Scale of the retention challenge

The Department of Defence’s (Defence) plan to grow its military and civilian permanent workforce to over 101,000 by 2040 is an ambitious undertaking. Defence’s March 2023 submission to the Joint Standing Committee on Foreign Affairs, Defence and Trade (JSCFADT) states that the Australian Defence Force (ADF) is operating at 3,300 below its Average Funded Strength. The current planned ADF workforce in 2023–24 is 59,673. Additionally, planned recruiting levels and entrants into the permanent ADF are failing to offset outflows, which last year reached around 6,600 separations. The shortfall is greatest across the ADF’s middle ranks. Army reported a separation rate of 13.2% in 2021–22, with the rates for Navy and Air Force hovering under 10%.

In a more contested and dynamic strategic environment, an effective retention strategy will be as critical as procuring any other capability for the ADF. Workforce challenges are intrinsically linked to the future force the Defence strategic review (DSR) seeks to deliver. Without the required number of personnel to support high-profile new capabilities, the ADF will struggle to deliver the outcomes the DSR advocates. It is therefore important that Defence creates ‘a compelling employee value proposition to attract and retain existing personnel’. Restructuring a defence force that is ‘fit for purpose’ requires investment in recruitment and retention strategies across the maritime, land, air, space and cyber domains. Defence has established a Tiger Team to drive this work.

Notable retention measures

The evolving strategic landscape underscores the sense of urgency the government brings to this issue, but the retention of military personnel is not a new challenge. Retention bonuses have often been used by Defence to address specific workforce issues. This includes bonuses for select reservists, which offer an incentive to help fill gaps in capability. Retention bonuses were introduced for Army and Navy in 2006 and for specialist categories in Air Force in 2022, with numerous others created for specialists across the services. In July 2008, Defence credited retention bonuses as a short-term strategy that helped support a reduction in ADF separations, which, at 9.9%, was at its lowest in almost a decade.

Recent recruitment and retention efforts have focused on the naval shipbuilding enterprise (Australia’s sovereign naval shipbuilding capability, pp. 58–59), cybersecurity, STEM, intelligence, and information and communications technology sectors (Defence annual report 2021–22, p. 100). The Military Superannuation and Benefits Scheme (MSBS) is a longer term measure for permanent ADF and MSBS members who have completed 15 years of service. Members are encouraged to commit to a further 5 years to receive additional retention benefits.

In 2016, the Submarine Deliberately Differentiated Package was introduced as part of a suite of measures with the purpose of addressing retention challenges. The first of its kind to be used in the ADF, the package included financial and non-financial components, and provided a model for future workforce challenges. In 2018, Defence reported that the measure was helping to stabilise the workforce, particularly for the submariner trades, and becoming an effective growth strategy. The deliberately differentiated model is now used across the ADF to help retain skilled personnel in critical capability positions. Comprehensive schemes to recruit and retain submariners will be even more crucial in the context of the future nuclear-powered submarine fleet.

Continuation bonus scheme

The most recent incarnation of retention bonuses is particularly significant. As part of the 2023–24 Budget, the Albanese Government announced the creation of a $50,000 continuation bonus for permanent ADF members. Up to $400 million has been committed to support a 2-year pilot program from 2024 that will provide bonuses to members who commit to a further 3 years service at the end of their 4-year mandatory period of service.

The creation of the new bonus is likely in response to an unsustainable separation rate, which, at 11.3%, undermines Defence’s workforce expansion plans. The bonus stands apart from others insofar as it is an across-the-board scheme that aims to curb the hollowing out of the ADF’s middle ranks.

Complementary to the bonus scheme, the Albanese Government allocated $2 million in the 2023–24 Budget to conduct a review into Defence housing policies. The Defence Home Ownership Assistance Scheme is a subsidy and home loan scheme available for current and former ADF members. Its effectiveness in supporting the retention of personnel is well-established. Eligible personnel continue to access the scheme, which, in survey data, is ‘consistently identified as a contributor to the retention of ADF personnel’ (2021–25 Defence corporate plan, p. 32). In a notable $46.2 million expansion of the scheme after changes to the legislation in November 2022, the eligibility criteria were widened and the 5-year deadline for separated ADF personnel and surviving partners to apply for their one final subsidy certificate was removed. The changes also reduced the qualifying period and the minimum thresholds for subsidy tiers. Furthermore, veterans who served on or after 1 July 2008 can now access the scheme at any time after leaving the military. The government’s review seeks to reduce the housing burden on personnel and boost home ownership.

Retention bonuses, benefit schemes and differentiated packages remain viable options as Defence expands its workforce out to 2040, during which time workforce challenges will continue to demand a public policy response. On this point, Chief of the Defence Force, Angus Campbell, has reiterated:

We are determined to meet this challenge and to be an employer of choice, in order to attract the best possible talent from all backgrounds, regions and walks of life throughout Australia.