While aged care providers are pleased that the Pay Equity Settlement has helped lift the wages of their staff, many are finding that the settlement is having a detrimental effect on their businesses.
In a report by Ansell Strategic, more than half of respondents reported a negative impact on their financial viability.
The report’s analysis of rest homes’ financial results found that, on average, facilities have experienced a decline in earnings.
The analysis shows that all types of providers, both large and small, corporate and not-for-profit, have experienced a decline in earnings. Not-for-profit operators as well as homes providing higher levels of dementia specific services have been most affected financially.
For some facilities, the introduction of the pay equity legislation has been the last straw. Among them was Taranaki facility Mission Rest Home, which closed earlier this year, citing pay equity and low occupancy as the key reasons for closure.
“Our staff deserve pay increases, but the reality is that the funding received, along with our occupancy, is not sufficient to make ends meet and we are not prepared to compromise our quality of care,” general manager Kim Poynter said at the time.
And other facilities could find themselves in a similar situation if things are not addressed.
Despite the Ministry of Health raising the contract prices for aged residential care services, rest homes are still struggling to make ends meet, thanks to the combination of the Pay Equity Settlement and escalating operating costs.
“With minimum wages forecasted to grow an average of five per cent per annum over the next three years and the settlement likely to drive an indirect rise in wages for other facility staff, the current funding arrangement for the sector is considered unsustainable,” reads the report.
The funding model review for the sector, which is now well underway, can’t come soon enough for the sector.
“The survey analysis has found that the current funding model does not support a sustainable aged care sector. The recent Pay Equity Settlement has further exacerbated this position,” says the report.
“It is imperative to the sustainability of the sector that a new funding system which offsets the impact of the Pay Equity Settlement on providers’ commercial viabilities is introduced in the near future.
“It is essential that the model is flexible, encourages innovation and development as well as ensures that older Kiwis have equal access to care and accommodation regardless of their location, background, socio-economic level, ethnicity or disability.”
The Ansell Strategic report is titled ‘Effects of the Pay Equity Settlement’ and is based on the responses of 68 operators, providing information on 321 homes and almost 23,000 beds across New Zealand.This represents approximately 60 per cent of all aged residential care places across New Zealand as at 31 December 2017.