Union E tū has hit back at claims that the pay equity settlement for care and support workers in aged care will not be fully funded by the Government.

The union says that some media reports have stated that the funding shortfall will be as much as $250 million, which it claims is incorrect.

“The intention of the Government is to fully fund the direct costs of the settlement,” the union said in a statement released yesterday. “Employers will receive additional funding towards offsetting the additional costs imposed by the legislation.”

New Zealand Aged Care Association (NZACA) Chief Executive Simon Wallace says he agrees that the Government’s stated intention was to fully fund the pay equity settlement.

“But the reality is that this isn’t the case for around a quarter of our membership.”

Wallace says he hasn’t heard of a $250 million shortfall and is not sure where that figure came from. The NZACA’s stance hasn’t changed from its submission to the Select Committee on the underpinning legislation. The submission discussed a “new reality” for some providers following the settlement, which would see some post-operational losses, make staff redundant or even close.

It’s a similar response from the Home and Community Health Association. Chief Executive Julie Haggie says they have just learned, two days out from implementation, that pay equity will not be fully funded for this year or next for the home and community support services sector.

“It doesn’t surprise us, but it saddens us,” says Haggie. “It is going to be incredibly destabilising for our sector. How do we plan for the future?”

Haggie says many providers will be left with no choice but to restructure in order to meet the costs.

“The outcomes, if we don’t get funded, are going to be really bad for clients. We will definitely be challenging the Ministry on this,” she says.

However, E tū maintains that the legislation will protect providers. It points to the relevant clause in the legislation that states that a funder must pay an employer “additional amounts over and above the amounts required by the funding agreement towards offsetting the additional costs faced by the employer as a result of this Act”. The legislation says that in determining what constitutes an additional amount, the funder should take into account the increased wage costs, training costs and “any other matter that the funder considers appropriate”.

E tū says it has raised the concerns of smaller providers with the Ministry of Health and confirms the Ministry is working to ensure they are not jeopardised by the settlement.

Wallace confirms that over the course of July the Ministry will work to support those providers that might struggle with the wage increase.

“There is a process in place working with the Ministry to support those operators that are finding this tough.”

Wallace said members he spoke with yesterday in Auckland were reassured by this.

In another step taken by the Government to smooth the path for providers, funding has also been provided three months in advance to employers, with audits then carried out to ensure that the funding – particularly for smaller employers – is sufficient to meet the legislative commitments.

However, Victoria Brown of Care Association New Zealand (CANZ), which represents many smaller residential aged care providers, says that in spite of the advance payment, members are finding it “very daunting”.

“As the Ministry decided to pay on occupied beds and only pay for those that are on the ARRC contracts and not the others, there is just not enough money to pay the tab,” she says.

“We have been given a three-month advance payment, but this has been averaged as well over the last six months’ occupancy. I don’t think there is anyone in our membership who is comfortable with this.”

Brown says while the cash advance is helpful in the short term, it is the long term that concerns providers.

Brown says providers are fearful of what the DHBs will do to them if they find they can’t afford to pay their increased wages bills.

“There is a clause in our contract that talks about insolvency. Will this be regarded as insolvency? If so, will a provider have their agreement cancelled? The CANZ Executive is really concerned.”

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