Purpose of the Bill

The purpose of the Wage Justice for Early Childhood Education and Care Workers (Special Account) Bill 2024 (the Bill) is to create a special account which will be used to fund grants to early childhood education and care (ECEC) providers to support a wage increase for their workers. Special accounts are used to set aside money within the Consolidated Revenue Fund for specific payments.

The grant program to be funded through the special account is the worker retention payment. To be eligible for the grants, providers will need to increase worker wages by 10% above the current award in the first year of the payment, and by 15% above the current award in the second year. Providers will also need to limit fee increases and meet other conditions.

Background

Early childhood education and care workforce

Around 221,000 people are employed in the ECEC sector (p. 119). There are a broad range of occupations in the workforce (p. 178):

• educators—who support children’s learning and development by delivering approved learning frameworks, supporting children’s daily routines and contributing to the service’s education program (qualification requirements can include certificate III or diploma-level vocational education and training)
• early childhood teachers—who plan and implement education programs including learning frameworks, lead and support children’s learning and development, mentor and supervise staff (qualification requirements are typically bachelor-level early childhood teaching qualifications or higher)
• service directors and managers—who are responsible for planning, administration and the regulatory compliance activities of ECEC services
• family day care coordinators—who provide leadership, support and planning for groups of family day care educators (qualification requirements include approved diploma-level qualifications)
• cooks, cleaners, allied health professionals, social workers and other support staff.

The early childhood education and care workforce is low paid

The Productivity Commission’s 2023 draft report, A path to universal early childhood education and care, found that the ECEC workforce is low paid relative to workers in other sectors, including those with similar qualifications (p. 203). In 2021, actual total weekly cash earnings for educators were just above the lowest decile when ranked with other occupations (p. 202).

Early childhood teachers had earnings below the median for all other occupations and significantly lower than primary and secondary school teachers (pp. 201–202). The Commission heard evidence that some ECEC workers were in a precarious financial position or were reliant on income from other sources (such as partners, family or second jobs) (pp. 199–200).

The 2021 ECEC Workforce Census indicates that more than half of ECEC employees were paid at award rates (p. 13). The Productivity Commission found those with bachelor’s degree or above qualifications were more likely to receive above-award rates of pay (p. 204–205). Around 16% of employees in the sector were covered by an enterprise agreement—around a third of not-for-profit providers had an enterprise agreement in place compared to 3% of for‑profit providers (p. 205).

Big Steps campaign

‘Big Steps’, a long-running campaign led by the United Workers Union, has called for a 25% increase in the award wages of ECEC workers.

While the worker retention payment will only fund a 15% increase in wages on the current national award, the United Workers Union still welcomed the announcement with the Big Steps campaign website stating:

The Federal Government’s announcement today delivers on its commitment to address low pay in the female-dominated sector and get wages moving.

The announcement addresses a sector-wide workforce crisis in early education, where staff shortages and burnout have led to 60 per cent of educators saying they want to leave within three years.

Fair Work Commission considerations of ECEC worker wages

The Fair Work Commission is currently undertaking a gender undervaluation review of priority awards which includes the Children’s Services Award 2010.

Recently, 2 equal remuneration order applications to the Fair Work Commission in relation to ECEC workers have been unsuccessful (p. 211). An application to increase the minimum wage of teachers (including early childhood teachers) on work value grounds resulted in an increase in the minimum wage rates under the Educational Services (Teachers) Award 2020 in 2021.

Multi-employer bargaining

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 implemented changes to promote multi-employer bargaining, particularly for workers in low-paid sectors.

In September 2023, the Fair Work Commission granted a supported bargaining authorisation to 3 unions representing ECEC workers to negotiate a multi-employer enterprise agreement with 64 employers (pp. 3–9), including G8 Education (the largest for-profit ECEC provider in Australia, p. 18). It is estimated that around 12,000 employees could be covered by the agreement. The Australian Government has joined the negotiations.

Worker retention payment

On 8 August 2024, the Australian Government announced it would provide funding to support a wage increase to ECEC workers via a ‘worker retention payment’. The payment will be in the form of a grant which ECEC providers must apply for.

The payment is intended to support a wage increase of 10% on top of the current national award rate in the first year, and 15% above the current national award rate in the second year.

Eligible workers:

• work at an eligible Child Care Subsidy-approved centre based day care or Outside School Hours Care service that opts in to the payment, and
• are covered by either the Children’s Services Award 2010, the Educational Services (Teachers) Award 2020 or a state-based ECEC award, or
• undertake the duties included in the Children’s Services Award 2010 and the Educational Services (Teachers) Award 2020.

Grant conditions on providers (the grant guidelines had not been released at the time of writing) include:

• limiting fee growth from 8 August 2024:
  • fees cannot increase by more than 4.4% in the period 8 August 2024 to 7 August 2025 and
  • fees in subsequent periods cannot increase by more than an amount based on the ECEC Cost Index published by the Australian Bureau of Statistics
  • exemptions may apply in limited circumstances
• engaging staff through a workplace instrument that meets grant conditions
  • the instrument must set out pay rates, penalty rates, working hours and leave entitlements—this may include enterprise agreements or individual flexibility agreements
• passing on all funding to eligible workers through increased wages.

What happens after the 2-year funding period

The worker retention payment is considered an ‘interim payment’ while:

• the Fair Work Commission finalises its gender undervaluation review of priority awards and
• the Government considers the recent ACCC and Productivity Commission (PC) reports on ECEC.

The Department of Education website states: ‘The Australian Government is committed to ensuring the cost of fair wages for ECEC workers is not passed on to families through higher fees. The government will determine longer-term funding arrangements as part of its response to the ACCC and PC reports’.

Family day care and in-home Care providers

Family Day Care and In-Home Care providers are not eligible for the worker retention payment. The Department of Education website states: ‘We will consult with the Family Day Care and In Home Care sectors to understand how support can be extended to their workforce.’

Policy position of non-government parties/independents

Liberal-Nationals Coalition

The Coalition has not stated a position on the Bill but has made some criticisms of the proposed worker retention payment. Shadow Minister for Early Childhood Education Angie Bell suggested that much of the proposed pay increase will be absorbed by higher inflation and raised issues with the proposed cap on fee increases:

The biggest farce with this policy is that Labor think they can inject $3.6 billion into the sector and keep fees down using a cap. I know it's hard for those opposite to understand because none of them have ever run a business, let alone an economy, but, when your costs are higher than your income, you have to cut costs somewhere, and that's exactly what we're likely to see under this policy, because many of these providers continue to watch their electricity, gas and grocery bills soar, in part thanks to the economic mismanagement of this Labor government. In fact, there's a real chance that services already paying staff 10 or 15 per cent above the award wage won't sign onto this. They'll pay their staff a little bit more and then they'll just increase their prices anyway, and that will land in families' laps. Even if some services keep fees down this year and next year, families will still be hit with eye-watering bills when the government funding dries up because providers will then be forced to pick up the wages tab and to do that they will have to increase their fees. (p. 53)

Australian Greens

Australian Greens Senator Steph Hodgins-May stated (p. 1) that the proposed wage increase ‘doesn’t go far enough’ and called for a 25% increase.

Key issues and provisions

Key provisions: establishing the special account

Clause 8 of the Bill establishes the Wage Justice for Early Childhood Education and Care Workers Special Account. The account is a special account for the purposes of the Public Governance, Performance and Accountability Act 2013—this Act sets out how amounts are credited and debited to special accounts, and how the Consolidated Revenue Fund is appropriated for the purposes of a special account. The Bill does not identify any amounts to be credited to the proposed special account. The Explanatory Memorandum states that the account will be credited through annual Appropriation Acts (p. 11).

Clause 9 sets out that the purpose of the special account is to make grants ‘to provide funding to support remuneration increases for workers in the early childhood education and care sector in order to facilitate access to quality early childhood education and care’.

Clauses 10 and 11 set out the legislative authority and conditions that are to apply to grants made from the special account:

• the Secretary of the Department of Education can make grants of financial assistance to approved providers in relation to the remuneration of workers
• these grants may be made by way of reimbursement or partial reimbursement of costs or expenses
• grants can only be made to those who have applied for a grant
• terms and conditions of a grant must be set out in a written agreement between the Commonwealth and the recipient, these must include:
• provisions that allow the grant to be used for the remuneration of a class of workers specified in the agreement
• provisions that limit any increase in ECEC fees charged by the provider
• circumstances where the recipient must repay amounts to the Commonwealth (these would become debts)
• the recipient must comply with the written agreement.

The Senate Scrutiny of Bills Committee sought further advice from the Minister for Education regarding the need for the Department of Education Secretary to have such broad discretionary powers under Clause 10 to make grants and the lack of guidance on the use of these powers in the legislation (p. 20).

Clause 16 is a transitional provision and provides for any written agreements in effect under section 85GA of the A New Tax System (Family Assistance) Act 1999 (the FA Act) before 1 July 2025, which were made as part of the worker retention payment program to be considered grants for the purposes of the special account from 1 July 2025. Section 85GA of the FA Act provides for the Secretary to enter into written agreements to make grants of money for purposes related to both:

• child care and
• either or both:
  • the provision of child endowment or family allowances within the meaning of paragraph 51(xxiiiA) of the Constitution;
  •  giving effect to Australia’s obligations under the Convention on the Rights of the Child and, in particular, under articles 2, 3, 18 or 23 of the Convention.

Clause 3 of the Bill also states that an object of the Bill is to implement the Convention on the Rights of the Child.

Section 85GA of the FA Act does not set further conditions on grants made under this provision but provides for the Minister’s Rules to specify requirements the Secretary must comply with in exercising this power. Currently, there are no relevant requirements set out in the Minister’s Rules.

Clause 17 is a sunset provision: the proposed Act will cease to have effect at the end of 30 June 2028.

Clause 18 provides for the Minister to make a legislative instrument prescribing rules required or permitted by the proposed Act, or necessary or convenient for giving effect to the proposed Act. Subclause 18(2) prevents these rules from setting compliance and enforcement powers, imposing a tax, setting an amount to be appropriated from the Consolidated Revenue Fund, or amending the text of the proposed Act.

Key issue: the Bill and the special account are not necessary to establish the worker retention payment

As indicated by the transitional provision at clause 16, section 85GA of the FA Act already provides the Secretary of the Department of Education with a power to make grants in relation to child care (as long as the purpose also relates to the provision of child or family payments, or to give effect to obligations under the Convention on the Rights of the Child). The Government expects that it may need to use this existing power to make worker retention payment grants in the period prior to July 2025, hence the transitional arrangements proposed in this Act.

The grant program could be authorised through other mechanisms. For example, amending the Financial Framework (Supplementary Powers) Regulations 1997.

It is unclear why the Government has decided to legislate a special account for the purposes of funding the proposed grant. The Bill does not set out the specific conditions of the grants (such as the proposed cap on fee increases) nor does it credit the special account with funds.

In an interview on ABC Radio National, Minister for Early Childhood Education Anne Aly was asked about the design of the Bill:

PATRICIA KARVELAS: And you've also claimed that the Bill is established in a way, or the pay increase is established in a way to ensure that a future government, perhaps, I don't know if you lose the next election under that scenario. It's not repealed as easily how is that the case?

DR ANNE ALY: Well, it's set in legislation for 10% this year and 5% in the following year. So, you know, I guess that, you know, if the liberal or the coalition government gets in next year and decides that they don't want to give early childhood educators a pay rise, that early childhood educators don't deserve the pay rise, or they think that, you know, this could be part of their $300 million of cuts that they are saying they're going to make, then they could introduce a bill to repeal it, but it would be very difficult to do that.

The Bill does not set the amount of the wage increase or appropriate any amounts to pay for the proposed wage increase.

Key issue: future uncertainty

While providers will need to deliver the proposed wage increases through enterprise agreements or other instruments, the government’s funding commitment towards these increases is only for a 2-year period. Wage increases delivered as part of enterprise agreements or other instruments may involve commitments beyond 2 years. This means that providers will be agreeing to wage increases without any certainty as to how they will be funded in the future.

As noted above, the Government has indicated that longer-term funding arrangements will be determined as part of its response to the recent ACCC and Productivity Commission reports on child care.

In an interview with ABC journalist Greg Jennett on 8 August 2024, Minister for Education Jason Clare was asked who would fund the pay rise after the 2-year grant period:

JENNETT: But after the double step hit on the 15 per cent wage bump up, what's your expectation when you get to 2026? So, that's after the full implementation of the 15 per cent pay rise. Who will pick up the tab from there?

CLARE: It's not the intention to pass that on to employers.

Echoes of the Early Years Quality Fund

The Wage Justice for Early Childhood Education and Care Workers Special Account bears a strong resemblance to the Early Years Quality Fund (EYQF): a special account set up to deliver grants to child care providers to support wage rises with conditions that included limiting fee increases. As explored below, the earlier special account only supported a small proportion of the successful applicants of the grants and only paid around 20% of the funds that were allocated to the program. This was due to a change of government, with the incoming Abbott Government not supporting the program and only partially honouring agreements entered into prior to the 2013 Election.

With a Federal Election due by mid-May 2025, providers may be concerned about the future of the program if it does not have bipartisan support (p. 5).

What happened to the Early Years Quality Fund

The Gillard Labor Government announced the EYQF in March 2013 to help offset some of the costs associated with the new National Quality Framework’s requirements to employ higher qualified staff. The purpose of the EYQF was to set aside funding for grants to long day care providers for wage increases for a period of 2 years.

The 2013–14 Budget provided $314.2 million over 5 years (2012–13 to 2016–17) for the EYQF and an associated initiative (p. 123). The EYQF was set up as a special account, with specific funding credited via the Early Years Quality Fund Special Account Act 2013 so funds would stay in the Consolidated Revenue Fund and not be available to be used for any other purpose.

EYQF grants were subject to a range of conditions, including limiting fee increases, as outlined in the Australian National Audit Office (ANAO) report (p. 46) on its administration:

… applications were to be subject to a number of conditions including:

• a practical commitment to the implementation of the National Quality Framework (NQF), including a detailed plan to meet the workforce qualification requirements commencing in 2014, and evidence of support for the NQF by a majority of permanent employees;
• approval of an enterprise agreement containing the approved EYQF wage schedule, which set out the hourly wage increase corresponding to each employment classification, with at least a $3 per hour increase from 1 July 2013 for an entry level educator holding Certificate III;
• an agreement to fee restraint, with fee increases limited to actual running cost increases (and no fee increases resulting from the increase in wages arising from the operation of the EYQF); and
• a preparedness to meet specified reporting requirements.

There were 453 ‘successful’ applicants but only 16 funding agreements were sent to providers prior to the 2013 Federal Election (p. 39).

When the Coalition Government was elected in 2013, it terminated grants under the EYQF (p. 41) and provided funding only to those approved prior to the election, and only for the first year of these agreements. The Coalition Government also sought to vary the funding agreements (p. 98) so that the grants would be used for professional development rather than wage increases. According to the ANAO, 16 providers received funding (15 small providers and Goodstart Early Learning, the largest provider in Australia), with grants paid totalling $62.5 million (pp. 33, 98).

Key issue: grant conditions may limit take-up

It is unclear how many providers will apply for the grants. Those already paying above-award rates to their workers may be unwilling to commit to fee caps which will limit their ability to cover increases in non-wage costs. The proposed 4.4% limit on fee increases in the year from August 2024 is significantly lower than fee increases across the last 2 years (Figure 1).

Some providers may face difficulties meeting the requirements relating to workplace instruments—they may have to quickly negotiate a new agreement with staff in order to be eligible for the grant. Some providers may have agreements which cover a broader range of staff than those covered by the 2 awards covered by the worker retention payment—for example social workers or allied health workers. Smaller providers may not have the resources to quickly apply for grants (which are intended to open for application in October 2024, with the wage increases commencing in December 2024).

Figure 1  Percentage change in average hourly fees for centre based day care and CPI from corresponding quarter in previous year

Sources: ‘Quarterly reports on usage, services, fees and subsidies’, Department of Education; Australian Bureau of Statistics (ABS), Consumer Price Index, Australia, ‘Tables 1 and 2. CPI: All Groups, Index Numbers and Percentage Changes’, (Canberra: ABS, 2024).