Detonating pay equity leaves workers footing the bill

Nicola Willis' state surrender from pay equity not only damages the quality of public services, but will also damage the government's future electability.

Last week a report I authored was released with E tū union, looking at the transparency of public funding in the aged residential care sector. It included a case study on the tax practices of Bupa Care Services New Zealand Limited (“Bupa”), the sector’s second largest company, that does not report the public funding it receives (unlike listed companies in the sector). Bupa is currently in the process of implementing roster changes at 17 of their 40 aged residential facilities.

To indulgently quote myself:

“Our research suggests that over the last decade, Bupa earned $3.3 billion in revenue and $293 million in profit, but only paid a total of $12 million in income tax – an effective tax rate of just four percent. In addition, interest payments on a major intercompany loan appears to have reduced their taxable income by $150 million over the last decade. That could have cost Aotearoa up to $27 million in lost tax revenue over that period.”

The report received excellent exclusive coverage in The Post over the preceding weekend. Aged Care Association Chief Executive Hon Tracey Martin enjoyed a cracking right of reply, eloquently noting that although she disagreed with the union’s approach, she agreed that

the funding model for aged residential care is broken. It’s unsustainable. It pits employers against employees because they are unable to pay their workforce what they believe they are worth. It fails to address pay equity or parity, and it undervalues a diverse workforce. Ultimately, it undervalues the care of our seniors. And if we’re truly committed to fixing this, we need to stop throwing stones and start working together.

It turned out to be a much bigger week for the funding of aged residential care than anyone had imagined, with the Government announcing major changes to the Equal Pay Act the next day, then passing them under urgency.

As Minister of Workplace Relations and Safety Brooke Van Velden describes:

The changes will discontinue current pay equity claims, but new claims can be raised under the amended Act if they meet the new requirements. Review clauses in existing settlements will become unenforceable. Settled claims can be re-raised 10 years after settlement, if the claim meets the new requirements.

This is a massive blow for the majority female workforce in the aged residential care sector. The Care and Support Worker Pay Equity Settlement reached in 2017 backstopped the wages and living standards of some 65,000 mostly women care and support workers and their families, lifting them 21 percent above the minimum wage. Without a commitment to fund it, the settlement expired in June 2022.

Wealth transfer on an industrial scale

1000 days later on 29 March 2025, the PSA calculated that

…[a]bout 65,000 mainly female care and support workers are losing $145 a week they are entitled to. That amounts to $18,662 each.
…
“These workers are now largely back on the minimum wage and many have had no wage increase for two years, making a mockery of the pay equity settlement. The failure to fund a settlement is a major and shameful breach of human rights”, says [PSA Assistant Secretary Melissa] Woolley, who is a former care and support worker.

In other words, not only has each care and support worker already lost out on tens of thousands in missed remuneration, but they may also be locked out from lodging another claim until 2027, costing tens of thousands more for each worker. The haste of these changes is such that this question is unclear.

With Budget 2025 dropping in just under two weeks, these women will pay a crucial role in funding the government’s landlord and income tax breaks ( last year they were debt-funded). The $2.9 billion in annual tax cuts disproportionately accrue to the wealthiest, as Susan St John succinctly explains:

The top 2 quintiles (40% of households) gain $1.6 billion or 55% of the total. But they also benefit by $750m a year from the landlords’ tax reduction. When that is included, they get 64%, by far the lion’s share of the total. What is so shocking is that the lowest quintile gets just 5.4% of the total. About 130,000 households get nothing at all and 8,000 are slightly worse-off.

To most, this is an industrial scale upwards transfer of wealth. But it was meticulously planned.

The month after Budget 2024, Minister of Finance Nicola Willis - who this morning described the Equal Pay Act as “a multi-billion dollar grievance industry driven by public sector unions”, put a paper to Cabinet titled Pay Equity Reset, in which she proposes

“that intensive central involvement in pay equity negotiations cease with the end of the time-limited funding for the Pay Equity Taskforce. I consider that this reduced central involvement will reinforce the primary employer and employee responsibility for bargaining outcomes.”

One little niggling issue…

Problem being that the government had somehow neglected to tell the sector itself.

Since the expiry of the previous settlement, many major providers had been happy to negotiate real wage cuts (i.e. increases below the rate of inflation) with workers, as the sector looked to government to meet its responsibilities under the Act.

Willis’ pre-budget speech mentioned that she was halving new spending, but she didn’t mention who would be paying for these cuts, instead focusing on the apparent “sea of debt and red-ink” left by the previous government.

In an op-ed in The Press, ACA Chief Executive Hon Tracey Martin derided the process that led to the shock announcement:

For months beforehand - at least six months - conversations were taking place, cabinet papers were being written, negotiations were taking place between coalition partners, trade-offs were being made. And while the government was doing all this work behind the scenes, businesses, representative groups and peak bodies were spending time and money on what they thought were good faith interactions with government departments and agencies on current claims.

Tens of thousands of dollars have been spent on jumping through hoops, set by government agencies, which we can now see were really just to keep us busy while quietly the pieces that led to the recent announcement could be moved into place.

It’s unsurprising Martin feels affronted, with the Aged Care Association having just organised an “educational tour delegation” to Australia to see what a properly-funded care sector looks like, involving government and opposition MPs as well as sector leaders. These things don’t come cheap.

Chair of the Health Select Committee Sam Uffindell - who in June 2023 told Parliament that once a month he tries to “take the shopping list off my wife and go out there and fill up the trolley … [which] gives my wife a break” and Committee Deputy Chair Hamish Campbell, an individual “deeply embedded” in a religious group under investigation by the FBI and NZ over sexual abuse allegations, were both part of the ACA delegation.

It seems these two individuals were unaware of the coming changes, based on Bernard Hickey’s timeline:

“A Cabinet sub-committee was set up in December [2024], which culminated in a Cabinet decision in March [2025] and plans for a legislative ram-raid last week. Willis did not tell her MPs until Sunday, many of whom had spoken with her in favour of the original 2020 Act.”

Notably absent from the trip was Minister for Seniors Hon Casey Costello, who would have been aware of the coming changes as a Cabinet member. Costello and her party NZ First are presumably hoping that the damage this decision does to its traditional (senior) supporter base is outweighed by the growth of their newer, alternatively-motivated supporters.

The Care Economy

The Australia delegation was bookended with a stunning electoral victory by the Australian Labor Party, who explicitly campaigned on a commitment to properly funding public healthcare, with re-elected PM Anthony Albanese regularly pulling out his Medicare card on the campaign trail.

As political commentator Russel Howcroft said on Gruen Nation:

Over the last three plus years, what the [ALP] government’s done is reframe the word “economy”… They’ve been talking about “the care economy” ever since they got into government three years, in fact Jim Chalmers wrote a 10,000 word essay in the monthly that talked about the care economy… to literally reframe the word economy to care economy and then win off the back of it is what they’ve done.

This decision is the polar opposite to Willis’.

In aged residential care, the commitment to the care economy has included the introduction of the Australian National Aged Care Classification funding model in October 2022. A crucial part of this is the minimum care minutes rules (per resident per day), which also include a specific number of registered nurse minutes, and specific funding supports these requirements, as well as reporting and compliance measures.

In March 2023 the Fair Work Commission implemented a 15% minimum wage increase in the sector, while additional increases for direct care workers, nurses, and general administrative staff have been implemented during 2025. Collective bargaining pushes these rates up further.

In other words, while the Trump effect was an obvious push effect in the Australian election, the commitment to properly fund the care economy was a powerful pull effect in its own right, that together have paid off political dividends.

The pay equity law changes have made that lesson an important one in the Aotearoa context. Protests have erupted around the country and continue to gain steam. This could be a turning point.

In a follow-up piece we’ll look at the difference between the NZ and Australian aged residential care systems in a bit more detail, including the respective funding models and wage setting mechanisms, the transparency requirements under each system, and the respective tax benefits of each.