Reforms in aged care: 15% wage increase and new provider responsibilities

We are seeing significant changes occurring in the aged care sector as the government acts to fulfil election promises to address the findings of the Royal Commission into Aged Care Quality and Safety, and the aged care work value case progresses through the Fair Work Commission.

In this article:

• The aged care industry work value case
• Next steps
• Federal legislation reform: Royal Commission Response Act
• Federal legislation reform: Code of Conduct
• Federal legislation reform: Care Reform Bill

The aged care industry work value case

On 4 November 2022, the Fair Work Commission Full Bench handed down an interim decision in the aged care work value case, deciding that nurses, personal care workers, assistants in nursing and home care workers should receive a 15% pay rise.

Prior to the election Prime Minister Anthony Albanese committed to funding the outcome of the aged care work value case and supporting any arbitrated higher wages.

The Commonwealth is expected to make submissions, alongside employer organisations, addressing how this increase should be timed and implemented in accordance with funding availability.

What is a work value case?

A work value case is a consideration by a Fair Work Commission Full Bench to vary minimum wages in a modern award, where the variation can be justified on the basis of "work value reasons".

"Work value reasons" are reasons justifying the amount that employees should be paid for doing a particular kind of work, being reasons related to any of the following:

• the nature of the work performed
• the level of skill or responsibility involved in doing the work; or
• the conditions under which the work is done

Why is a work value case being heard in the aged care industry?

The Royal Commission into Aged Care Quality and Safety made several key findings about the workforce in the aged care sector.

These findings included that:

• there are currently not enough workers in the industry to be able to provide high quality person-centred care
• workers do not receive adequate education and training
• the sector must focus on career development and progression to increase the quality of care; and
• there is an identified gap between remuneration of workers in aged care compared to those performing similar work in other sectors

A major recommendation of the final report was that employee organisations entitled to represent workers in the aged care sector should collaborate with the Commonwealth Government to apply to vary wage rates to reflect the work value of aged care employees.¹

In 2021 applications were lodged to the Fair Work Commission by the Health Services Union (HSU) and its members, the Australian Nursing and Midwifery Federation (ANMF) and the United Workers Union (UWU) (known together as the collective organisations) to vary the minimum wage rates and classification structures of the Aged Care Award, Nurses Award and Social, Community, Home Care and Disability Services Industry Award.²

What was submitted to the Fair Work Commission?

Employee representatives submissions

The collective organisations are seeking an increase in pay for workers in the aged care sector.

Specifically, the collective organisations seek:

• variation of the Aged Care Award to increase remuneration by 25%, and changes to Schedule B classification definitions seeking to clarify potential ambiguity
• variation of the Nurses Award to insert a new Schedule F to provide a classification structure specifically related to those engaged in the provision of services for aged persons, and increasing remuneration for that staff group by 25%; and
• variation of the Social, Community, Home Care and Disability Services Industry Award to insert specific reference to home aged care employees in the definitions, and provide a relevant minimum wage structure at Clause 17A

The collective organisations made extensive submissions seeking to demonstrate the necessity of the changes to achieve the modern award objectives to provide a safety net of fair and relevant minimum wages, given a historical undervaluation of the work performed by workers in the sector.

Employer representatives and aged care industry submissions

A joint submission was made by Aged & Community Services Australia, Leading Age Services Australia and Australian Business Industrial representing employers in the industry.

These submissions agree that significant changes to the standards within the industry in recent years has altered the work of registered murses, care workers and chefs or cooks. However, the employer organisations did not put forward a recommended wage increase, as it is their position that the issue of remuneration can only be addressed by changes in government policy to provide the funding.

The Commonwealth submissions

The Commonwealth made submissions on 8 August 2022, confirming its position to support pay increases for aged care workers and to recognise the importance of the recommendations arising from the Royal Commission.

Generally, the Commonwealth endorses the collective organisations' position that more stringent regulatory demands have "...increased the expectations of the workforce to have the skills and attributes to deliver a higher standard of quality and safe care while also placing additional administrative requirements on many workers."

The Commonwealth made this submission in relation to registered and enrolled nurses, personal care workers, and ancillary workers such as cooks, cleaners and administration workers.

The Commonwealth also agreed with the collective organisations that "the undervaluation of caring work in the aged care sector has, in part, been driven by gender-based assumptions about the work value of that work" and that "this contributes to the work value of aged care workers being significantly higher than the modern awards currently reflect".

Interim decision of the Full Bench

The Full Bench concluded hearing submissions early September 2022.

On Friday 4 November 2022, the Full Bench made an interim decision to increase wage rates of "direct care" aged care workers by 15%.

Direct care workers include registered nurses, enrolled nurses, assistants in nursing, personal care workers and health care workers, in both residential and in-home aged care.

The Full Bench accepted several propositions put forward to it by the parties and various expert witnesses, most notably:

• that feminised industries, such as aged care, are undervalued, as the valuation of work is influenced by social expectations and gender-biased assumptions
• there are constraints in historical wage fixing principles which have created barriers to the proper assessment of work value in female-dominated industries and occupations
• the work undertaken by direct care workers has changed significantly in the past two decades, with the needs of those being cared for having significantly increased in terms of clinical complexity, and cognitive and mental health
• the minimum rates do not properly compensate direct care workers for the value of the work they perform; and
• with respect to support and administrative employees, further work is needed to arrive at a determination

The Full Bench made it clear that the 15% does not exhaust its consideration of the Union's claim for a 25% increase either for direct workers or for other employees in the industry; it is merely an interim measure.

The Full Bench has also advised that there are several complex issues which require further submissions, and accordingly their decision will be made in three separate stages.

Next steps

This interim decision constitutes Stage 1 and ensures the 15% increase for direct workers can move to implementation without delay.

In Stage 2, the parties will have the opportunity to make submissions and address evidence in relation to timing and phasing in of the 15% wage rise.

In Stage 3, the Full Bench will determine if there are any justifiable wage increases for support workers not dealt with by Stage 1 (such as administration workers, cooks, and cleaners), and if there are any further wage adjustments that are justified for direct care employees.

Importantly, Stage 3 will also include a more detailed consideration of the classification definitions and structures of the relevant Awards, again including further submissions from any additional parties.

Given the funding arrangements in the aged care sector, the employer organisations and the Commonwealth sought an opportunity to make further submissions regarding the timing of the 15% wage increase, which will be submitted as part of Stage 2.

For now, employers in the sector are not required to take any action but should start to consider how this change will be factored into business planning.

If you are operating under an enterprise agreement, we recommend proactively reviewing the wage rates provided for in your agreement and seeking further advice where necessary.

The Full Bench is expected to issue directions in relation to Stage 2 on 22 November 2022.

Lander & Rogers will continue to keep abreast of the case as further submissions and progressions are made.

Federal legislation reform

Two new pieces of legislation were introduced almost immediately on Prime Minister Albanese taking power, signalling significant reforms for the aged care sector.

Royal Commission Response Act

The Royal Commission into Aged Care Quality and Safety was established on 8 October 2018 in response to instances of poor care and concerns for the safety of Australians receiving aged care services.

The final report titled Care, Dignity and Respect was presented to Parliament on 1 March 2021 and made 148 wide-ranging recommendations for the fundamental reform of the aged care system.

The Aged Care and Other Legislation Amendment (Royal Commission Response) Act 2022 (Royal Commission Response Act) was assented to on 5 August 2022.

Most notably, the Royal Commission Response Act:

• provides the legislative framework for a new funding model from 1 October 2022
• creates a Star Rating System will which see the Department of Health and Aged Care publish a comparison rating for all residential aged care services by the end of 2022
• extends the Serious Incident Response Scheme which currently applies in residential aged care, to all providers of home care from 1 December 2022; and
• introduces a new Code of Conduct applying to approved providers, their workforce, and governing persons, also effective from 1 December 2022

Code of Conduct

From 1 December 2022, a Code of Conduct for Aged Care (Code) will be introduced to improve the safety, health, wellbeing, and quality of life for people receiving aged care, and to boost trust in services.

The Code is largely based on the existing disability sector Code of Conduct, and will include a requirement to provide care in a safe and competent manner, free from all forms of violence, discrimination, exploitation, neglect, abuse and sexual misconduct.

The Code sets out behavioural expectations for individuals working in aged care, and expectations related to training, policies, and procedures of providers. Employers will be required to take reasonable steps to ensure their workforce and governing body comply with provisions of the Code.

The Aged Care Quality and Safety Commission will be responsible for enforcement of the Code and will have access to a range of compliance and enforcement actions to respond to varying situations - including up to banning workers, and sanctions or revocation of provider status.

We encourage employers to prepare for 1 December by familiarising themselves with the exposure draft of the Code released by the Department of Health, and the accompanying draft guidance for aged care workers and governing persons provided by the Commission.

Care Reform Bill

The Aged Care Amendment (Implementing Care Reform) Bill 2022 has passed debate in both Houses and when assented to will make three key changes to the Aged Care Act 1997.

Registered nurses on duty 24/7

Most notably, Schedule 1 of the Bill establishes a responsibility for providers of residential aged care and certain kinds of flexible care, to ensure that a qualified registered nurse is on site and on duty in every facility, 24 hours a day seven days a week, from 1 July 2023.

The purpose of this new obligation is to complement the existing provider responsibilities contained in the Quality of Care Principles 2014 to maintain an adequate number of appropriately skilled staff to ensure care needs of residents are always met when needed.

The proposed changes will also increase minimum care requirements resulting in residents receiving an average of 200 minutes total daily care, including 40 minutes with a registered nurse, from October 2023.

Capped home care charges

The provisions in Schedule 2 of the Bill increase home care consumer transparency and ensure the direct needs of care recipients are met.

The new legislation introduces a power enabling the Government to cap the charges that providers of home care services may charge care recipients for administration and management fees.

Transparency of information

Schedule 3 of the Bill introduces a mandatory requirement for the Secretary of the Department of Health and Aged Care to publish certain information relating to aged care services. The measure seeks to help consumers understand key details of a provider's operations and empower them to make informed care choices.

Lander & Rogers will provide further updates as the legislation progresses.

¹ Recommendation 84: Increases in award wages.

² AM2020/99, AM2021/63, AM2021/65.

Photo by Katarzyna Bialasiewicz on Getty Images.