BACKGROUND: Although the Individual Placement and Support (IPS) approach to supported employment has been shown to be more effective than other approaches, it is not clear whether IPS is financially viable within a blended funding system.

OBJECTIVE: This study aimed to compare the financial viability of two approaches (pre-IPS and IPS enhanced) to supported employment for people with mental illnesses in a context where fee for service funding is blended with results based funding.

METHODS: An Australian disability employment service at three locations on the central coast of New South Wales (n = 107) assessed their pre-IPS service results over an 18 month period in terms of job commencements and the attainment of 13 and 26 week employment milestones. Services were then enhanced with IPS practices and a new cohort (n = 68) was tracked for the same outcome variables over the same time period. Both results were compared to the national cohort of disability employment service participants with the same primary psychological or psychiatric disability type (n = 15,496).

RESULTS: Supported employment services enhanced by IPS practices achieved significantly more job commencements (67.6%) than pre-IPS services (56.1%) and the national average for DES providers (39.9%). IPS enhancements were most cost effective per person and per 26 week employment milestone, for those with greater assistance needs.

CONCLUSIONS: IPS enhanced employment services were most financially beneficial when applied to participants with more severe psychiatric disabilities. Providers assisting people with psychological or psychiatric disabilities could benefit from developing a capability to deliver more intensive evidence-based practices such as IPS. The financial advantage of IPS enhancements increases with both the extent of clients’ assistance needs and with the funding system’s emphasis on results-based funding.