Aged care providers ‘gaming’ funding with threats to withhold wages: union

Aged care providers operating in Australia have been accused of “gaming” federal funding models by threatening to withhold wage increases for their staff, after the Fair Work Commission (FWC) ruled aged care workers should receive a 15% pay rise from July this year. 

Australian Nursing and Midwifery Federation federal secretary Annie Butler has called on the government to legislate a mechanism forcing providers to pass on the increase in full, after the union’s members reported pushback from a “majority” of providers.

“Unfortunately we are concerned that it’s going to be more along the lines of a majority rather than a minority who won’t pass them on because of the indications they made in the Fair Work Commission hearing on February 13,” Butler told Crikey. 

“The providers’ lawyers claim they have a legal right to absorb the funds.”

In November last year, the FWC announced its decision to authorise an interim 15% pay rise for “historically undervalued” aged care workers, after a royal commission found low pay was a driver of worker shortages. The interim increase fell short of the 25% unions were asking for.

In December, the government announced it would phase in the increase over two years, citing budget restraints for the delay. The first 10% would come in 2023 and the additional 5% in 2024. 

That decision was eventually overruled by the FWC earlier this month, when it ordered the increase be passed on to workers in full. Butler said early signs of resistance from providers to pass on the increase should prompt government intervention. 

“I’ve spoken to the minister, and we know the government intends for the additional funding to be for wage increases. But unless there’s a mechanism that absolutely locks that funding down and guarantees it, we know it won’t happen,” she said. 

“Because several times when governments have tried before, increased funding has never reached the aged care workers themselves.”

The wage increase is estimated to cost about $1.9 billion a year. The government, following its December proposal, has only budgeted two-thirds of the wage increase, exposing providers to early concerns they will be left to foot the bill for the remaining third, which could cost an estimated $575 million. 

Fears of added costs for the sector come as many providers struggled to keep the lights on. The government’s financial snapshot for the aged care sector for the September quarter of 2022 showed 66% of private providers were operating at a loss, losing $28 a resident daily. 

With just 34% of private homes operating in the black, Aged and Community Care Providers Association CEO Tom Symondson called on the government to urgently fund the wage increase in full.

“We have publicly supported the need for significant pay rises for our workforce, and fully supported the government’s 2022 election commitment to fully fund them. However, this must not be at the costs of our sector’s ability to deliver care to older Australians,” Symondson said in a statement last week.

“We continue to engage with the government to find a workable solution.”

Until budgetary commitments are revealed in May, Butler said she would continue to urge the government to mandate providers pass on the increase in full.

“[The mechanism] should be they have to demonstrate through audited reports that the funding they gain is passed on as wage increases as a condition of ongoing subsidy. That’s what we’ll be seeking, rather than just a voluntary reporting approach,” she said. 

Aged Care Minister Anika Wells couldn’t be drawn on the progress of discussions between the government and representatives from across the sector. 

A government spokesperson told Crikey that such a mechanism was being discussed, but a decision on how the wage increase would reach workers would be announced in the “near future”.