Aged care providers back delaying pay rises

The Financial Review, 13 May 2024

Aged care employers have backed the Albanese government’s proposal to stagger pay rises over two years due to fear of closures if the sector is forced to pay unfunded increases, clashing with unions who are demanding the full rise by July 1.

Treasurer Jim Chalmers has promised a multibillion-dollar funding allocation in this week’s budget for the aged care pay rise, as well as a yet-to-be-determined wage increase for childhood educators as part of their multi-employer bargaining.

However, the full hit to the budget could depend on whether the Fair Work Commission decides to grant the aged care increase in full by June 30 or phase it in over 18 months, as proposed by the government.

The Aged and Community Care Providers Association (ACCPA) has said that while it was disappointed with the government’s phase-in proposal, employers were “commercially compelled” to support the timeline to ensure the viability of the sector.

“If the operative date is not aligned to the additional Commonwealth funding, aged care employers throughout the sector will be forced to consider reducing placement offers for residents and clients, redundancies due to the inability of the employers to operate, or total business closure due to the inability to sustain the wage increases absent funding,” its submission filed late on Friday said.

The ACCPA has also said providers would struggle to complete all necessary pricing and financial analysis by July 1, given the wage increases varied across classifications.

Government wants January start

The FWC in March determined that direct carers should get further pay rises of 2 per cent to 13.5 per cent, on top of an interim 15 per cent increase last year, due to the gendered undervaluation of pay. Indirect carers, such as cooks and laundry workers, should get a 7 per cent increase.

But the government wants the increases to be delayed until January and phased in fully by January 2026 due to concerns a large pay jump could fuel labour shortages by attracting workers from other sectors.

The Health Services Union’s submission said such concerns were “entirely speculative and unsupported by evidence”.

“This problem (if it exists) is not appropriately addressed by maintaining the undervaluation of the work of aged care employees for any longer than is necessary,” the union told the commission.

“The attraction and retention problems encountered in the sector favour the … increases commencing as soon as possible.”

Aged care consultancy Stewart Brown has roughly estimated the funding needed for the aged care pay rise over the forward estimates would be about $4.8 billion, or $1.2 billion a year.

However, the total aged care bill could surpass $11 billion if the commission also hands down a predicted 10 per cent pay rise for enrolled and registered nurses in the sector – a matter to be determined in the coming months.

Stewart Brown principal Grant Corderoy estimated such an increase would add another $1.6 billion a year to the budget for aged care.

‘Inflationary aspect’

While stressing the sector needed the increase to attract new workers, he said there was some merit in phasing it in.

“The government has to take a holistic view and would be very concerned this could have an inflationary aspect because, of course, other community services like disability, childcare, even education, could quite rightly demand the same,” Mr Corderoy said.

The Australian Nursing and Midwifery Federation (ANMF) has written to the government to request it “immediately rectify” any exclusion of nursing wage rises in spending proposals to cabinet.

But the government has told the union it is going to wait until after the commission delivers its decision.

The ANMF said in its submission it presumes the government “will act responsibly with appropriate haste to reformulate its funding position once the commission has indicated the scope of wage increases for enrolled nurses and registered nurses in aged care”.

As for direct carers, the union backed an immediate increase by June 30, saying aged care workers had been “subsiding the profit margins of their employers, the Commonwealth budget and the taxpayer for some time now”.

“This situation should not be permitted to continue … it is time to finish what was started,” its submission said.

United Workers Union director Carolyn Smith said the budget funding for early childhood educators would be “a key moment” in the government’s response to the union’s claim for a 25 per cent increase as part of multi-employer bargaining.

“We’re certainly confident it will be a significant increase,” she said. “I think it has to be because the loss of educators is so significant. We’re really seeing rooms closed in centres and the government has really struggled to roll out its promises due to workforce shortages.”

The government will also have to factor in the ACTU’s claim for a 9 per cent increase in this year’s minimum wage for female-dominated sectors based on FWC’s gender equity objective introduced by Labor in 2022.

Mr Chalmers has said the full cost of the wage increases for childcare will be reconciled after the budget.