Aged care pay rise delayed due to Labor funding decision

The Financial Review, 1 July 2024

Pay rises for 250,000 aged care workers of up to 14 per cent have been delayed until next year, giving the federal government a break over what will likely cost up to $5 billion extra in funding.

The Fair Work Commission rejected the government’s proposal to stagger the pay rise of between 2 per cent and 13.5 per cent over 18 months to 2026. But faced with uncertainty over short-term government funding, it agreed to phase in the increase in two tranches – half on January 1 and the rest on October 1, 2025.

A further 80,000 indirect carers, including cooks and cleaners, will receive their full 7 per cent increase from 2025.

The pay rise, which addresses the historic undervaluation of women’s work in the sector, followed a 15 per cent interim increase last year.

The delay means aged care centres will be subject to minimum staffing requirements, coming into effect in October, before the full increases are passed on.

Health unions, which had wanted the full increase from July 1, warned that the sector was still in an “attraction and retention crisis” even as they welcomed the commission rejecting the government’s longer timeline.

“The commission’s decision to bring the introduction of the increase forward three months faster than the government wanted is a welcome improvement,” Health Services Union national president Gerard Hayes said.

“But the government should not have to be dragged to this position.

“The attraction and retention crisis in aged care is with us now and there’s no sense in delaying wage justice for a workforce that strives so hard for such modest reward.”

Aged and Community Care Providers Association policy general manager Roald Versteeg said, “pay rises have played and will continue to play an important part in attracting and retaining workers, in the face of critical shortages across the aged care sector”.

While acknowledging worker disappointment and employer “frustration” at the delay, he said “the commission’s decision reflects that submission by the government”.

The government has not allocated a specific amount for the wage rise, to be funded from a $60 billion contingency reserve and estimated to cost $4.8 billion over the next four years. However, it told the commission it had budgeted funding from January 1 next year and January 1, 2026.

The full bench, headed by president Justice Adam Hatcher, said the commission was not prepared to fast-track the increase on the assumption that the government’s 2024-25 funding would change, “having regard to the likely consequences for employers if no further funding is provided in response to any decision we make”.

“In respect of the second tranche of increases for direct care workers and home care workers, on the basis that this will occur in the 2025-26 financial year, we give less weight to the Commonwealth’s decision concerning the timing of funding,” it said.

“The Commonwealth will be in a position to make a further decision about funding the second tranche of increases having regard to this decision when it prepares the 2025-26 federal budget.”

Unions had argued that delaying the increases would put workers under pressure from cost-of-living increases.

However, the bench said this year’s minimum wage increase should maintain the real value of their wages until they get the increase.

A government spokesman welcomed the decision and said that “now the operative date and phasing has been determined, the government will work to finalise the implementation of these wage increases”.

It previously committed $11.3 billion to fund last year’s 15 per cent interim increase.

United Workers Union aged care director Carolyn Smith argued that to continue to attract workers while they await the full increase, aged care employers should offer more full-time work and longer hours “so people don’t have to work for two providers to get a full-time job”.

“The FWC and the government have done the heavy lifting in terms of wage increases. It’s time for employers to show up as well and look at some of the ways they employ people,” she said.