Chapter 1Introduction
1.1The Wage Justice for Early Childhood Education and Care Workers (Special Account) Bill 2024 (bill) would establish a special account to fund wage increases for workers in the Early Childhood Education and Care (ECEC) sector.
1.2The wage increase is designed to support fair remuneration for ECEC workers, help attract and retain ECEC workers, contribute to the ongoing professionalisation of the sector, encourage good faith bargaining and enterprise agreements in the sector, and ensure ECEC remains affordable and accessible for families.
1.3The wage increase would be delivered via a grant program—the Early Childhood Education and Care Worker Retention Payment Program—which would fund a 15 per cent pay rise over two years. Grant funding would be 'tied to a condition that providers limit fee increases to ensure workers are paid fairly without the costs being passed on to families'.
1.4The program would deliver a typical early educator with a pay rise of at least $103 per week in December 2024—increasing to $155 per year in 2025—or around $7800 per year.
1.5The special account would cease on 30 June 2028. This reflects the interim nature of the funding, which is designed to support wage increases while the Fair Work Commission (FWC) finalises its gender undervaluation review of priority awards.
1.6The Australian Government will also consider longer term funding arrangements, including charting a course for universal ECEC, as part of its response to the findings of the recent Australian Competition and Consumer Commission (ACCC) and Productivity Commission (PC) inquiry reports.
Context of the bill
ECEC workforce shortages
1.7A recent capacity study by Jobs and Skills Australia (JSA) revealed the existing shortfall of qualified ECEC workers—needed to both meet demand and support sustainable working conditions—is approximately 21 000, with even more workers required to meet future demand.
1.8In addition, recent inquiries by the ACCC and PC found that 'workforce shortages are directly impacting the supply of childcare services', and that higher remuneration and better conditions are likely to lower attrition rates and attract more staff to the sector'.
ECEC sector wages
1.9Many participants in the PC inquiry pointed to 'prevailing pay and conditions as one of the most significant factors (and for some, the most significant factor) contributing to the workforce constraints faced by the sector'.
1.10According to the PC, hourly earnings for early childhood educators are similar or less than some retail, office-based and care occupations, with earnings of educators and early childhood teachers being lower than most other occupations (see Figure 1.1 over).
Figure 1.1Earnings of educators and early childhood teachers (ECT)
Source: Productivity Commission 2024, A path to universal early childhood education and care, Inquiry report no. 106, Vol. 2, Supporting papers, p. 151.
FWC gender undervaluation – priority awards review
1.11In its Annual Wage Review Decision 2023–24 (Decision), the FWC determined to 'establish a program for the timely resolution of gender undervaluation issues arising in respect of certain modern awards'.
1.12The Decision also highlighted the findings of a FWC gender equity research project, which led to the identification of priority areas for attention, including the modern awards and classifications applicable to ECEC workers.
1.13The FWC review, which is expected to conclude by the time of its next Annual Wage Review Decision, will 'consider whether the minimum wage rates for the relevant classifications in identified awards should be increased on work value grounds in order to remedy potential gender undervaluation'.
Multi-employer bargaining
1.14The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 brought in changes to promote multi-employer bargaining, particularly for workers in low paid sectors (which includes ECEC).
1.15In September 2023, the FWC granted supported bargaining authorisation to three unions representing ECEC workers to negotiate a multi-employer enterprise agreement with 64 employers. It is estimated that the agreement could cover approximately 12 000 employees.
Consultation on the bill
1.16Development of the grant program involved extensive consultation with ECEC stakeholders, including ECEC service providers, educators, unions and advocacy organisations. This included consultation as part of the Fair Work Commission ECEC supported bargaining process, as well as consideration of submissions to the ECEC inquiries by the ACCC and the PC.
1.17Consultation was also undertaken with Australian Government departments, including the Department of Employment and Workplace Relations and the Department of Finance.
Overview of the bill
1.18The object of the bill is to support a wage increase for ECEC workers in order to:
(a)address current workforce shortages by helping to attract and retain ECEC workers;
(b)contribute to the ongoing professionalisation of the ECEC sector;
(c)ensure that ECEC remains accessible and affordable to families; and
(d)encourage good faith bargaining and the making of enterprise agreements in the ECEC sector.
1.19The bill would also implement Australia's international obligations under the Convention on the Rights of the Child.
1.20The key parts of the bill are:
Part 2 – which would establish the Wage Justice for Early Childhood Education and Care Workers Special Account (special account);
Part 3 – which would enable grants of financial assistance to approved providers under the A New Tax System (Family Assistance) (Administration) Act 1999 (Faily Assistance Administration Act); and
Part 4 – which contains miscellaneous provisions, including the proposed sunset provision, and the transitional arrangements for funding agreements in effect prior to 1 July 2025.
Part 2 – special account
1.21Part 2 of the bill would establish the special account, which would be used to administer funding for the Early Childhood Education and Care Worker Retention Payment Program (grant program). It would be credited via annual Appropriation Acts.
1.22The purpose of the special account would be to make grants to support wage increases for ECEC workers 'to facilitate access to quality early childhood education and care'.
Part 3 – grant program
1.23The bill would empower the Secretary of the Department of Education (Secretary) to make grants of financial assistance to approved providers, in relation to the wages of eligible workers engaged by those providers. Grants would only be made to providers who apply for funding under the grant program.
1.24Funding under the grant program is not capped but depends on a formula which is based on the labour costs for the charged hours of care provided by a service on a monthly basis (as per the administrative data held in the Child Care Subsidy system), and a Commonwealth contribution rate to support a wage increase. Variations in the formula account for differences in costs between service types.
1.25To be eligible, providers must be approved for Child Care Subsidy, operate Centre Based Day Care or Outside School Hours Care services, engage workers through a workplace instrument that meets grant conditions, and meet grant conditions and reporting requirements.
1.26An eligible worker would be a person who works at an eligible ECEC service that receives grant funding and is covered by the Children's Services Award 2010 or the Educational Services (Teachers) Award 2020 (or primarily undertakes the duties in these awards but is covered by a different award or instrument). This may include early childhood teachers, educators, cooks, coordinators, room leaders and support workers.
1.27Recipients would only be able to use grant funding for the purposes of providing a wage increase for eligible ECEC workers and for associated costs such as payroll tax, superannuation payments, and employee entitlements.
1.28Grant recipients would be required not to increase the fees they charge by more than a specified percentage amount each year. For the 12 months commencing 8 August 2024, this amount would be set at 4.4 per cent. The amount for subsequent periods would be determined using a new ECEC Cost Index, which is currently being developed by the Australian Bureau of Statistics.
1.29ECEC providers would be able to request an alternative fee growth cap where they can demonstrate that the standard restriction would seriously impact the viability of their service.
1.30Further details about grant program requirements are set out in the Grant Opportunity Guidelines (Guidelines).
1.31The Guidelines also provide for an administrative complaints process where an applicant is not satisfied with the outcome of their application. Unsuccessful applicants would be able to make a new application.
1.32Grant funding would be paid in arrears by way of reimbursement (or partial reimbursement) of costs or expenses.
Part 4 – miscellaneous provisions
1.33Part 4 includes a sunset provision, which would see the legislation cease to operate at the end of 30 June 2028. This would allow the grant program to run for two years, including closure and evaluation activities. It would also provide time for the Parliament to consider amending the date, should this be intended.
1.34In addition, Part 4 sets out transitional arrangements for funding agreements that are in effect prior to 1 July 2025. This would ensure that agreements entered into as part of the grant program before this date would have effect as if they were entered into under Part 3 of the bill.
1.35Part 4 would also enable the Secretary to delegate their functions and powers under Part 3 of the bill to a person who is an official of a non-corporate Commonwealth entity and has the expertise appropriate to that function or power.
1.36In accordance with the Office of Parliamentary Counsel's (OPC) Drafting Direction No. 3.8 – Subordinate Legislation, the Minister would also be able to make, by disallowable legislative instrument, rules prescribing matters required or permitted to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the bill.
Financial implications
1.37The total cost of the grant funding is expected to be $3.6 billion over two years from 2024–25, taking into account the initial funding provided under the Family Assistance Act.
Consideration by other parliamentary committees
1.38When examining a bill, the committee considers relevant comments published by the Senate Standing Committee for the Scrutiny of Bills (Scrutiny Committee) and the Parliamentary Joint Committee on Human Rights (Human Rights Committee).
1.39The Scrutiny of Bills Committee reported on the bill in its Scrutiny Digest 12 of 2024. Ministerial responses were sought and received on 3 October 2024.
1.40At the time of writing, the Human Rights Committee had not considered the bill. However, the Explanatory Memorandum's statement of compatibility with human rights states that the bill is 'compatible with human rights because it promotes the protection of human rights'.
Conduct of the committee's inquiry
1.41On 19 September 2024, the provisions of the bill were referred to the committee for inquiry and report by 30 October 2024.
1.42The committee advertised the inquiry on its website and invited submissions by 4 October 2024. The committee received 25 submissions, which are listed at Appendix 1 of this report. The public submissions are available on the committee's website.
1.43The committee held a public hearing in Melbourne on Wednesday, 23 October 2024. A list of the witnesses who gave evidence at the hearing is included at Appendix 2.
Acknowledgements
1.44The committee thanks those individuals and organisations who contributed to this inquiry by preparing written submissions and giving evidence at the public hearing.