How changes in aged care are driving workforce efficiencies

August 8, 2015
FCB Workplace Law

Industry Focus

Health & Aged Care

As the aged care sector continues to deal with a range of changes, many leading aged care providers are looking at innovative ways to improve workforce efficiencies. FCB Workplace Law Partner, Jessica Fisher, discusses how smart acquisition processes and realigning workforce capacity can achieve this.

Over recent years, the aged care industry has undergone a significant shift. As our general population both ages and grows, economists, legislators and business interests have all had to acknowledge the significant risks (as well as opportunities) that come with shrinking workforce-to-retiree ratios, inadequate superannuation and pension reserves and changing social expectations about quality of life in senior years.

For employers in the sector, demographic, social and funding changes have led to an array of specific workforce challenges. To their credit, leading care providers have been addressing these head on: adopting pro-active workforce planning strategies; engaging with government regarding training and productivity initiatives; and developing new service models that better align client needs with workforce capacity. But at the same time, many employer initiatives continue to face barriers caused by ‘traditional’ workforce structures, patterns and expectations. Indeed, until their last minute repeal late last year, the sector was facing the prospect of having funding streams tied to enterprise bargaining outcomes, somewhat reminiscent of the ‘old-school’ industrialism that pre-dated the Hawke-Keating reforms last century.

Although the growth outlook in aged care is strong and attracting unprecedented levels of private investment, competition levels are also high, driven by factors including funding challenges, tax advantages for not-for-profit providers and comparatively low margins. As a consequence, any long term investment strategy needs to incorporate productivity improvements, just like other industries facing external competitive pressures, like retail and manufacturing.

Against this backdrop and given recent debate about whether the Fair Work Act creates barriers to productivity, we look at two key areas where aged care employers have been overcoming industrial barriers to achieve better business outcomes.

Efficient consolidation

One area where business strategists often overlook workforce inefficiencies is in mergers and acquisitions and, over the last few years, there has been a flurry of consolidation in aged care.

It’s true, of course, that M&A strategy is complex and is often driven by factors which can make workforce issues seem insignificant: if the value of a target asset depends on the immediate retention of an existing workforce, then trying to leverage the process to reduce staff wages or wind back entitlements isn’t likely to match the strategy (particularly in aged care, where trained staff are hard enough to come by as it is!). In addition, whenever the best commercial opportunities arise, there’s always pressure to grab them quickly; so in many cases there simply isn’t the time or appetite to pursue a lengthy or detailed due diligence process, or weed out all potential workforce inefficiencies before a deal is done.

Despite this, there are some relatively simple steps that a business can take in conjunction with an acquisition, that can:

  • Smoothen the post-transition industrial outlook (and pave the way for any later workforce integration plans)
  • Make the most of any cost base benefits already enjoyed by the target business (at least for an initial ‘buffer period’ post acquisition)
  • Significantly reduce the compliance burden that comes with administering ‘inherited’ workplace instruments (particularly when those conditions are very different to what otherwise applies within the purchaser’s existing operations).

For example, over the last 18 months or so, FCB has assisted numerous businesses in the health, aged care and retirement living industries (amongst others) to obtain orders from the Fair Work Commission, ensuring that their preferred industrial instrument will apply to the transferring workforce, not the enterprise agreement that the Fair Work Act would otherwise mandate. In effect, this allows for the alteration or preservation of beneficial industrial conditions as part of the transaction, without the need for a time consuming ‘good faith’ bargaining process as is usually required under the Act.

Although the process of applying to the Commission requires specialised knowledge and pre-planning, in comparison to the vast investment that goes into the other aspects of a commercial acquisition process, the time and investment involved in such a Fair Work Application is usually minimal. Furthermore, if you’ve done it once, the process can be replicated and rolled out again for future acquisition processes. As a consequence, clever aged care providers are now ensuring that their due-diligence toolkit incorporates a stand-by plan, to allow a Fair Work Application to be built into the acquisition process quickly, whenever appropriate target opportunities arise.

Re-aligning workforce capacity

The other area where leading aged care providers have been overcoming inflexible industrial frameworks is in the area of workforce design.

Traditionally, job descriptions in the sector have been dictated by very structured, occupation-based classification systems, specified by Awards or by similarly constructed ‘template agreements’. Nurses would do nursing work, cleaners would do cleaning work and activities officers would take residents on outings and attend to their (apparently quite separate) need for human interaction. Furthermore, the ‘aged care’ industry was itself demarcated from other related sectors, like retirement villages, disability care and home care. Even the recently ‘modernised’ Aged Care Award maintains this artificial separation, despite the fact that today’s residential care providers are leveraging their resources to diversity (eg, into home care and disability care).

Against this very structured industrial framework, shortages of skilled staff, growing demand for better ‘whole of person’ services and even more sophisticated models of resident (and non-resident) care mean the pressure is on, both to attract high calibre workers to the industry and to ensure that each worker who is already in the system is performing at the peak of their functional abilities. Essentially, this means up-skilling each worker as far as their abilities permit, matching the more complex roles with more highly skilled workers and delegating simpler tasks to those with less skills or experience (while, at the same time, offering everyone the conditions and variety required to keep them engaged, energised and performing at their best). But slotting this high performance model into old-style, restrictive classification structures simply doesn’t work: it is like trying to fit the proverbial square peg into a round hole. As a consequence, employers are having to adapt.

As an example, forward-thinking employers in aged care are investing in enterprise bargaining processes in a way which allows them to move away from traditional demarcations and work structures. For example, this may include:

  • implementing ‘whole of business’ Enterprise Agreements, rather than having several, separate Nursing, Non-Nursing and Disability/Home Care agreements
  • using ‘mixed-function’ clauses to allow greater cross-over between workers that would traditionally be limited to set functions within specific classification boundaries
  • at the ‘pointy end’, developing blended roles that completely reshape the old classification systems (and, typically, involve giving more staff more responsibility in return for up-skilling and additional rewards).

In a strongly unionised industry, these are not insignificant changes, and often require a considerable level of determination and commitment to execute. But providers are increasingly realising that the structural efficiencies and service improvements that can be launched from a more flexible industrial platform are well worth the investment. Moreover, it is generally recognised that – despite high levels of industry churn – providers can achieve much lower rates of turnover, improve employee engagement and differentiate themselves from the competition by offering staff genuine opportunities to develop skills, progress their careers and be rewarded commensurate to the additional value they add (rather than simply stepping them through artificial, pre-determined, industrial pay points). As a consequence, pro-active aged care employers are taking a multi-faceted approach to bargaining, by reviewing and updating their long term workforce strategies regularly, and investing in preparatory and interim initiatives to support workforce planning (eg, targeted workforce culture and perception surveys, broadly based consultations and sponsored job design trials and training initiatives). This layered approach not only generates better information to guide formal bargaining strategies, it also supports the type of direct, practical and cultural engagement that is necessary for lasting organic change but which could never be achieved through transactional industrial bargaining alone.

The final word

The experiences of aged care employers can be of benefit to all of us, no matter our industry or focus. Just like those in other sectors, aged care employers face competition and productivity challenges that can make the difference between staying in business or not. And just like other businesses, the aged care sector experiences its share of regulatory burdens, not least in the sphere of industrial and workplace relations. So to see aged care providers finding ways to break down some of those barriers, or working around them using multilayered workforce strategies, might just provide the ‘thought bubble’ that is needed to help other employers facing similar or comparable challenges.

Today more than ever, a business needs creative, smart solutions to allow it to navigate environmental changes and challenges, while remaining nimble and adaptive enough to respond quickly when new threats or opportunities arise. With some well-executed industrial strategies, in workplace relations at least, the aged care industry has shown us that this is possible.

Would you like to discuss ways to improve workforce efficiencies in your business? Please call us on (02) 9922 5188 or email us at