Pay rise procrastination mounts pressure on providers

One month after the Fair Work Commission announced an additional pay rise for aged care employees, the Federal Government has confirmed it will fully fund the increase… but not until 2025 and in two separate stages.

The news is a blow for unions and employers who are in desperate need of a stronger workforce but are once again faced with a staggered pay rise rollout. 

Key points

• The Fair Work Commission (FWC) announced that direct care workers would receive up to an additional 13.5% pay boost on top of the previously introduced 15% increase
• Indirect care workers were not as fortunate, with a maximum increase of 7% awarded to only a select cohort
• After providing no immediate response to the FWC’s announcement, the Government officially submitted its response to the Stage 3 Aged Care Work Value Case last Friday
• They strongly support the wage increase and are committed to funding them, however, also believe that phasing in the wage increases would be appropriate as a sudden jump could result in labour shortages for other sectors

The Health Services Union (HSU) spearheaded the Work Value Case and is among the first to have critically responded to the Government’s announcement. HSU National President Gerard Hayes told the Australian Financial Review that the decision means aged care workers will have waited six years for their full pay rise after the Work Value Case began in 2020.

“We’re not talking about getting a few more people into the sector – we’re talking about stopping the hemorrhaging of people leaving,” Mr Hayes said.

“A phasing program will maintain more pressure on the sector as opposed to what’s really needed – to attract and retain.”

The Government’s FWC submission outlines its funding rollout as follows:

• Indirect care workers eligible for a pay rise will receive it in full from January 1, 2025
• Direct care workers will receive an increase corresponding to 50% of their relevant Stage 3 wage increase (including on-costs) from January 1, 2025 
• The remaining 50% will be provided from January 2026 and also includes funding for any associated on-costs

The Government also said it is satisfied that granting the wage increases in alignment with two phases of funding commitments would ensure there is a non-material impact on business and employer costs. 

It also acknowledged that given the size of the proposed increases varies between different award classifications it is difficult to calculate and apply a standard indexation as it normally would. 

“It is necessary to ensure that increased funding is distributed accurately and that there are appropriate accountability mechanisms in relation to the expenditure of additional funding, which takes time given the diversity of aged care program arrangements,” their submission read.

Additionally, a funding implementation date of January 1, 2025 means they can correctly calculate and apply increases as per pricing advice from the Independent Health and Aged Care Pricing Authority (IHACPA) while also making necessary program and technology changes. 

Importantly, after navigating through much preamble, the Government cites a competitive labour market and workforce shortages as a major cause for concern. Rather than introducing the full funding commitment in eight months, it wants to protect multiple sectors.

It highlighted that job vacancies in the Health Care and Social Assistance Industry in February 2024 were around 118% higher than in February 2020, compared to the rest of the economy which was 49% higher and has started to soften. 

“In this context, the Commonwealth considers it prudent to adopt a phased approach to the funding of large one-off wage increases, particularly where large wage increases may draw workers from other sectors of the economy that also face employment shortages,” their submission stated.

The fact direct care workers received a 15% increase “relatively recently” was also noted.

Registered Nurses (ENs) and Enrolled Nurses (ENs) will also have to wait as the Government said it will not finalise the classification structure and pay rates for aged care RNs and ENs  until the Australian Nursing and Midwifery Federation’s Nurses Award Work Value Case is finalised. 

The Government’s full submission, and all information relevant to the Work Value Case, is available on the Fair Work Commission’s website.