Summary of the pay equity for care and support workers

The settlement originates from the TerraNova pay equity claim brought by the union E tū on behalf of care worker Kristine Bartlett. 

The Employment Court agreed that the Equal Pay Act 1972 allowed the claim - that there was systemic undervaluation of care and support work because it was mainly performed by women - to be tested in court.

The Government decided to seek to resolve the case out of the courts through negotiations and to include home care and disability sector workers as well as aged residential care workers in the settlement. 

Parties to the negotiations were the Ministry of Health, ACC and District Health Boards and employee representatives - E tū, the Public Service Association and the New Zealand Nurses Organisation. The Council of Trade Unions was involved as an interested party.

While employers were represented in the negotiations by the New Zealand Aged Care Association, Home and Community Health Association, and New Zealand Disability Support Network, they were not parties to the settlement agreement.

The Care and Support Worker (Pay Equity) Settlement Act was passed with unanimous support from across the House in June 2017.

From 1 July, when the settlement was enacted, workers received pay rises of between 15 and 50% depending on their qualifications and experience.

Workers on the minimum wage of $15.75 per hour moved to at least $19 per hour – a 21% pay rise. For people working 30 hours or more a week, this adds at least $100 to their weekly earnings or an additional $5,000 a year.

The settlement is being introduced over a five-year period and will see workers’ wages increase up to $27 an hour during that time.

Funding for training is also included in the settlement, supporting a better qualified workforce, reduced turnover in the sector and improved care for New Zealanders.

The Act removed any liability for employers to compensate care and support workers for historic issues of systemic gender discrimination.  It also extinguished the right of those same workers to make future pay equity claims against their employer for a five-year period.

• The pay equity settlement removes wage discrimination based on gender for 55,000 care and support workers.
• The increased wage rates are expected to help with recruitment and retention of workers which means better continuity of care for clients and a more stable workforce overall, especially important for New Zealand’s ageing population. 
• The Act links pay rates to qualifications which will encourage care and support workers to increase their qualifications, meaning that over time, New Zealand will have a more highly trained workforce.

The new pay equity wage rates help 55,000 care and support workers throughout New Zealand. Predominantly women, care and support workers help older and disabled clients in aged residential care, home and community support services and community residential living.   

• The increased costs for employers of care and support workers are funded in three ways:
  • The Government is providing $2.048 billion over five years by increasing funding of District Health Boards (DHBs) and the Ministry of Health: Disability Support Services (DSS).  In turn DHBs and DSS are increasing their payments to providers that employ care and support workers.
  • Aged care residents with assets over the threshold for the government subsidy are paying an increased ‘maximum contribution’ as  a result of the increase in the rest home price.
  • ACC is funding providers of services to its clients. 
• The additional $2.048 billion the Government is providing over five years is being funded primarily through additional funding to the health sector and will not impact health funding or the provision of frontline health services in other areas. 
• The funding covers wage increases, other costs incurred because of the introduction of pay equity including higher leave costs, KiwiSaver contributions and ACC levies, and training.
• Increased costs due to normal wage pressures, volume increases or overhead increases will be met from existing health sector funding and managed in price setting negotiations between DHBs and service providers.

Aged Residential Care

Aged residential care provider representatives (New Zealand Aged Care Association and Care Association of New Zealand), the Ministry of Health and DHBs, agreed in discussions in May 2017, that the additional funding would be delivered through an increase to the price paid for nationally contracted residential care services (rest home, hospital, dementia and psycho geriatric). 

The mechanism for incorporating pay equity into the aged-related residential care services agreement resulted in some providers receiving more funding than their direct pay equity costs and a smaller number less.

DHBs are the first point of contact for providers who have any concerns about the financial impact of pay equity. The Ministry has been collecting information relating to the workforce make-up of providers and this is being used to help work through these concerns. 

To assist those providers with a material deficit due to the incorporation of pay equity funding in their contract, the Government has put in place a one-off transitional support fund. Providers given this support are required to develop a transition plan to ensure they can continue to operate within the new pay equity environment.

Home and Community Support Services and Community and Residential Living

Pay equity funding for home and community support services and community and residential living providers is based on actual increased wage costs and delivered through advance payments.

Any difference between the actual increased wage costs resulting from pay equity and the advance payments will be paid to or recovered from providers in a regular reconciliation process.

The Ministry of Health is working closely with DHBs to incorporate pay equity funding into the service contracts between providers and their funders.