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Risk in Context

Welcome Relief for the Aged Care Sector: Workforce Retention Bonus and the Impact on Workers' Compensation

Posted by Lyle Steffensen July 09, 2020

When it comes to the Coronavirus pandemic, the aged care sector has been significantly impacted. In an industry already bursting at the seams to cope with compliance, staff shortages, Royal Commissions and scrutiny by the media and wider community, the National Cabinet’s plans to introduce temporary funding to support Aged Care providers, residents, staff and families, announced in late May 2020, has provided much relief for those within the sector. This announcement includes a AUD$234.9 million grant for a COVID-19 retention bonus, helping to ensure the continuity of the important work that frontline employees within the aged care, residential and home care environment undertake.

According to the Australian Government Department of Health, the bonus will be paid to eligible direct care workers who provide clinical care, personal care or allied health services within the Residential Aged Care or Home Care environments. Staff within the Residential Care environment can receive two payments of up to $800, while Home Care workers can receive up to $600 - the Australian Government clarifying for Aged & Community Services Australia (ACSA) that the discrepancy relates to the particular workforce challenges within the Residential environment since COVID-19.

The two payments of retention bonus consist of one for eligible staff employed in June 2020, and an additional payment for eligible staff in August 2020, paid by their employers. Approved Residential Aged Care Providers, Home Care Providers, Agencies and Approved Multi-Purpose Services (MPS) Providers, can apply for the grant on behalf of their staff. The government also announced that the funding is to be treated as income for employees and will not be exempt from tax.

The responsibility remains on providers to apply for the grant on behalf of their workers. With the extra funds going into the pockets of their frontline workers, some facilities may be wondering what the payment of this bonus means for their Workers’ Compensation premiums, and whether this extra funding could potentially be included in their rateable wages that need to be declared.
Typically, Workers’ Compensation premiums are calculated using the amount payable to employees for their wages, where the higher the wages paid, the higher the premium. With additional funding ultimately increasing an employee’s annual wage, some concern had been expressed that the increase in overall wages may contribute to a significant premium increase for compulsory Workers’ Compensation cover.

Good news, however - the majority of Australia’s states and territories have confirmed the bonus will not be attributable to aged care providers’ rateable wages, with a decision by Victoria on this point still pending. This means that, based on these announcements, other than for Victoria at this stage, bonus payments will not impact the calculation of Workers’ Compensation premiums. Our expert Care Solutions team and Workers’ Compensation specialists are continually monitoring developments and will provide further clarification once confirmed.

While the retention bonus scheme has received other criticism due to its limitations surrounding eligibility, this package, alongside additional government funding, provides much welcome relief to an industry that has felt the brunt of the COVID-19 pandemic.

If you have any further questions, please contact our National Care Solutions Practice Leader, Lyle Steffensen for insurance advice for Aged Care or our Workforce Strategies, Senior Consultant, Claire Chalmers for more specific information on Workers’ Compensation. Be sure to also check out our recent Workplace Risks Q&A from our COVID-19 forum for the Care environment, for more updates on Workplace Risks and advice pertaining to the COVID-19 pandemic.

Please note: This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Any statements concerning tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as tax, accounting, or legal advice, for which you should consult your own professional advisors. Any projections are subject to inherent uncertainty which could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change. The information contained herein is based on current sources we believe reliable but which are subject to change, and we make no representation or warranty as to its accuracy. Except as may be set forth in an agreement between you and Marsh, Marsh shall have no obligation to update this analysis and shall have no liability to you or any other party with regard to the analysis or to any services provided by a third party to you or Marsh. LCPA No. 20/234.

Lyle Steffensen

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