Rest homes and unions are united in their call for Government to review the way pay equity is funded for the residential aged care sector. Many rest homes are struggling to stay afloat as they cope with the consequences of the pay equity settlement.

The settlement, which came into effect on July 1 this year, lifted caregivers’ pay rates, however government funding has not covered the cost of increased wages for many aged care providers.

Care Association New Zealand (CANZ) director Victoria Brown says as a result of the shortfall in funding, many providers have had to restructure and make a number of valuable staff redundant as they simply can’t afford to keep them.

Highly qualified and long-serving staff are among those to lose jobs as their Level 4 status under the pay equity legislation has seen a significant increase to their wages – an increase that has not been covered by pay equity funding for many providers. Some administrative staff have also lost jobs as providers attempt to save on costs.

However, union E tū says it will oppose any provider who uses a restructuring process as a wage reduction exercise rather than a genuine exercise in business viability.

E tū Assistant National Secretary John Ryall says restructuring occurred before the pay equity settlement and has continued to occur following the settlement.

New Zealand Aged Care Association (NZACA) chief executive Simon Wallace agrees that restructuring is “not new” for the sector, but he says pay equity has exacerbated problems for some.

“The sector has been historically underfunded and pay equity has brought issues to a head.”

Victoria Brown says shoe-string budgets have forced things like facility maintenance and upgrades down the priority list.

“And it won’t be long before it starts to impact on the quality of care. We’re in a perpetuating cycle of decline.”

Brown says while providers are “holding on” for the moment, they are “terrified” that things won’t change next year.

“We’re hoping for a miracle,” says Brown.

Struggling providers have been directed to their District Health Boards (DHBs), where they are required to complete a tool to ascertain whether they are eligible for transitional funding. The funding is intended to cover them up until June 30 next year.

Simon Wallace says in some cases even the transitional funding won’t cut it, and the NZACA is pushing for this funding to be extended for a second year.

Brown says providers are grateful for the transitional funding, although it isn’t a long-term fix.

“It’s a Band-aid solution but at least it is a solution and acknowledgment that they got the funding model wrong.”

Indeed the funding pay equity funding formula for the residential aged care sector has proved contentious due to revelations of some providers being significantly over-funded while others have faced a shortfall in funding. Both NZACA and CANZ are pushing for the formula to be reviewed as part of next year’s Age-Related Residential Care (ARRC) contract negotiations with DHBs.

The union has also lent its support for a review of how pay equity is funded, saying the funding for pay equity settlements needs to be “publicly transparent, justifiable and fair”.

“E tū has called for the Ministry of Health to convene a summit of aged care residential providers, funders and unions to discuss the funding formula for the pay equity settlement to see if it should be changed to offset the problems being experienced by small standalone providers,” says John Ryall.

Health Minister Dr David Clark, who has responsibility for aged care within his ministerial portfolio, says he is working with the sector on pay equity issues.

“I’m continuing to work with officials on this,” says Clark, “Looking after our vulnerable populations is a key driver for this Government. It’s also important to care for the workers who care for them.”

The Ministry has indicated that a solution might lie in the forthcoming review of the funding model for aged care providers. While the Health Minister has given the review the green light, it is still yet to get underway and it is likely to be years before providers see the result of any change.

For many rest homes, this will be too late.



  1. However, union E tū says it will oppose any provider who uses a restructuring process as a wage reduction exercise rather than a genuine exercise in business viability.

    What does this even mean?

    Has this man ever run a business or for that matter had a real job?

  2. this means that the restructuring by way of making experienced/highly workers redundant and hiring low skilled workers at the lower rates to do the same job, is not the solution, the government wants highly trained people to care for the aging population and has legislated for the funding, however the way the funding is calculated is apparently unfair the some providers in the residential care sector as its based on occupancy and it is a business of changing demand, however the same number of workers are employed on a weekly basis regardless of how many beds are filled therefore the business runs at a loss…
    other parts of the legislation are unfair to the suppoprt workers, for example travel reimbursement is 3.7k between clients, its meant to be a “swings and roundabouts” scenerio, but its the workers that pay the costs for inefficient rostering, and clients who live further out ie between 5 and 15 km the support workers are also expected to arrive at that far away place at the same time they leave the last… how that calculation was deemed to be fair is a mystery.


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