Third sector organizations (TSOs) have emerged as key players in the delivery of public services to assist jobless people to improve their employability and move from welfare to work. Drawing on in-depth research with employability providers in Scotland, this article explores how TSOs have responded to the challenges of a rapidly changing public services environment. Specifically, we use the concept of the ‘New Public Governance’ to explore TSOs' relationships with UK, devolved and local government stakeholders. TSOs demonstrated a pragmatic approach to shaping their services to reflect the priorities of public funders, and identified some opportunities arising from the new emphasis on ‘localism’. However, the evidence suggests that opportunities for collaboration at times remained constrained by certain forms of ‘contractualism’ and top-down performance management. Based on the evidence, lessons for future policy and practice are considered.