Payment by Outcomes Mechanisms

What is a payment by outcome mechanism?

Payment by Outcome (or PBO) mechanisms are an innovative way for governments to work with the private sector to solve complex social problems (eg reduced incarceration, unemployment, or homelessness).

In a PBO model, the government does not dictate how the service provider should carry out their work to achieve the agreed outcomes; they leave the design of the service delivery model up to the provider, relying on a demonstrated track record of success.

The focus is on supporting long-term outcomes, rather than activities and incremental progress. 

Why is a PBO important for social enterprise?

Jobs-focused social enterprises, otherwise known as work-integrated social enterprises (or WISE) are playing an increasingly important role in addressing complex barriers to employment. WISE experience significantly better employment outcomes, with success rates of 80% to 52 weeks and beyond.

This is because WISEs provide the training and wrap-around supports (eg workplace capacity building, flexible work environments, social support structures and career support) that are essential to success in day-to-day operations.

An outcomes payment structure which incentivises long-term employment will fund these additional costs and help to create impact at scale.