The residential care workers settlement

The residential care worker settlement has changed pay relativities and represents a shock to the labour market, particularly given the number of employees affected and initial estimates of the cost involved, writes John McGill.

Care workers and similar roles have long featured in our remuneration database, particularly in our Not-for-Profit Survey which we have conducted for eight years. 

Over this period we have reported on the pay levels this group receives and our analysis of the roles uses a mix of what we call job matching and job evaluation. 

Job matching is a relatively simple technique for ensuring similar roles are compared correctly. Job evaluation is a much more powerful form of analysis examining in detail all aspects of the job. Both forms of analysis are used in assessing these roles with clients in an effective way. 

The overall consensus in the market over a number of years is that for care workers, these are relatively straightforward roles. Note this is not a comment on the care, dedication and professionalism of the individuals in the roles or challenges they may face, rather it is a determination around the relativity of the role as compared to others in the organisation.

Changing the tides earlier this year, there was a large settlement where Christine Bartlett, through her union, put forward a pay equity claim – the Terranova case. 

The outcome was a large settlement with the government, which funds the majority of these roles and similar. There will be an increase in pay for this group from $15.75 per hour to $27 per hour over the next five years. In salary terms, increasing a FT salary from $32,800 pa to $56,000 pa, is a 71 percent increase in salary pay. Fifty five thousand employees are affected and the estimated cost over five years is $2 billion.

This settlement has changed pay relativities so that a role previously paid in the labour market (albeit tied down by a tough funding regime over many years) at a relatively low level is now assessed as being at a similar level to many higher professional positions, a wide range of supervisory positions across many sectors and many well qualified technical roles. 

This represents a massive shock to the labour market, particularly given the number of employees affected and initial estimates of the cost involved.

From what we understand of the settlement, part of the basis is that the skill level of care workers will be increased over time, meaning some change in the “size” of the role. This is likely to lead to a differentiation of roles similar to what happened to nurses many years ago as the role of nurse aide was developed. 

This growth in the role will only occur over time, whilst the immediate issue is the actual impact to other roles. Many will draw conclusions from the care workers settlement as to the relativity to their own roles.

So what has happened so far? What may be to come?

  1. Mental health workers are among the first to make the point that this outcome should be applied further. They see themselves as doing similar roles, maybe working alongside care workers and feel aggrieved. As appears to be the case, there are many mental health workers considering the move to becoming a care worker. The government has moved (at the time of writing) to prevent DHB’s applying the care workers’ settlement to other roles including mental health workers. We will likely see more on this to come. 
  2. As well as the immediate relativity argument, there will be other groups which see themselves as similar either contemplating, or actually preparing, their cases. The related upward relativity issues with the supervisors of care workers, and potentially the managers of the supervisors now about to be paid less or at a similar level to the care workers, will see these latter two groups looking at their pay with a more critical eye. The response from the organisation has to be to adjust their pay to reflect the change. This may be an issue for some organisations with a lack of extra capital and the absence of an increase in government funding. 
  3. Rest homes are looking at cutting supervisory or other roles and increasing fees for residents in response. Some rest homes may, and have, closed as their cost structures will not cope.
  4. There are different groups in any rest home environment, they all are affected by this settlement and will be looking at their options. This in turn is likely to lead to a broader labour market reaction.

In response, there has been new government legislation proposed to stem the flow of relativity based cases and the comparisons being used.

 This has invited a range of criticism on the proposed rules to be put in place. Relativities have a life of their own and have long existed within every part of the labour market.  Relativities will ignore legislation, employer cost structures, and exhortations from those who think they know what they should be. It is likely the pressures in the next few years will become enormous in this part of the labour market.  


John McGill is the CEO at Strategic Pay.

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