As more than 100 rest homes face financial strife in the wake of the Government’s pay equity care and support worker deal, Newsroom reveals another blunder in the Ministry of Health’s funding decisions

For one family-owned South Island rest home, the Government’s decision to fund higher care and support worker wages on a per-resident basis left it $23,600 short a year.

Owners of the 25-bed facility, who did not want to be identified, had less than two months to prepare for the financial impact of the July 1 pay rises – with details of the deal and its funding mechanisms only made public in early May.

At the time, the owners calculated that each fortnight, the rest home was eligible for up to $3300 to cover higher carer wages, according to the Ministry of Health’s funding mechanism.

However, the associated increase in wages for the home’s staff – taking into account the mix of full- and part-time workers with varying experience-levels and qualifications – was $4200 under the new rates, the owner said.

So each pay period, the rest home knew it would take a direct hit of at least $900, he said.

Because funding for workers was allocated on a per-resident basis, this calculation also assumed a best-case scenario – where the home was consistently full – and could claim the maximum amount, the owner said.

“Had this all been known beforehand, then the funding may well have been different.”

Simon Wallace, NZ Aged Care Association

While losing at least $23,600 each year would be significant for a number of small businesses already struggling with tight margins – as several rest homes forced to close around the country have found –  these owners looked at their books and decided to try to make it work.

“We’ve also got an obligation to the other staff as well as these residents,” the owner said. We’ve had some of these residents for over 15 years – it’s their home,” he said.

Blindsided on Day 4

However, less than a week after the new pay rates were implemented, the Government-contracted industry training organisation Careerforce made an unexpected announcement that raised the wages of hundreds of overseas-qualified care and support workers.

The July 4 announcement, published in an online statement, stated qualified nurses from the Philippines, India, South Africa, Australia and the UK employed as care and support workers were “assessed as having equivalency” to the New Zealand qualification, or experience level, required for a $21 hourly wage. Prior to this, those workers had been regarded as having sufficient qualifications to be paid at either $19 or $20 an hour.

In the case of the South Island rest home interviewed by Newsroom, more than a third of its care workers were reclassified. Overall, six staff moved from the lower pay bands to either the highest, or second highest band.

On an individual basis, it didn’t seem like much, but “our gross wage costs” for care staff increased by more than $1000 each fortnight, the owner said.

Annually, that amounted to an extra $28,100 for wages, bringing the total funding shortfall directly related to care worker pay increases to about $51,700.

Within a day, the home’s original plans to trim certain expenses so that higher wage costs could be met were deemed insignificant. Its $23,600 funding shortfall had doubled, with no notice or discussion – and to stay open, drastic cuts or extra funding was needed immediately.

Mounting costs

Simon Wallace, chief executive of the New Zealand Aged Care Association, said any reclassification of overseas qualifications impacting care workers should have taken place before funding rates were determined.

“There are hundreds of internationally-registered nurses [from the five identified countries] that are working as caregivers,” he said.

“Immediately you’ve got hundreds of [workers] going up from Level 0 or Level 2, to Level 3 or Level 4 on the pay scale. That makes a huge difference to the wages.”

“Part of the reason [could be] that .. nobody at the Ministry anticipated how potentially complicated it could be.”

Ray Lind, Careerforce.

Overall, there are four pay bands – legislated under the Care and Support Worker Settlement Act – which set minimum pay rates for 55,000 care and support workers. Each of those pay bands is due to increase annually over the next five years.

Wallace, who knew of three rest homes which had closed since the pay rate increases, believed excluding the impact of the reclassifications of overseas-qualified nurses diluted the amount of funding available to providers.

Aged care providers had until June 2 to declare to the Ministry of Health the qualification and experience levels of care and support staff. That information was used to determine how much workers received under the higher pay rates, the financial impact on employers, and the level of funding needed.

“We had no idea at all,” Wallace said of the reclassification announcement. “That change came after July 1, and all the rest homes had … declared where all their employees were on the various levels to the Ministry, and then came the change to the international RN [registered nurse] qualification.”

“Had this all been known beforehand, then the funding may well have been different,” he said.

“I’ve got one member that’s got 30 out of 72 staff who this impacts,” Wallace, whose organisation represents more than 600 aged care providers, said.  

“That makes a huge difference to his salary bill.”

Last-minute rush

Careerforce chief executive Ray Lind said the Ministry of Health approached the organisation on May 19 with a request to begin assessing international qualifications for care and support workers.

Aware of the June 2 deadline providers had to submit pay information to the Ministry, Lind knew the job would be tough.

“I remember thinking at the time we’ve got about three days of doing this work.”

When asked about the Ministry’s timing, Lind was unaware why it took until May 19 for Careerforce to be called in.

“Part of the reason [could be] that … nobody at the Ministry anticipated how potentially complicated it could be, and we weren’t party to the negotiations … to say ‘hold the bus’ – this is more complicated than it seems.”

“Sorting out the nursing qualification equivalency” was a long process, and some cases were still being determined, he said.

“We’ve had thousands of people contacting us via email – [saying] ‘I’ve got this certificate, what’s the equivalency?’ We’ve actually hired three extra staff to help.”

Dodging the question

When approached by Newsroom, the Ministry of Health refused to answer any questions regarding the timing of its approach to Careerforce.

Jill Lane, director of service commissioning, also refused to comment on whether the Ministry had purposely delayed the process of assessing overseas qualifications to ensure any cost impact would be excluded from its funding model for the pay equity settlement.

“The Ministry understood it would take time to complete the work,” Lane said in an email. “Assessment of overseas qualifications is complex and requires detailed knowledge of the learning outcomes delivered by each training provider.”


Haphazard implementation:

April 18: Health Minister Jonathan Coleman announces $2 billion pay equity settlement.

May 2: Settlement agreement signed by representatives from the Crown and unions.

May 3: Details of agreement released publicly. First peek for providers.

May 19: Careerforce approached by Ministry of Health to assess overseas qualifications for care and support workers.

May 25: Care and Support Settlement Bill introduced to the house.

May 29: Deadline for submissions.

June 2: Final day for providers to submit staff pay information to Ministry of Health.

June 8: Care and Support Worker (Pay Equity) Settlement Bill passed into law

July 1: New pay rates rolled out

July 4: Careerforce announce nurses qualified in India, Philippines, Australia, South Africa, UK working as care and support staff must be paid at least $21 an hour.

August: At least 100 aged care facilities at risk of financial sustainability. At least three rest homes have closed due to insufficient funding of pay equity changes.  

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