation, there’s clearly an uncertainty as to how much this would cost. Any fund would have to set aside an amount, have an expectation of how much would be claimed, and be prepared for a much larger sum. This could be mitigated by protecting contracts in a diverse set of areas —so that local government section 114 notices are not catastrophic to the fund, and themes — so that changes in overall Government policy aren’t too damaging. However, it would still definitely be better suited to a philanthropist with a solid stomach for risk, or with an actuary on staff.

Possibly the biggest barrier would just be the weirdness of the funding. The positive social impact is made by the commitment to fund something. The actual thing you fund is deliberately not useful (the option for people to sit at home doing nothing), but the recent memories of the furlough scheme might mean it’s more understandable.

What would success look like?

The key measure would be: does reduced income uncertainty increase staff retention in the run-up to the potential end of a commissioned contract?

There will always be other reasons people leave jobs, whether that’s for better pay or a change in role, but if people are frequently leaving because of contracting uncertainty, we should see some evidence of change. Crucially, staff need to be extremely informed of what this protection means, as its the awareness of its existence that is the only mechanism for having any effect.

In terms of measurement, it’s unlikely a pilot will be large enough to have real statistical power to distinguish based purely on staff retention rates in the preceding months, so the evaluation would have to be mostly qualitative: interviews and surveys, rather than being able to run a full measured randomised controlled trial.

Who could fund this?

It can’t be a local funder: it would be too exposed to changes in politics or budgets of particular local authorities. It can’t be a thematic funder either, for the same reason. In all likelihood, this would be a pooled fund of risk-taking philanthropists with an understanding of local service delivery charities, probably with some background in finance or insurance, who are willing to look a little eccentric.

If that pool does come together, at Plinth we would be very keen to help identifying eligible services, tracking contract risk, communicating the guarantee clearly to staff, and measuring whether it actually improves retention. We’re extremely happy to look a little eccentric.