Huge potential hit on health budget

Government Ministers were last night dodging questions about the potential fiscal impact of the pay equity working group decision announced late yesterday.

The group’s recommendations could deliver a hit of several hundred million dollars to the health budget.

The Working Group was the Government’s answer to the fallout from a pay equity claim lodged against the Terra Nova aged care group in 2012 by one of its female employees and the Service and the Food Workers Union.

The Employment Court in a decision upheld on appeal the Working Group found that women in predominantly female workforces could make a claim for pay equity under the Equal Pay Act.

This paved the way for workers in other industries who believed they did not have pay equity to also take legal action and ask the Courts to set principles to implement pay equity for their industry.

In setting up the Working Group last October, Workplace Relations Minister Michael Woodhouse said:“It is not practical or efficient for workers and employers to have to go to Court to seek principles for their particular industry one-by-one.”

The Working Group recommendations  apply to claims from workers in predominantly female staffed occupations and requires the employer – if asked — to negotiate a pay equity claim in good faith.

The Working Group, chaired by Governor General designate, Dame Patsy Reddy, recommends that any pay equity claim will require an assessment of the nature of the work which must be “objective, free of assumptions based on gender and fully recognise the importance of skills, responsibilities, effort and conditions that are commonly overlooked or undervalued in female dominated work.”

The Working Group had its origins in a pay equity claim lodged against the Terra Nova aged care group in 2012 by one of its female employees and the Service and the Food Workers Union.

Aged care workers are mostly female and on very low wages.

 A caregiver working in a District Health Board geriatric hospital receives on average $17.50 an hour compared with an average hourly rate of $15.30 in the private aged care sector.

The Nurses Organisation Industrial Services Manager, Cee Payne, last night confirmed that they believed that $26 an hour would be fair for the workers concerned.

The Working Group decision does not imply that a wage claim as big as that would necessarily be accepted.

In fact, business sources were calling the Group’s recommendations a sort of victory because they would keep any claims out of the Courts.

“Preserving the status quo is a victory,” said one business source familiar with the negotiations.

But even so, something will have to give in the negotiations and the workers are likely to get some sort of an increase.

Plainly any wage increase has the potential to have a huge impact on the Government which would not only have to pay for its own employees in District Health Board facilities but would also face claims for increased contract fees for the private sector homes.

Last December Finance Minister Bill English told POLITIK that the Government faced two big challenges to its operating budget this year — the outcome of the Terra Nova case over equal pay for health care workers and the costs of the Inland Revenue’s Business Transformation computer re-equipment.

Last night his office was directing calls about the potential fiscal impact of the Working Group to Health Minister Jonathan Coleman.

A spokesperson for Dr Coleman would say only that negotiations were continuing, and it was a pretty complex issue.

But Labour’s health spokesperson, Annette King, told POLITIK she had been reliably informed that the cost to the Government could be between $300 and $600 million and that despite Mr English’s comments last year, no provision had been made for the spending in the Budget of a fortnight ago.

Ms King’s figures may not be too wide of the mark. The Aged Care Association says that their calculations show that the sector would need to find an additional $500 million annually to increase caregiver pay rates to the level suggested by the Nurses’ Organisation. 

Lead BusinessNZ representative on the Working Group Phil O’Reilly said the use of normal rules of individual or collective bargaining to reach pay equity outcomes was a straightforward and robust approach.

“The use of existing good faith provisions in the Employment Relations Act and existing dispute processes including mediation, facilitation and determinations from the Employment Relations Authority will assist the parties concerned,” Mr O’Reilly said.

CTU president, lead union representative on the on the Pay Equity Joint Working Group Richard Wagstaff said the group could take pride in the agreed principles.

“We are now closer along the path to achieving equal pay for work of equal value than we ever have been before. New Zealand had led the world in equality when in 1893 women won the right to vote.

“We can still be world leaders, this time in equal pay,” Mr Wagstaff said.

But the Beehive was saying very little.

Workplace Relations Minister Michael Woodhouse simply said: “The Government will now consider the Joint Working Group’s recommendations and expects to respond to them shortly,” Mr Woodhouse says.

“This is a very important issue, and while a lot of progress has been made through this process, it’s important we take the time to get it right.”

This has the potential to derail the Government’s whole fiscal strategy which is presumably why last night no one in the Beehive was really willing to say anything.