Industrial Relations Commission of New South Wales CITATION: Nursing Homes &c., Nurses' (State) Award, Re (No 4) [2005] NSWIRComm 88 New South Wales Nurses' Association, Aged and Community Services Association of New South Wales and ACT Incorporated, Australian Nursing Homes & Extended Care Association (NSW), Australian Business Industrial, Catholic Commission for Employment Relations and Service Industry Advisory Group, Employers First. PARTIES: FILE NUMBER(S): IRC 3069 and 3870 of 2003 CORAM: Wright J President; Sams DP; Boland J; Bishop C CATCHWORDS: Award - Wage Fixation - Application for increased rates of pay and allowances - Nurses - Aged Care - Work value - Special case - Capacity to pay - Continuing education allowance - Rates of pay increased - Award varied Aged Care Act 1997 (Cth) LEGISLATION CITED: Industrial Relations Act 1996 Bank Officers (State) Conciliation Committee (No 1) [1929] AR 61 Cement Workers (Southern Portland Cement Co Ltd) Award (1949) 95 NSWIG 1016 Crown Employees (Officers in Charge, Workshops, Forestry Commission) Award [1964] AR 196 Crown Employees (Public Sector - Salaries 2004) Award [2005] NSWIRComm 53 Crown Employees (Teachers in Schools and TAFE and Related Employees Salaries and Conditions Award (2004) 133 IR 254 Health and Community Employees Psychologists (State) Award (2001) 109 IR 458 Health Employees Pharmacists (State) Award and other Awards (2003) 132 IR 244 Nurses' (Department of Ageing, Disability and Home Care) (State) Award [2005] NSWIRComm 19 Nursing Homes &c., Nurses' (State) Award [2003] NSWIRComm 311 CASES CITED: Operational Ambulance Officers (State) Award (2001) 113 IR 384 Pastoral Industry (State) Award (2001) 104 IR 168 Public Hospital Nurses (State) Award (1989) 32 IR 316 Public Hospital Nurses (State) Award (2002) 115 IR 183 Public Hospital Nurses (State) Award (No 3) (2003) 121 IR 28 Public Hospital Nurses (State) Award (No 4) (2003) 131 IR 17 Public Hospital Nurses (State) Award (No 5) [2004] NSWIRComm 326 Social and Community Services Employees (State) Award (2001) 113 IR 119 State Wage Case 2004 (2004) 132 IR 190 HEARING DATES: 05/18/2004; 05/19/2004; 05/31/2004; 06/02/2004; 06/03/2004; 06/04/2004; 06/10/2004; 06/11/2004; 06/15/2004; 06/16/2004; 06/17/2004; 06/18/2004; 06/21/2004; 06/22/2004; 06/23/2004; 06/24/2004; 06/25/2004; 06/28/2004; 07/01/2004; 07/02/2004; 07/12/2004; 07/19/2004; 07/20/2004; 08/30/2004; 08/31/2004; 09/01/2004; 09/02/2004; 03/17/2005 DATE OF JUDGMENT: 03/29/2005 Ms C M Howell of counsel and Mr N Dawson of counsel New South Wales Nurses' Association Mr A T Britt of counsel Aged and Community Services Association of New South Wales and ACT Incorporated LEGAL REPRESENTATIVES: Australian Nursing Homes and Extended Care Association (NSW) Australian Business Industrial Catholic Commission for Employment Relations Service Industry Advisory Group Mr A Katic Employers First JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES FULL BENCH CORAM: WRIGHT J, President SAMS DP BOLAND J BISHOP C Tuesday 29 March 2005 Matter No IRC 3069 of 2003 NURSING HOMES &c., NURSES' (STATE) AWARD Application by the New South Wales Nurses' Association to vary award re salaries and other matters Matter No IRC 3870 of 2003 NURSING HOMES &c., NURSES' (STATE) AWARD Application by Aged and Community Services Association of New South Wales Inc and others for variation re Nurses' Award published 22 January 1999 DECISION OF THE COMMISSION [2005] NSWIRComm 88 INTRODUCTION 1 In June 2003 the New South Wales Nurses' Association ("the Association") made application to vary the Nursing Homes &c., Nurses (State) Award ("the Award"). The application involved the following amended claims: (a) Variations to all wage rates and consequential adjustments to wage related allowances; (b) A continuing education allowance for RNs, (including managerial, educational and clinical grades) and ENs; (c) The insertion of other outstanding matters including paid parental leave, a reasonable workloads clause and a continuing education allowance for AINs into a Leave Reserved clause. 2 The following month another application to vary the Award was made by a number of employer parties, they being: Aged & Community Services Association of NSW & ACT Inc. (ACSA); Australian Nursing Homes & Extended Care Association (NSW) (ANHECA); Australian Business Industrial (ABI); Catholic Commission for Employment Relations (CCER); and the Service Industry Advisory Group (SIAG). That application sought changes to the Award in relation to the definition of seven-day shiftworker, the definition of ordinary pay, span of hours for working day shift and a clause dealing with leave without pay. The Full Bench was subsequently advised that the employer parties would not be pursuing their variations and sought to have the matters placed in a leave reserved provision. 3 That leaves only the Association's application to be considered in this decision. In respect of wages, the Association sought increases of 27.5 per cent to wage rates for all classifications under the Award, together with consequential adjustments to wage related allowances. On 18 September 2003, by consent of the parties, the Full Bench increased rates of pay by six per cent from 27 August 2003 and expense related allowances by 5.61 per cent: Re Nursing Homes &c., Nurses' (State) Award [2003] NSWIRComm 311. In providing for the interim increase of six per cent the Full Bench stated: [13] The employers, whilst expressing their consent to the increases sought, have made clear they should not be taken to have accepted all the bases upon which the Union contends for the increases. They do, however, make clear that they accept that the increases agreed represent fair and reasonable increases on an interim basis and that they are not such, in terms of the relevant principles as to interim awards, as would embarrass any final result in the proceedings. [14] They also accept there have been changes in the work value of employees working under the award and that that consideration is material to the consent which they have given to the award variation and to the Commission varying the award today. [15] We do not consider that we are obliged to rely on all of the bases upon which the applicant puts forward its claim. We consider it is sufficient for us to find, and we do, that the increase represents a fair and reasonable increase on an interim basis in the rates and allowances under the award. We note the agreement of the parties that work value changes of some significance have occurred and we also consider that the interim increase would not embarrass the final result of any final award in these proceedings. [16] Although what will occur today will be, in a formal way, the variation of the award, we consider that in substance the Commission is making an interim award and that the requirements for the making of an interim award should be satisfied. We conclude that those requirements have been met. We accordingly vary the Nursing Homes &c Nurses' (State) Award in terms of the parties' agreement, including as to cl 19, to which reference has earlier been made. We make the necessary variations in terms of the document filed by the union and which has become Exhibit 2. The variation to cl 19 shall take effect from 18 September 2003. We also vary the rates in Table 1 - Salaries of Part B - Monetary Rates, and Table 2 - Other Rates and Allowances of Part B - Monetary Rates, from the beginning of the first full pay period commencing on or after 27 August 2003. 4 Rates of pay were increased by a further five per cent at the conclusion of the hearing of the evidence and submissions in the proceedings, with an operative date of 27 August 2004. The interim increase arose out of a proposal by the employer respondents whereby it was submitted a further interim increase of five per cent for registered nurses (RNs) and enrolled nurses (ENs) and a further four per cent for assistants in nursing (AINs) would be appropriate. The Full Bench decided on a uniform adjustment of five per cent without prejudice to the Association's claim regarding retrospective adjustment of any wage increases. Our decision on the second interim increase in Re Nursing Homes &c., Nurses' (State) Award (No 3) [2004] NSWIRComm 263 was as follows: [3] The agreement in principle is that it would be appropriate for the Commission to grant a further interim increase in the particular circumstances of these proceedings and the interim increase should be operative from the first pay period to commence on or after 27 August 2004, such operative date being without prejudice to the union's submissions as to retrospectivity. [4] The differences between the parties are: (1) the quantum of any interim increase; and (2) whether any increase granted should be uniform between the classifications. Specifically the employers argue that any increase should be lower in percentage terms for Assistants In Nursing than it should be for Registered Nurses and Enrolled Nurses. [5] We consider that in the light of the common ground between the parties, the special circumstances of the case before us and the principles as to interim awards we should grant an interim increase at this stage of these proceedings. [6] We determine that there should be an interim increase for all classifications of five per cent operative from the first pay period to commence on or after 27 August 2004. We have of course determined the amount of the increase, with regard to the relevant principle, that the quantum awarded on an interim basis should not be such as to "embarrass the final result" of the award proceedings: see, for example, Public Hospital Nurses' (State) Award (2002) 115 IR 183 at [35] and Australian Liquor, Hospitality and Miscellaneous Workers' Union, New South Wales Branch and Employer First [2002] NSWIRComm 207 at [16]. 5 With the two interim increases, the outstanding wage claim is 16.5 per cent. The Association sought payment of this increase retrospectively, with 12 per cent payable from 27 August 2003 (making a total of 18 per cent from that date) and 4.5 per cent payable from 1 January 2004. The Association sought an expiry date for any new award of twelve months from the date of this decision. 6 In presenting its case, the Association relied on the special case, work value and allowances principles under the Commission's wage fixing principles determined in the State Wage Case 2004 (2004) 132 IR 190. In particular, the Association relied upon: (a) a long standing nexus between the Public Hospital Nurses (State) Award and the awards applying to nursing homes that had been disrupted particularly since the late 1990s and which should be restored; (b) the industry as a whole overwhelmingly supports parity with the public hospital system; (b) a significant shortage of nurses that is likely to worsen; (c) significantly increased productivity of nurses of all levels in the RAC sector; (d) a significant increase in the nature of the work, skill and responsibility of nursing staff in the RAC sector since 1 July 1990. 7 Whilst the employer respondents rejected many of the bases relied on by the Association for its wages claim, the employers took a commendably realistic and responsible approach in these proceedings. They have acknowledged there has been increases in the work value of the nursing workforce in the aged care sector (although not to the extent claimed by the Association), reached agreement with the Association on the first interim increase of six per cent and proposed a second interim increase. 8 The employers contended, however, they did not have the capacity to meet the cost of the wage increases sought by the Association or the claim for retrospectivity. The employers submitted that funding rates and resident fees are set and restricted under the terms of the Aged Care Act 1997 (Cth); costs are shared by government and residents - 70 per cent by the Commonwealth and 30 per cent by residents. Accordingly, the employers proposed the following additional wage increases (to the interim increases already granted) on the basis of what they could afford to pay: Enrolled Nurses, Registered Nurses and above · five per cent from first pay period commencing on or after 27 August 2005; · six per cent from first pay period commencing on or after 27 August 2006. Assistants in Nursing · four per cent from first pay period commencing on or after 27 August 2005; · four per cent from first pay period commencing on or after 27 August 2006. The employers sought an expiry date for any new award of 1 March 2007. 9 Finally, by way of introduction, we should record the fact that there was extensive evidence and material tendered by both sides of the record in the proceedings. There were 47 witnesses in all, with proceedings extending over some 30 sitting days excluding directions hearings and conciliation proceedings conducted by Sams DP. 10 The Full Bench also conducted inspections of five nursing homes in the metropolitan area of Sydney, which we found most helpful in gaining a better insight into how the industry operates. Those homes inspected were: 1 Clermont Nursing Home, Ryde. 2 Canberra Nursing Home, Lidcombe. 3 Lilian Wells Nursing Home, North Parramatta. 4 Bethel Nursing Home and A H Orr Lodge, Ashfield. 5 Endeavour Nursing Home, Kogarah. NATURE OF INDUSTRY 11 It is not known precisely but it would appear from the information that is available, the Nursing Homes &c., Nurses (State) Award covers approximately 30,000 registered nurses (RNs), enrolled nurses (ENs), and assistants in nursing (AINs) in the residential aged care (RAC) sector. 12 According to the information sourced by the Association, there are approximately 932 accredited RAC facilities in New South Wales although the number of employers is substantially less. New South Wales has approximately 51,797 funded RAC places, which is almost one third of the Australia wide total. Of this number, about 51,156 were operational as at June 2003. The number of funded RAC places has been steadily increasing over recent years, notwithstanding the increase in programs such as Community Care, which enable older persons to be cared for in the home. Each year the Commonwealth releases additional places that are subject of a tendering process. 13 Residential aged care providers include religious, charitable and community institutions (not for profit providers), various private for profit providers and State and local governments. Approximately 70 per cent of RAC facilities in New South Wales have 60 beds or less. The majority of RAC facilities are made up of hostels and/or nursing homes. These hostels and nursing homes may stand-alone or be co-located. The employers contended that nurses might work in nursing homes and hostels but the overwhelming majority of aged care nurses work in nursing homes and only a small number work in hostels. The employers also contended personal care assistants (PCAs) and care service employees (CSEs) make up the overwhelming majority of the unregistered care staff in hostels and that at some nursing homes AINs and CSEs work side by side performing identical roles. 14 Ms C Howell of counsel with Mr N Dawson of counsel for the Association, referred to what Professor Warren Hogan described in a paper to a conference in October 2003 of the Australian Nursing Homes and Extended Care Association (ANHECA) entitled "Sustainability, What Choices, Future Directions" as the "extraordinary heterogeneity" of the industry. This diversity is reflected in such factors as: (a) the diverse range of institutional structures – private for profit, religious, charity and community based, state and local government; (b) the range in size of RAC facilities – from under 20 to over 100 places or beds; (c) the diversity in size of operators, from single facility operators to national companies running chains of facilities. 15 The Association submitted that whilst there was heterogeneity of operators, the funding arrangements were remarkably uniform across the industry, with the overwhelming majority of all funding coming from the Commonwealth Government, together with Commonwealth controlled contributions from residents. It was further submitted the industry is currently undergoing "massive structural changes driven in part by the requirements of the Aged Care Act." The changes, it was submitted, involve a reduction in the total number of operators and a reduction in the number of smaller sized facilities. 16 The Association observed that the RAC workforce is overwhelmingly (94 per cent) female. About two thirds of all employees are part-time. It was submitted that the proportion of the workforce made up of registered and enrolled nurses working in the industry has decreased significantly, by 17.8 per cent between 1994 and 1999. RELEVANT PRINCIPLES 17 The wage fixing principles relevant to these proceedings are: · Principle 10, Special Case; · Principle 6, Work Value; · Principle 5, Adjustment of Allowances and Service Increments. 18 The special case and work value principles have been recently considered in a number of decisions of the Commission, including, in particular Re Social and Community Services Employees (State) Award (2001) 113 IR 119 at 128 - 130; Re Operational Ambulance Officers (State) Award (2001) 113 IR 384 at 418 - 420; Re Public Hospital Nurses (State) Award (2002) 115 IR 183 at 186 - 190; Re Health Employees Pharmacists (State) Award and other Awards (2003) 132 IR 244 at [23] - [27]; Re Public Hospital Nurses (State) Award (No 4) (2003) 131 IR 17 at [16] - [22]; and Re Crown Employees (Teachers in Schools and TAFE and Related Employees) Salaries and Conditions Award (2004) 133 IR 254 at [30] - [32] and [86] - [96]. It is unnecessary, in light of those recent decisions, to reconsider the principles except to emphasise that: 1 In order to satisfy the requirement for a special case, the applicant must demonstrate that the case has "special attributes" or is "out of the ordinary" so as to take it outside the restrictions which may otherwise apply under the wage fixing principles: Re Operational Ambulance Officers at [166]. 2 An applicant to a special case needs to establish an "adequate evidentiary foundation" to establish the special factors that warrant an award variation in order to set fair and reasonable conditions of employment: Re Operational Ambulance Officers at [168]. 3 A tribunal charged with determining whether the tests under the work value principle have been met must carefully sift through the material that has been placed before it and separate out those changes which have occurred to the nature of the work, skill and responsibility of employees or to the environment in which the employees work and which have not previously been the subject of compensation. An objective assessment then has to be made as to whether the changes that have occurred amount to such a significant net addition to work requirements as to warrant the creation of a new classification or upgrading to a higher classification. The change is to be measured from the last time wages were increased on the basis of work value or from the date of operation of the second structural efficiency adjustment allowable under the State Wage Case 1989 , whichever is the later. An assessment is then to be made as to how that change should be measured in money terms. Such assessment will normally be based on the previous work requirements, the wage previously fixed for the work and the nature and extent of the change in work: Re Public Hospital Nurses' (State) Award (No 4) (2003) 131 IR 17 at [20]. 19 Principle 5(e) of the Commission's wage fixing principles provides that: Where changes in the work have occurred or new work and conditions have arisen, the question of a new allowance, if any, will be determined in accordance with the relevant principles of these principles. The relevant principles in this context may be Work Value Changes or First Award and Extension to an Existing Award. SPECIAL CASE CLAIM - THE ASSOCIATION'S CASE Factors relied upon by the Association 20 The special case factors relied upon by the Association as taking the present case "out of the ordinary" and providing an evidentiary foundation justifying the wage increases sought as being "fair and reasonable" were as follows: (a) There has been a long-standing nexus between the Public Hospital Nurses (State) Award and the awards applying to nursing homes. That nexus has been disrupted particularly since the late 1990s and should be restored; (b) The nature of nursing work in the two sectors has in fact moved towards convergence over the last 15 years as the nursing home environment has become significantly more acute, reinforcing the need to restore the nexus; (c) The industry as a whole overwhelmingly supports parity with the public hospital system for good and obvious reason - that it is necessary in order to recruit and retain appropriately skilled and qualified staff; (d) There is a significant shortage of nurses and that shortage is likely to worsen significantly due to the ageing of the nursing home workforce and the increase in demand for nursing care in the RAC sector if not addressed by appropriate remuneration; (e) There has been significantly increased productivity of nurses of all levels in the RAC sector due to increased workload and reductions to staff numbers; (f) To the extent that the respondent relies upon evidence concerning the financial or economic state of the sector it is rejected; (g) All of the factors relied upon in respect of work value. Nexus 21 Prior to 1989, private for profit nursing homes were covered by the Private Hospital Nurses' (State) Award, with nurses in the "not for profit" RAC sector predominantly covered by the Nursing Homes (Voluntary Care Association) Nurses' (State) Award. In 1971, public hospital rates were introduced by consent in the "not for profit" sector. Consent was not reached in the private sector and the matter was arbitrated. Also in 1971, Cahill J granted parity between public hospital nurses and nurses employed in private nursing homes under the Private Hospital Nurses (State) Award. In so doing he noted that there was "no difference of substance between the value of nurses working in nursing homes and those working in medical wards of public hospitals": Re Private Hospitals Nurses (State) Award [1972] AR 156 at 192 22 In November 1988 the coverage of both the private "for profit" and "not for profit" sectors were transferred to a new award, the Nursing Homes &c, Nurses (State) Award. 23 Between 1988 and 2000 wage parity between the public hospital nurses and nursing home nurses was maintained. After that the wage relationship deteriorated with a two per cent wage adjustment received by public hospital nurses on 1 January 2001 not received by nursing home nurses until 1 July 2002. Increases in the Public Hospital Nurses Award since 1 January 2003, totalling 21.5 per cent for RNs, were not flowed on. However, as we have already noted, a six per cent interim increase was granted to nursing home nurses on 27 August 2003, and a further interim increase of five per cent was granted on 27 August 2004, leaving the differential for RN and EN classifications at 10.9 per cent. The current differential between AINs in public hospitals and those in nursing homes is 7.1 per cent (thereafter), although there is the prospect of further increases being granted to AINs in public hospitals on work value grounds: see Re Public Hospital Nurses (State) Award (No. 4) at [286] - [287]. Convergence of the Hospital and the Aged Care Systems 24 Ms Howell submitted there has been a very significant convergence of the hospital and aged care systems in the last 10 – 15 years. Sixty-four per cent of high care residents now enter a RAC facility from hospital. This convergence, it was submitted, was due to a number of factors including increased age and acuity of residents, and the transfer of many complex nursing procedures from acute hospitals to nursing homes. 25 The Association referred to the evidence of Ms Susan Owens, the Director of Nursing at Eric Callaway House, Phillip Bay who said of her facility: We are really not a nursing home any more (we) are a sub-acute psycho-geriatric unit. 26 Reference was also made to the evidence of Mr Peter Allen, the Director of Nursing at Wollongong Nursing Home, who noted: A nursing home isn't a place that just looks after old people, it's an extension of our medical system. 27 Ms Sue Macri, Executive Director of the Australian Nursing Homes and Extended Care Association (ANHECA), gave the following evidence: Q. To the extent we can see that trend of increased care for residents with severe conditions such as pneumonia in a residential setting rather than acute care setting, what we are seeing is a degree of convergence between the acute care and the residential aged care sector? A. We're seeing that without the additional funding unfortunately because the resident classification scale does not take into account, subacute care or palliative care. Q. We're seeing it in terms of the work but not in terms of the funding perhaps? A. That's exactly right. 28 In particular, the Association drew attention to the evidence of Mr Paul Sadler, Chief Executive Officer, Aged and Community Services Association of NSW & ACT Inc (ACSA), who gave the following evidence when commenting upon the ACSA's submission to the Review of Pricing Arrangements in Residential Aged Care ("the Hogan Review") carried out by Professor Warren P Hogan (Professor Hogan's Review was presented to the then Minister for Ageing, the Hon Julie Bishop MP, on 5 April 2004): Q. I take you to the high medical needs of residents. You will see the submission makes a comparison between the rate of payment for nursing home beds and the cost for the bed day at hospital public or private, paragraph 4 below Quality for Residents with high and/or special needs? A. That is correct. Q. The submission says that is a relevant matter for the review to make. Presumably it is relevant because there are close parallels between the nature of the service provided in a hospital and the service provided in a nursing home particularly in light of the type of procedures which are listed immediately above? A. The comparison notes considerably the health care needs of residents and in the footnote point 18 the fact that that comparison is pertinent given that many high care residents are admitted direct from hospital. As I read the submission it does not argue that it is arguing they are the same or exactly the same level services provided but there are relationships between the two. Q. They are close enough the comparison is relevant? A. It is a relevant comparison, yes. Q. And because of the increased complexity of nursing care in the homes that comparison is becoming more relevant over time? A. That is correct. 29 The Association submitted the rationale for wage parity is now stronger than it has ever been because of the increasing convergence of the two sectors. Nursing shortage 30 The Association submitted the RAC sector is, like the rest of the health industry, suffering a shortage of RNs, ENs and AINs. The shortage, it was contended, has been in existence for a number of years but is showing signs of worsening. 31 The Association referred to the Senate Community Affairs References Committee Report on the Inquiry into Nursing The Patient Profession: Time for Action, which noted in June 2002: Against this background of rising acuity levels of residents, evidence pointed to a number of major trends in the workforce employed in the aged care sector: there is an acute shortage of registered nurses; the number of enrolled nurses in the sector has decreased; and the number of unregulated workers has increased. The Senate Committee concluded that the shortage of qualified staff had reached a crisis point. 32 Other indicators of nursing shortages referred to and relied upon by the Association, and the effects of these shortages, included: (a) A conclusion of the Hogan Review was that the general shortage of nursing staff in the residential aged care sector is greater than in other areas of the health system, that there were specific barriers to recruitment, retention and re-entry to the aged care workforce and that the workforce was ageing. (b) The National and State Skill Shortage Lists for 2003 and 2004, which list only Professions and Trades, show a shortage of registered nurses in aged care nationally and in every State and Territory. (c) Mr Glenn Bunney, the President of the Aged and Community Services Association recently stated in the ACS Update of April/May 2004, under the heading "Staffing crisis", that the shortage of care staff was a major problem for services across the industry. (d) Many of the witnesses in the present proceedings spoke of the shortage of RNs, ENs and AINs (e) Professor Alan Pearson, Executive Director of the Joanna Briggs Institute and Professor of Nursing at La Trobe University noted in his oral evidence: Well, there is a national and international shortage of nurses, this is an international phenomenon established across the aged care field; whenever there is such a shortage there is increased pressure to recruit nurses to the acute care sector so the aged care – there is a knock on effect and it is always exacerbated to recruit in time of shortage… (f) Evidence of the difficulty in recruiting AINs experienced by a number of nursing homes, as was the retention of AINs. (g) Turnover of AINs was also identified by many witnesses as a problem. Dr Bill Martin, Associate Professor and Principal Research Fellow, Flinders University, identified in his evidence in the proceedings that the turnover rate for personal carers nationally was 25 per cent per annum, which is higher than the national average. This was of particular concern in an industry where familiarity with residents is a crucial part of the job. (h) ANHECA, in its March 2003 submission to the Hogan Review stated that because of the difficulties in attracting sufficient nursing staff, it is now commonplace for aged care providers to rely on the use of agency staff. It stated: The detrimental impact of this on the aged care sector is twofold and relates to the ongoing ability to achieve and maintain standards as well as increased costs. (i) A relatively recent phenomenon that has the potential to exacerbate the shortage in the RAC sector has been a drift of nurses back to the public hospital sector. (j) As a result of the nursing shortage, staff are often required to work short staffed because replacement staff are simply unavailable. Finding replacement staff, even when they were available, was described as both difficult and time consuming. Further, unfilled shifts increase pressure on the remaining nurses and encourage remaining nurses to seek alternative work. (k) The shortage of staff is exacerbated by high turnover levels, particularly amongst AINs. This is a significant factor in RAC where continuity of care and familiarity of staff with residents, and their behaviour, is particularly important. (l) The ageing of the RAC workforce has the potential to significantly aggravate the shortage of nurses in the sector in the next 10 years. Statistics from the Australian Institute of Health and Welfare shows that between 1993 and 1999, the average age of nurses in residential care facilities moved from 42.3 to 44.5. Data extracted from Australian Bureau of Statistics data shows that about a quarter of personal carers (which includes AINs) and ENs are over 50 and about 46 per cent of RNs are over 50. Forty per cent of the aged care workforce is between 45 and 54 and 17 per cent of the workforce is aged 55 – 64. (m) There was evidence about the age of both RNs and AINs at individual facilities. At one facility, 12 of the 13 RNs were over 40; nine of them were over 50 and of the AINs, 12 out of 19 were over 40. (n) Professor Pearson said in his evidence: [T]he recruitment and retention report, shows that there is a major problem in the recruitment of young nurses in the field of aged care…The evidence is that the workforce within the sector particularly the registered nurses workforce is aging; it is over the mid 40s now and there is few young nurses coming into the field. There have been numerous reports over the last 10 years; practically every state and territory has done a local investigation into recruitment and retention and nursing in general and aged care; all of them identify there is a problem that has been developing at least for a decade and that in the future it is likely to be much worse. (o) The Hogan Review found there is a projected increase in the demand for nursing staff in the RAC sector, due to the ageing of the population and the projected increase in RAC places. 33 The Association submitted in relation to the nursing shortage that the Commission could conclude there is presently a very significant shortage of nurses of all classifications in the RAC sector. The shortage is widespread and not limited by region or by classification. Further, that: [T]he shortage can be expected to worsen significantly, all other things being equal, due to the aging of the RAC workforce. At the very time that this is happening, the demand for nursing staff will increase. If the present extreme difficulties are not addressed, then a crisis of very substantial proportions can be expected. Industry support for wage parity 34 The Association contended there was an abundance of evidence that "players within the industry, peak employer bodies and individual employers regard parity of wages between the public hospital sector and the RAC sector as essential" and that "[t]his proposition is advanced by employers primarily on the basis that without parity it is not possible for the RAC sector to recruit and retain sufficient nursing staff." 35 The evidence referred to by the Association included: statements from senior executives of ANHECA and submissions to various inquiries by that body; the findings of the Senate Community Affairs Committee inquiry into nursing, entitled The Patient Profession, A Time for Action, which recommended that "the Commonwealth provide additional funding to implement wage parity between aged care and acute care nurses in each state and territory"; a report into nursing issues in aged care produced by the University of South Australia Centre for Research into Nursing and Health Care, published in March 2002 that recommended "[w]age parity for registered nurses in the residential aged care sector compared to registered nurses in other areas…"; the preferred position of ACSA that "we are able to achieve wage consistency between the aged care sector and the acute care sector" (their concern being that this was to be done in a manner that was funded by the Government); and submissions by various bodies to the Hogan Review calling for the removal of wage disparities between the public sector nurses and those in aged care. 36 Ms Howell referred to the Commonwealth's position regarding wage parity and the statement in January 2004 by the then Minister, Ms Julie Bishop that: The Australian Government also recognises the disparity in wages between the aged and acute care sectors, which have (sic) arisen as a result of different State and private enterprise agreements. In the 2002-3 Federal Budget the Government provided $211.1 million over four years for increases in residential care subsidies, which will help employers of aged care workers provide for increases in wages and improved workplace conditions . 37 Reference was made to the 2004-05 Budget that, it was submitted, provided funding expressly targeted towards wage parity. In respect of an additional $877.8m over four years, the Budget Papers stated: This will assist aged care providers to continue to provide high quality care for older people, including assisting in paying more competitive wages to nurses and other staff. 38 In stating its conclusions on the parity and nursing shortage issues, the Association submitted: Parity between the public hospital sector and the RAC sector was established by arbitrated decision of the Commission in 1971. There is no industrial justification for this loss of relativity, and indeed the evidence is to the contrary, that the role of nurses in the RAC sector has become more akin to nursing in an acute hospital, but with other factors (such as lack of immediate medical support) which make it even more challenging. The loss of parity has exacerbated shortage issues and those issues are set to worsen to a serious degree in future. Further what emerges clearly from the above evidence is the strong link between parity and quality of care. The concerns of the industry as a whole are clear. Parity is essential in order that quality staff be attracted and retained. The applicant submits that the evidence set out above comfortably established circumstances which are out of the ordinary and which support pay increases under the special case principle. The only perceived obstacle to the restoration of parity is the perceived inadequacies in funding. The Commonwealth obviously takes the view that funding, in light of recent increases, is adequate for the purposes of achieving parity. Productivity issues 39 It was submitted by the Association that the productivity of nurses, in terms of residents cared for, has increased significantly at a time when the work of providing care has become increasingly complex and challenging. In this respect it was submitted: (a) The total number of RAC beds in NSW has increased significantly over recent years. (b) The occupants of those beds are older, frailer and sicker than ever before. (c) The total number of workers in the RAC industry decreased between 1995-6 and 1999-2000. The number of RNs and ENs has certainly decreased substantially. (d) The volume of work to be performed in respect of each resident has increased, for reasons including increased acuity and dependency, and the increased administrative requirements under the Aged Care Act 1997. (e) The share of work in nursing homes and hostels provided by registered and enrolled nurses has declined. Professor Hogan showed that the decline has been significant with a 17.8 per cent decline in the two categories between 1994 and 1999. This decline has occurred in the context of increasing RAC bed numbers and increased acuity. Accordingly, a reduced number of nurses, with a different (and less costly) skill mix are performing more work. SPECIAL CASE CLAIM - THE EMPLOYERS' CASE 40 The employers' chose not to deal seriatim with each aspect of the Association's claim but, nevertheless, addressed each of the main aspects of the claim relying on their extensive evidence and other material tendered in the course of proceedings. Nursing shortages 41 The employers submitted wage increases should not be awarded as a result of shortages since: (a) such an approach is contrary to long-standing principle to set rates to address shortages; (b) there are public interest reasons why industrial tribunals do not award increases to address shortages including: (i) the rates do not reflect true work value; (ii) once awarded such rates are almost impossible to remove even after the shortage has gone; (iii) the new rates become the 'market rate' and inevitably flow on to those working elsewhere as personal care assistants; and (iv) such matters are better addressed by employers who have difficulties recruiting to pay an above award salary which allows any increases to be targeted to where there may be a need in respect of both issues of classification and geography. 42 Further, it was submitted, the evidence of Professor Pearson revealed a range of reasons, in addition to wage levels, that nurses leave aged care employment, including: · personal or family reasons; · low pay; · low staffing levels; · excessive documentation; · poor status as factors related to leaving the aged care sector; · shortage of qualified staff (high workload); · physically demanding or unpleasant work; · lack of job satisfaction; · psychologically demanding work; · lack of funding and equipment; · inadequate care for residents. 43 In these circumstances, it was submitted, the issue of pay was but a single factor in retaining and attracting nurses and so any increase in rates was unlikely to have a significant beneficial effect on recruitment and retention, but would impose a significant burden on the employers. 44 The employers referred to the evidence of Professor Pearson that recruitment and retention problems have plagued the aged care sector for the last 20 years during a period when there was wage parity between the aged care and public hospital sectors. In those circumstances, it was submitted, to increase wages of aged care nurses in line with nurses in the acute public health sector would not cause a rush of nurses into the aged care sector. 45 The employers referred to a reference by Dr Martin in a February 2004 Report by the National Institute of Labour Studies ("NILS") where it was concluded: The aged care workforce is not a labour market in crisis in the sense that the residential aged care facilities do not face overwhelming difficulties in meeting their needs for the provision of direct care workers. 46 The employers contended that although the February 2004 NILS Report suggested some difficulty in recruiting RNs, the number of vacancies for direct care workers was generally low in residential aged care facilities. 47 Mr A Britt of counsel for the employers referred to a report by Dr Martin prepared for ACSA and ANHECA setting out the results of his analysis of a survey that the two organisations had asked their members to complete in 2003. Mr Britt submitted the results of this survey were generally comparable to the February 2004 NILS Report. 48 Mr Britt submitted: The Survey found that the facilities that provided data for the combined survey were not facing significant difficulty in attracting Registered Nurses, Enrolled Nurses or Assistants in Nursing. There was a low proportion of hours undertaken by agency staff. There was a low proportion of overtime worked by staff. Few facilities paid any classification of staff over award payments. There are few differences in labour market conditions between Sydney and non-Sydney facilities, but it is possible that Sydney facilities faced somewhat greater difficulty in finding staff than those located elsewhere particularly in the higher use of agency supplied Assistants in Nursing and Registered Nurses as well as the higher rate of vacancies for Assistants in Nursing in Sydney compared to elsewhere. Further, the results of the survey showed that in comparison to the results set out in the February 2004 NILS Report, the facilities surveyed appear to face a somewhat more benign labour market than all Australian facilities and these facilities do not currently face unusual difficulty in recruiting Enrolled Nurses and personal care assistants. 49 Counsel for the employers referred to evidence led by the Association relating to: § The use of agency staff to replace staff who are absent or supplement the permanent workforce; § Difficulties said to exist in finding replacement staff where employees are absent; § Actual vacancies at the time of the hearing; § Recent recruitment of nurses into the aged care industry; § Reasons why staff leave employment in the aged care industry; § Casual pools in the aged care industry; § Staff moving to the public hospital system from the aged care industry; § Difficulties in recruitment varying between areas; § Other strategies to attract staff to the aged care sector other than by paying increased salaries. 50 In relation to this evidence the employers submitted: [T]he lay witnesses at best demonstrate a smaller number of vacancies that would be expected in any industry when a snap shot is taken of vacancies in the industry especially where the levels of part time and casual employment is particularly high. The level of vacancies … is such not to warrant any salary increase. The bulk of the evidence is that the real difficulties arise in replacing staff who are absent, especially at short notice, rather than employment into "permanent" positions. In our submission this occurs across a range of industries and does not warrant a salary increase. Further, a number of employers … are still able to maintain a casual pool in order to cope with this situation or are able to engage agency employers. Further, the evidence does not demonstrate a significant loss of nurses to the public hospital system. Further, despite the alleged shortage and lack of parity with wages in the public hospital system the lay evidence demonstrates that employers in aged care are able to recruit new employees. 51 The employers referred to a federal Government announcement of a number of initiatives to increase the number of persons graduating as nurses in aged care with increased funding of 400 undergraduate higher education places in nursing specific to aged care growing to an extra 1094 places after four years. Further, that there was funding of up to 15,750 places for aged care workers over the next four years to obtain or upgrade their qualifications up to EN level and funding for a further 5,250 ENs over the next four years to obtain training in medication management and the English language for up to 8,000 aged care workers. 52 As to the studies and papers relied upon by the Association to demonstrate a shortage of nursing staff, the employers submitted they go to show a shortage of RNs not of AINs, who make up a much larger proportion of the industry's workforce. As to the shortage of RNs the employers submitted it was restricted to casual relief and in respect of permanent employees it would appear that any shortage is not uniformly across the board but restricted to certain pockets of Sydney and the far North Coast and in nursing homes as distinct from hostels. 53 In relation to the issue of parity, the employers referred to what was said in Re Public Hospital Nurses (State) Award (No 3) (2002) 121 IR 28 at [117] - [118]: [117] Mr Ronsisvalle referred in his evidence to the prospect of a flow on to rates of pay for nurses in the Private Hospital Industry (State) Award and the effect of that on charges for private health services. He said "Increased private health insurance premiums would be likely to push people back from the private to the public health system. This will be a further source of cost pressure on public hospitals." [118] Given the basis upon which we propose to increase rates of pay for public hospital nurses we do not envisage any automatic flow on to private hospital nurses. Any increase to private hospital nurses would only occur if a proper case was made out under the wage fixing principles in respect of proceedings involving the relevant award or awards. 54 It was submitted if parity of wages between nurses in the public hospital system and the aged care sector was the basis for a special case increase it would undermine the need for the Association to make out an increase only if a proper case was made out under the wage fixing principles in respect of nurses in aged care. 55 It was conceded that following the 1972 decision of Cahill J in Re Private Hospitals Nurses (State) Award "[t]here has been up until relatively recently a close nexus between the rates of pay for nurses in public hospitals and those nurses employed in the aged care sector." However, the employers submitted that even though for a substantial period of time there was parity or near parity in wages for nurses engaged in the aged care sector with those engaged in public hospitals and even though it was a number of the employers' policy to have parity or seek to have parity, this was not a basis for re-establishing parity. 56 It was submitted that the nature of work for nurses in both the public hospital system and in aged care have changed considerably in the last 32 years and what was appropriate then need not be appropriate today. In this respect it was submitted: In the 1970s nursing was still within the hospital system where nurses did their training and their education in their working environment. So that nursing in the 70s was very different to nursing today when nurses attend universities, do an undergraduate degree and they have clinical practice while they are doing that and then they come out into the health care industry as a registered nurse. In the 1970s nursing homes were very much more on a medical model compared to today. Residents in those days were called patients. They were in, probably, anything from a 12-bed ward down to a 2 or 4-bed ward and they were not assessed by the Commonwealth as needing nursing home care. Today the residents, they are called residents. They live in what we try to call a home-life environment. They live in, today there are still some 4-bed ward nursing homes around, but predominantly they are 2-bed and single-bed with en suite where residents are able to create and make their own environment. 57 Additionally, it was submitted that parity of wages does not exist in other States. Further, that from approximately 1992/93 there was, in general (except for one period), a lag between changes in rates between the aged care sector and public hospitals as a result of the Union entering into enterprise bargaining in the public sector. During the 1990s the aged care sector had different priorities on management structures than those in the public hospital sector. In addition, during this period, there were changes in conditions between the aged care sector and the public hospital sector. 58 Mr Britt submitted that since the late 1998 employers in NSW have begun to change their thinking on the issue of parity. The initial basis for such a change was a change in the funding model for the industry from the Care Aggregated Model (CAM) that funded wages on actual award amounts that changed to the Commonwealth Own Purpose Outlays ("COPO") payments whereby subsidies are indexed each 1 July on a formula that takes into account the Consumer Price Index (CPI) movement from March to March and the safety net adjustment flowing from the national wage case as a percentage of Average Weekly Earnings. The mix used by the Commonwealth is 25 per cent CPI and 75 per cent of the safety net adjustment. 59 It was acknowledged that employers still supported parity provided it was economically sustainable and there was a clear relationship between parity and funding. A large gap in wages between the sectors was conceded as being undesirable in the long term. 60 Nonetheless, the employers submitted: In the last twelve months employers in NSW are beginning to see themselves as being different from the public hospital system and that aged care should be pursuing an Award that is relevant to the aged care industry rather than continually piggybacking up the public hospital system … Further, this thing is in part motivated by both the size of this claim by the Union and the limitations of COPO funding ... Finally the aged care sector is unsure as to the work value of nurses is equivalent between the sectors in 2004. The Union's claim is not for parity but wage increases in excess of the public health sector of some 5.5% for RNs and ENs and 9.5% for AINs. Further, in considering the issue of parity it is important to consider the impact of salary packaging in particular in the not for profit public benevolent institutions where salary packaging provides an enhanced benefit than similar packaging in the public hospital system ... The effect of such packaging is that an employee in the aged care sector employed in a public benevolent institution may have a smaller gross package than a comparable employee in a public hospital but a greater take home remuneration package. The evidence is that salary packaging was widely available in the sector. Although it is conceded that the scale benefits of salary packaging will greater reward those on higher wages. The Respondents invite the Commission to recognise that aged care sector has now developed into an industry in its own right and that nursing staff working in aged care should be regulated and remunerated accordingly. The Respondents submit that this is appropriate given that across Australia the industry is the ninth largest employing industry … Further, given the system of funding which now applies to a national industry the appropriate comparisons of wages may well be wages paid to aged care employees in other states given those wages have to be paid out of the same funding formula. Productivity/workload 61 The employers referred to the Hogan Review, which showed an increase in the number of persons employed in the residential aged care industry in direct community service provision from 92,000 in 1995/96 to 110,867 in 1999/2000 - an increase of 20.5 per cent. By 2003 this number had increased to 116,000. 62 Although it was conceded that the figures in the Hogan Review showed that the number of registered and enrolled nurses in the sector have decreased as a percentage of the direct care workforce, in particular, in accommodation for the aged, there had been a considerable increase in the number of personal care assistants employed. 63 The employers submitted that there was no direct evidence in the proceedings that the change in ratios has led to an increased workload for nursing staff generally or any nursing classifications in particular. CONSIDERATION OF SPECIAL CASE CLAIM Nexus and Parity Issues 64 It must be accepted that there had been for a considerable period of time, since the early 1970s to the latter half of the 1990s, a nexus between award wage levels of nursing staff in aged care and those in public hospitals. The Association submitted the nexus should be restored and that there should be parity between the two groups. 65 We are not inclined to restore parity simply because of an historical nexus in the award rates of pay for nursing staff in the RAC sector and public hospitals. Of course, the Association did not rely solely on the historical connection but submitted there had been a convergence in the nature of nursing work in the two sectors over the last 15 years as the nursing home environment has become significantly more acute, that there was widespread industry support for parity and that there was a significant shortage of nurses in aged care. 66 Putting aside for the present the comparative value of the work of nursing staff in the two sectors, we are not satisfied that, on special case grounds, we should restore parity by re-establishing a wages nexus so that whenever there is an increase in rates of pay for nursing staff in public hospitals it would automatically flow to the relevant classifications in the Award under consideration. Now that the nexus no longer exists we consider the Award should continue to stand alone. 67 We accept that nursing homes are involved in providing more acute levels of care than was the case 15 years ago and there has been some convergence of the nature of nursing work in nursing homes with that performed in the public hospital system. However, we do not consider that is a reason for restoring parity. In our opinion, the nursing home environment and the factors that create that environment are different to that of public hospitals and, in the context of wage fixation, give rise to different considerations. The terms and conditions of employment in the awards covering nursing staff in the two sectors should be determined not primarily by reference of one to the other but by applying the relevant legal and industrial principles to the facts and circumstances of the sector under consideration at the time. 68 That is not to say that the rates of pay for nursing staff in public hospitals is not a relevant consideration in determining rates in the aged care sector. There has been, and we consider there continues to be, a strong relationship between the work value of nurses in the two sectors and RNs are able to move relatively easily between the two sectors. It would be unfair and inconsistent with the requirements of s 10 of the Industrial Relations Act to provide fair and reasonable conditions of employment for employees to allow too big a gap to develop between the award rates of pay for nurses in the two sectors because of the strong work value correlation. 69 Further, if award rates of pay become too much out of kilter it will distort the nursing labour market by disadvantaging one sector against the other in their competition for what continues to be a relatively scarce resource, namely, nurses. The employers recognise this and many favour the parity principle but they face the limitations imposed by the Commonwealth's funding arrangements - a paramount consideration for them given that the Commonwealth substantially funds the sector. It may be noted that Ms Macri, Executive Director of the Australian Nursing Homes and Extended Care Association, described the sector, as "a franchise of the Commonwealth". 70 Whilst we do not propose to restore parity we do propose to increase rates of pay for nurses in the RAC sector beyond the interim increases already granted. In doing so, we are acknowledging the longstanding nexus that has previously existed and although the nexus no longer applies a significant wages gap emerging for the reasons expressed above should be avoided. At the same time, sufficient flexibility and scope to set wages in the Award according to the peculiar circumstances of the aged care industry without the overbearing influence of a formal nexus should be provided. Nursing shortage 71 We are satisfied there is a shortage of nursing staff in the aged care sector. This is consistent with the national and international shortage of nurses referred to by Professor Pearson in his evidence. We are also satisfied the RAC workforce is ageing and coupled with the difficulties being experienced in the recruitment of young nurses in the field of aged care, this has the potential to significantly aggravate the shortage of nurses in the sector within the next decade. 72 We do not consider the evidence supports a finding that the present shortage is acute across the three nursing strands (i.e., RNs, ENs and AINs) or that it exists amongst the higher nursing classifications of Directors of Nursing (DONs) and Deputy Directors of Nursing (DDONs). The shortage is concentrated mainly amongst RNs. Nor do we consider the evidence supports a finding that the industry is in crisis or under serious strain as a consequence of the shortage such that this would be a factor in deciding to grant a wage increase across the board: see Re Public Hospital Nurses (State) Award (No 3) (2002) 121 IR 29 at [89]. 73 A claim for wage increases cannot succeed if it is based solely on the contention that there is a shortage of a particular skill or class of labour: Public Hospital Nurses (No 3) at [90]. In Public Hospital Nurses (No 3) at [89] the Full Bench granted increases to nurses on the basis of evidence that the nursing shortage: … [I]s causing a strain on the public hospital system in New South Wales; that the shortage is a serious problem that needs to be addressed as a matter of priority both in respect of the short and long term; that nurses are coming under increasing stress because of the shortage, with an effect on the value of their work; and, critically, that nurses' wages are below the level of all other comparable health professionals and this is contributing to the nursing shortage. 74 It is apparent, as we have said, that there is a shortage of RNs and the evidence was that those employed in the aged care sector are coming under increasing stress as a consequence. The wages of RNs (and ENs and AINs) in the aged care sector are also below the level of their counterparts in public hospitals and whilst it is difficult to gauge the extent to which the higher rates of pay for nurses in public hospitals is exacerbating the shortage in the aged care sector, there was some evidence this was the case. The medium to long-term outlook of an increasing nursing shortage in the sector is also a matter of concern. 75 The Full Bench in Public Hospital Nurses (No 3) at [106] determined, on balance, that as a general proposition pay was an important consideration for nurses both in terms of attracting people to the profession and in retaining them. However, the Full Bench agreed with the Report by Dr John Buchanan and Ms Gillian Considine of the Australian Centre for Industrial Relations Research and Training (ACIRRT), University of Sydney in May 2002 that pay was but one issue and an increase in wages, on its own, would not solve the problem of the nursing shortage. 76 We consider the Full Bench's view in Public Hospital Nurses (No 3) on this issue applies equally to the aged care sector and we accept Professor Pearson's evidence that there are a range of reasons, in addition to wage levels, that influence nurses in taking up and in leaving employment in aged care. 77 We consider, nonetheless, that a wage increase for RNs in the aged care sector would contribute to alleviating the present shortage of such nurses, relieve the pressure on RNs employed in the sector, redress the wages imbalance with RNs in public hospitals and assist in lessening the prospects of a serious nursing shortage in the medium to longer-term. We do not consider a wage increase for other nursing classifications is justified on the grounds that a nursing shortage exists. Productivity issues 78 We accept the evidence and the Association's submissions relating to the increase in workload and productivity amongst nursing staff in the aged care sector. That evidence and submissions was to the following effect: (a) The total number of RAC beds in NSW has increased significantly over recent years. (b) The occupants of those beds are older, frailer and sicker than ever before. (c) The total number of workers in the RAC industry decreased between 1995-6 and 1999-2000. The number of RNs and ENs has certainly decreased substantially. (d) The volume of work to be performed in respect of each resident has increased, for reasons including increased acuity and dependency, and the increased administrative requirements under the Aged Care Act 1997. (e) The share of work in nursing homes and hostels provided by registered and enrolled nurses has declined. Professor Hogan showed that the decline has been significant with a 17.8 per cent decline in the two categories between 1994 and 1999. This decline has occurred in the context of increasing RAC bed numbers and increased acuity. Accordingly, a reduced number of nurses, with a different (and less costly) skill mix are performing more work. WORK VALUE CLAIMS - THE ASSOCIATION'S CASE 79 The Association relied on the following matters in support of its work value claim, submitting that there had been such a degree of change as to give rise to a significant net addition to work requirements for all classifications thereby justifying the pay increases sought: (a) The impact of the Aged Care Act 1997, including but not limited to the Resident Classification Scale and the Accreditation requirements; (b) Changes to the resident population including ageing and increased acuity; (c) Increased complexity of medical procedures undertaken in residential aged care facilities, including IV treatment, PEG feeds, care of tracheostomies etc; (d) Decreasing length of stay of residents; (e) Increased incidence of dementia; (f) Increased incidence of palliative care; (g) Increased training and skill requirements; (h) Higher levels of multiskilling for all classifications; (i) Substantial increase in volume and complexity of documentation to be completed by all levels. 80 In respect of AINs, the Association relied upon the following additional factors as giving rise to "a very significant work value increase": (a) The impact of the AIN review in the mid 1990s; (b) The introduction of the certificate III qualification in the late 1990s; (c) The increased clinical role assumed by AINs; (d) The increased range of duties performed by AINs; (e) The reduced levels of supervision of AINs. 81 In respect of ENs, the Association relied upon the following additional factors as giving rise to "a very significant work value increase": (a) The introduction of the Certificate IV qualification in the early 1990s; (b) The increased clinical role of ENs; (c) The increased range of duties performed by ENs. 82 In respect of RNs and managerial grades the Association relies upon the following additional factors as giving rise to "a very significant work value increase": (a) Increased scope and complexity of clinical functions; (b) Increased supervisory functions; (c) Increased range and complexity of managerial /administrative functions. Impact of the Aged Care Act 83 It was submitted by the Association that the Aged Care Act represented a "massive change to the way in which the industry is structured and funded". Most importantly for the nurses in the industry, it was submitted, the Act introduced a new Resident Classification Scale (RCS), and it established mandatory requirements for the purpose of accreditation of facilities. Each of these, the Association contended, has placed additional burdens on nurses of all classifications. 84 The Association referred to what ACSA said in its July 2001 submission to the Senate Inquiry into Nursing: In 1997 the Federal Government introduced a residential care reform program that saw the introduction of accreditation and a changed Residential Classification System (RCS). While these changes were welcomed as positive moves by the industry, their introduction has created a higher administrative workload for aged care services. There is considerable anecdotal evidence that this heavier 'red tape' workload has resulted in nurses leaving the sector. 85 The Association submitted that prior to 1997 there were standards that were monitored, but no formal accreditation process. RAC facilities must now apply for accreditation and satisfy accreditation requirements in order to receive funding. Accreditation assesses the performance of facilities against 44 outcomes of the four accreditation standards which are: · Management systems, staffing and organisational development; · Health and personal care; · Resident lifestyle; and · Physical environment and safe systems. Facilities must be accredited by the Aged Care Standards and Accreditation Agency not less than every three years. 86 In relation to the accreditation process the Association referred to the evidence of: Ms Lucille McKenna, Director of Nursing at Palm Grove Nursing Home, Narraweena; Professor Pearson; Ms Lorraine Read, Director of Nursing at Bethel Nursing Home, Ashfield; and Mr Andrew Cant, a registered nurse who had worked as a Director of Nursing and a Deputy Director of Nursing in Aged Care. 87 In her oral evidence Ms McKenna described the effect of the accreditation requirements of the Aged Care Act on nursing work: Q: First of all can you explain the relationship between the quality improvement process and the accreditation requirements under the Act? A: Well under the Act, every aged care facility is required to be accredited, and one of the main requirements of accreditation is that we have in place a continuous quality improvement process. So it requires that we actually have a quality improvement committee and we go through the various aspects of proving that we are continuously improving our outcomes. Q: How does the quality improvement regime which is now in place compare with the system which was in place prior to the introduction of the Aged Care Act? A: Prior to the introduction of the Aged Care Act, we were monitored, what we call outcome standards and basically the outcome assessors that came along to the facility looked at outcomes only. The main change is that there is an absolute requirement that you prove you meet generally those outcomes and that is where this enormous workload has generated from that proving and being able to direct everything you do. Q: Could you explain to the Commission what the consequences in practical terms for the nursing staff are of the changes you referred to? A: Well the consequences have been absolutely enormous. You start with the actual application. Previous to the Aged Care Act there was no requirement for an application as such as there is now. The application is enormous that takes some usually the rest of your workload, it would take you some months to prepare and you have in that application to show everything that you have that is going to prove you are achieving the outcomes that you say you are achieving. 88 Ms Read said of the changes since 1997: …[N]ow the documentation, when the accreditation team come to the nursing home which is usually for two days and they look at everything, they certainly look at the documentation, they look across the board. For instance, if you had a nurses meeting and at the nurses meeting you decided to buy a new lifter, they would look at what we did with that decision, we would have to show we took it to the management meeting and (had) done an assessment, and then we would have to loop that all around until the documentation so they do a paper chase I guess so, and also in our documentation. Now we in our management, where we set goals we show at the end of the year how many in percentage in those goals we have achieved. Things like that we never would have done before. It is a new experience I guess. 89 The RCS determines funding for each individual resident. Assessment of each resident is required: · on admission; · upon transfer from another residential care facility; · following a dramatic change in care needs; and · annually. For each assessment, nurses are required to conduct detailed assessments in relation to 21 different areas of the resident's behaviour and condition. 90 The Association's evidence was that requirements of the RCS and associated documentation requirements were continuing to add extra pressure on nursing staff. In this respect, the Association referred to the evidence of Professor Pearson, Mr Cant, Ms Annette Peters ((RN) Assessment/Admissions Officer, UnitingCare, Springwood), Mr Benjamin Brouwers ((RN) Director of Nursing, Veronica Nursing Home), Ms Christina Heath ((RN) Community/Duty RN and after hours supervisor at RSL Veterans' Retirement Village, Narrabeen), Ms Fiona Bell ((RN) Acting CNS, Raffles Assisted Aged Care, South Tweed Heads), Ms Grace Dawson ((RN) Director of Nursing, Endeavour Nursing Home), Ms Jan Armstrong (Director of Nursing, Lilian Wells Nursing Home), Ms Kim Hunn ((RN) Miranda Nursing Home), Ms Louisa Chambers ((RN) Director of Nursing, Pinehaven Nursing Home, Suffolk Park), Ms McKenna, Ms Sonya Hughes ((RN) Strathlea Nursing Home, Armidale), Ms Susan Owens ((RN) Director of Nursing, Eric Callaway House, Phillip Bay) and Ms Yolanda Gleeson ((RN) Tweed Heads Residential Aged Care Facility). Ms Gleeson noted that when she started in aged care in 1989, she spent one hour per day on documentation; she now spends four hours per day. Changes to the resident population 91 The Association submitted it was beyond doubt that residents cared for by nurses in aged care facilities have become older, more dependent and sicker. It was further beyond doubt that the degree of change in this respect has been very substantial, because of the combined effect of a number of factors, including the ageing of the population, and programs designed to assist the elderly to remain in their homes for longer. 92 The Association noted that as at June 2003 over 50 per cent of RAC residents were over the age of 85. This average age has been increasing over time and was one of the contributing factors leading to a frailer, more dependent and sicker resident population. 93 It was submitted that with the shift in emphasis towards community care where aged persons are appropriately cared for at home, those entering residential care tend to be older and frailer, and thus more likely to require a high level of care. 94 The Association submitted that a further development contributing in a substantial way to the increased frailty and acuity of the RAC population is the transfer of care from acute hospitals to the RAC sector. The general trend, it was submitted, was to avoid admitting residents to acute hospitals, and to minimise the length of stay where such admission was unavoidable. This was particularly the case with residents suffering from dementia. 95 The Association relied on evidence given by Ms McKenna as follows: Q. I take you to paragraph 122. You refer there to the fact that public hospitals are transferring nursing home residents sometimes within twenty four to forty eight hours after surgery such as hip replacement. In your experience does that represent a change over time from what occurred, say, ten years ago? A. Absolutely. Definitely. In years gone by people would have had their surgery and gone back to a rehabilitation unit but now if the person is in a nursing home the likelihood is they would be returned to you as soon as possible and that can be as soon as twenty four hours after surgery. It is almost as soon as they remove the drips and things that make it difficult for people to be transferred, they are transferred back to the nursing home. 96 Similarly, reliance was placed on the evidence of Ms Heather Pirie, RN and Supervisor, Coffs Harbour Masonic Village, who stated: When I started in aged care, I never had to do a CAPD [continuous ambulatory peritoneal dialysis], PEG feeds, and now hospitals try and get people out earlier and only want acute people in there. They are leaving more care to us in the nursing home. ... Unstable diabetes, people with colostomies, complex dressings, complex pain management programmes, people coming straight after theatre that need rehabilitation. It's a lot more intense now than it used to be. 97 The NSW College of Nursing submission to the Productivity Commission in November 1998, relied upon by the Association, discussed the issue of early discharge. The submission observed: Discharge one or two days post surgical hip replacement or repair of a fractured neck of femur is not uncommon. This in itself demands a high level of skill and resources, but combined with the aforementioned concomitant disorders, with or without dementia, the required level of skill and resources, human, technological and other, rises markedly. 98 In relation to the extent of increased acuity, the Association explained the RCS is the tool used by the Commonwealth to determine funding for each resident. It provides a measure of resident dependency. It provides for eight levels, four "high care" and four "low care". The level of each resident is determined using a bundle of 21 indicators, including such matters as continence, behavioural issues, communication skills, and technical and complex medical procedures required. 99 The Association referred to statistics that showed as at June 2002, almost two thirds of residents in residential aged care facilities were classified as "high care" (i.e., RCS 1-4). Within the high care group, the number of RCS 1 (the most dependent category) has increased by 35.9 per cent during the period from 1998 to 2002. During the same period, it was submitted, the proportion of residents requiring assistance with specific needs has also increased significantly. 100 The Association referred to other evidence supporting the extent and effect of increased acuity. This included various submissions by the New South Wales College of Nursing, ANHECA, ACSA and the evidence in these proceedings. Oral evidence by Ms Susan Owens, the Director of Nursing at Eric Callaway House, was as follows: With their co-morbidities, they do not only have dementia. I have five with at least five different diagnoses. We have diabetics, Parkinson's, Pitts' disease. We have cancers. We have residents that because they are living longer and are of a greater age have horrific skin irritations. We have colostomies or one colostomy. Our other colostomy passed away over Christmas. We have cardiac disease. We have lung disease. We have asthma. We have peripheral vascular disease. We have one amputee and all of them need full nursing care. 101 The Association referred to the evidence of Mr Peter Allen, the Director of Nursing at Wollongong Nursing Home, who observed: A nursing home isn't a place that just looks after old people, it's an extension of our medical system. Many of the things, especially medical things being treated in hospital are often stabilized in hospital and then that person is moved into a nursing home, but still with that underlying condition that was originally stabilized and will probably, in all certainty, become unstable again and will require treatment through the nursing home, through the nurses and the doctors in the nursing home environment or transfer back to hospital or progress on to palliative. 102 Reference was also made by the Association to the evidence of Ms Heath, who has worked at the RSL Veterans' Retirement Village at Narrabeen as a RN since 1990. She described the changes she has observed since that time: It has just changed tremendously. Out of sight…In 1990 I would describe the village, the hostels, the low care hostels as more like an old man's rest home. We had residents there who would be out most days going to the races, going on public transport trips around the city…They were very active. There were very few of them on supervised medication. There were very few walking aids for instance, in the lower care hostels. Phyllis Stewart Hostel was always a frail aged, and you would have the walking frames there, but not in any to the same degree as now. There is – whole care needs of the residents have changed remarkably. I would say that in 1990 there were mostly seventy year olds in the hostels. Now they are all about 80, 90 and in the very high care hostels the average age is 90, where it used to be 70, 75. So as they have got older, their care needs have got more and more complex. Their diagnoses have got more and more complex. (In) 1990 you would have them come in with maybe one problem, like that have a wound which was not healing, and they were there for wound care…I look at some of the files in…our high care hostel, and you have a list of about ten diagnoses, five of which could be life threatening. So that comes with technology changes. In 1990 even oxygen concentrators were not in the village. Now we seem to have them in every hostel … 103 The Association relied on the evidence of Professor Pearson to the following effect: My professional observation, this is aside from the report, this is now speaking as a nurse with experience in the field. The population that we see now in residential aged care facilities closely resembles the population 15 years ago in the acute medical wards [in] acute hospitals…These are people generally very frail who are generally sick with more than one condition and where a large proportion of them have some form of dementia and display challenging behaviour. This is a completely different patient population to how it was even ten years ago…15 years ago there was a rise in the popularity called normalisation where we tried to make nursing homes like homes; had domestic type beds and hid the medication trolleys because that was the kind of population we had. That is no longer even talked about in this industry now. We need adjustable height beds and all the kinds of facilities we used to think belonged in hospitals because of dependency of residents particularly in the high care facilities. 104 Reference was also made to the evidence of Mr Paul Sadler, the Chief Executive Officer of ACSA, who said: [T]here is no question that more residents in residential aged care are now classified at the higher levels of the classification scales, whichever one you use, and that reflects increasing levels of dependency and need for assistance by many of the aged care residents…if you looked at the standard mix in residential care facilities in the seventies and early eighties, there would have been a lot of people in nursing homes who were at relatively low levels for need of care. Increased complexity of medical procedures 105 The Association submitted there was an "overwhelming amount of evidence of the ever increasing complexity of nursing procedures required by residents in both high and low care accommodation". The Association contended the procedures that have been introduced overwhelmingly since 1990 (and in most cases since 1995) included: · IV therapy; · PEG feeding; · major wound management; · tracheostomy care; · supra-pubic catheters; · peritoneal dialysis; · treatment of unstable diabetes; · use of oxygen concentrators; · continuous oxygen; · subcutaneous morphine; and · the management of complex dressings. 106 The Association referred to RCS statistics to demonstrate the incidence of complex medical procedures has gone up. In this regard it was submitted the number of residents in the highest category ("Extensive Assistance Required") had increased nationally by over 66 per cent between 1999 and 2004. The number of residents requiring no technical or complex medical procedures has decreased significantly during the same period. 107 The Association also relied on the evidence of a number of its witnesses as to increased clinical complexity of nursing. For instance, Ms Read stated: We do get residents now who are discharged from hospital much earlier that they would have been in the past. So if they have gone in with a fractured hip, they come back to us often within the first 24 hours; we then have to organize rehabilitation and you know look after them as you would in hospital after 24 hours of a surgical procedure. As I stated before we do more peg tubing and catheters, tracheotomies, peritoneal dialysis, all those sorts of things you would not have had ten years ago... 108 Evidence relied upon relating to specific clinical issues included evidence from Ms McKenna concerning supra-pubic catheters: Supra-pubic catheters have become normal for lots of people with debilitating illnesses, people with illnesses like multiple sclerosis now have supra-pubic catheters and these are managed by nurses, changed by the nurses in the nursing home. They all need to be able to do them, because they need to be replaced within an hour of coming outside, coming out. They fall out or are pulled out accidentally. Ms Gleeson stated with respect to complex wound management: [A] lot of the larger dressings, they were kept in hospital and that things such as suctions, those dressings techniques they use now, they were actually done within the hospital setting, but we are actually looking after those sorts of things. 109 Ms Gleeson also stated in relation to infection control: When I started in aged care there was no requirement for the nurses to be aware of infection control, or it wasn't widely publicized that that had to be applied. We are looking after people who may have behavioural changes, we have to know how to better care for these people, we have to know how to manage people who are on oral cytotoxic medication which required different – they have different needs as well from a normal resident…we have to be aware of those. We have to monitor all our infections, we collect data to monitor infections and things like that, infections control committee. So none of that existed when I first started in aged care. Increased incidence of dementia 110 It was submitted by the Association that: Whilst the incidence of dementia may not be increasing, as Professor Hogan and others have noted, its prevalence in RAC is increasing significantly as the population ages. The increased incidence of dementia increases the volume and difficulty of nurses' work, and also the level of skill required. The latter is particularly the case because the rising incidence of dementia is combined with the general increase in acuity and co-morbidities discussed above. Many residents have other major illnesses as well as dementia. 111 The Association referred to an article in the ACS Update, the monthly magazine of ACSA, which described the situation relating to the increased incidence of dementia as follows: In residential care, we have seen a shift from people with dementia being unusual in facilities, with one or two facilities taking the majority of these people in each centre or town. These days almost every facility will have substantial numbers of people with dementia and this has forced changes in practice. We have moved to homes within a home, small group approaches to care, using a wide range of therapies rather than medication to manage behaviour, and in an increase in the number of qualified staff. 112 According to sources relied upon by the Association, about 10 per cent of those with dementia have severe behavioural or psychological symptoms of dementia (BPSD) and require dementia-specific residential aged care or management through psychogeriatric teams consulting with mainstream residential aged care facilities; much larger percentages of dementia sufferers have mild to moderate BPSD. 113 Other evidence referred to by the Association on dementia and its implications for the RAC sector was that: (a) Residents were being admitted to nursing homes at a much later stage in the dementia disease process and homes were having to deal with increasing numbers of residents who have alcohol related dementia. (b) Very few residents now have enough cognitive ability to participate in their own care. (c) Current staff to resident ratios, staff training and nursing and care staff remuneration appear inadequate for quality dementia care. (d) Residential aged care is not designed for caring for persons with very severe or extreme BPSD, or who are physically violent, however there will be times when residential care facilities may be the only source of care, at least until specialised care can be located or accessed. Palliative care 114 The Association submitted nursing homes and hostels are now providing high level palliative care that was not available in the past and are educating staff in such care. It was contended palliative care has become the focus of much of the care that is now provided, whereas in the past nursing homes did not admit persons who were in palliative care. 115 The Association referred to the evidence of Ms Grace Dawson, Director of Nursing, Endeavour Nursing Home, that: From my experience in the past anyone that had palliative care or was receiving palliative care or was receiving specialised nursing care would not be sent to a nursing home whereas these days, due to improvements in technology and the use of more specialised nursing care to prolong life that has changed. And further: Nursing care has become more complex. If someone has been in hospital for some time, for instance…they used to go to a hospice until they passed away. Due to insufficient beds, they get transferred out of hospitals to nursing homes and the palliative care tends to be more complex such as administering morphine or continuous oxygen or they come in with catheters for dialysis or tracheostomies, which you didn't see in nursing homes previously. 116 Ms McKenna described the emotional demands placed on nurses in providing palliative care and the increased work: Anyone who you are looking after who is dying has very very special needs and this is very very draining. The incidence of deaths has increased in the last few years because of people coming to us much sooner and often for a short period of time but it can be very stressful on the staff. ... Q. In terms of the nurses providing care, what is the consequences of the increase that you have observed in palliative care patients? A. Well because their stay is so much shorter, an enormous amount of work you need to do with your assessment and the RCS, the preparation of the care plan, getting to know the resident, orientating the resident and their families and their families are a huge part of our workload nowadays. Their expectations are very high and they require an enormous of orientation to the facility and to the sort of issues and problems that they are going to encounter, especially if the resident has been admitted after a catastrophic event and it has not been a gradual decline. These people are often quite traumatised and so the work load for the nurses is huge. Like I said before, there are no more of us. We have to keep doing more work with the same amount of staff. Q. Are there any particular skills which are required for palliative care as opposed to general care? A. Lots of patience. A huge amount of your own person and your own person goes to these people to the point that when you walk out of the nursing home at the end of the day you can feel emotionally drained and physically exhausted by the amount of intensity with which you have to look after these people through this difficult time and I cannot emphasise enough the families that do it to you as well. It is not just the patients, it is the people who are around the patients of the residents that drain the nurses in this. We have found we have had much more debriefing sessions for our staff, for our nursing staff for all of the staff largely. We have also found we have had to have grief and counselling lectures, have had to increase that to make sure that people have the skills to be able to cope with this difficult situation. Higher levels of multiskilling 117 The Association submitted, "the luxury of specialisation is not available to the overwhelming majority of nurses in RAC." Reference was made to a statement by ANHECA as follows: In the aged care sector nurses practice a full range of care incorporating prevention of health breakdown, rehabilitation, palliation, mental health, counselling and family therapy. In this way nurses in aged care provide comprehensive support, treatment, care and protection to residents through their work with multidisciplinary teams and with a range of people involved in nursing care. Registered nurses also manage most of the aged care services both as clinical leaders who set care standards, and as business managers who ensure ongoing viability of the organization. 118 The Association referred to the evidence of Ms Lisa McDowell, a Nurse Educator at the College of Nursing, who pointed out the practical requirements for multiskilling: For example, in the public sector patients are moved to the geriatric ward after any other acute illness has been dealt with in the specialized wards. ... In contrast, an RN in a nursing home may be performing dialysis in one room, inserting a supra-pubic catheter in another, and administering a PEG feed and managing a resident with a trachie [tracheostomy] in another. Increased training requirements 119 It was submitted by the Association the amount of in-house and external on the job training has increased very substantially over recent years. Ms Jan Armstrong, Director of Nursing, Lilian Wells Nursing Home, gave the following evidence: A huge change in training, just in the last five years since I have been there …we have developed our training to pretty much the state of art training. Before it was fairly ad hoc. It was not structured. It was not developed in consultation as much as it is now and we can clearly demonstrate that we are training staff and getting effective results. 120 Ms Armstrong noted that staff are more informed about medication management, behavioural management and clinical observation in relation to dementia than 10 years ago. 121 Mr Peter Allen, the Director of Nursing at Wollongong Nursing Home, said in his evidence: The aged care nurse of today is required to have the following specialist skills: · understanding the resident's care needs; · pre-empting or initiating care; · intervening to reduce or prevent behavioural problems; · intervening to reduce or prevent pain; · maintaining resident safety; · correctly manually handling the resident to prevent injury to resident or staff; · preventing and/or detecting development of medical/nursing problems that this group of residents are susceptible to; · preventing transmission of infection; · understanding, respecting and promoting resident privacy and dignity needs; and · understanding and reporting signs and symptoms of illness. 122 It was submitted the training offered by external bodies has also developed increasing complexity since the mid 1990s, reflecting the changing nature of aged care nursing. Ms McDowell gave evidence of the changes to course content of courses offered, including the Graduate Certificate in Aged Care. Specific Factors Affecting the Work Value of AINs 123 The Association submitted the substantial reduction in RN and EN numbers has had a particularly significant impact on AINs. This has occurred both because the number of RNs and ENs has decreased, and because the remaining RNs and ENs have increasingly since 1997 been required to perform managerial and administrative functions associated with the requirements of the Aged Care Act. It was submitted work previously done by RNs and ENs has been shifted to AINs. 124 The Association described in some detail the changes affecting the work value of AINs. Targeted training in the form of a Certificate III qualification in Aged Care was introduced in 1997. This qualification is now the standard (though not yet universal) requirement for AINs in RAC. Dr Christine Manwarring, the Manager, Health and Aged Services Programs at TAFE New South Wales, gave evidence that the Certificate III qualification has been expanded from 320 hours in 1997 to 500 hours from 2002, although it can usually be delivered in 400 hours because of overlapping content in different units. There was, nevertheless, a minimum 25 per cent increase in the hours of study required. The increase in hours was the result of the increased skills and competencies required of the students. 125 Dr Manwarring said of the developments since 1999 leading to the current course content: Significant changes have been introduced by TAFE since 1999 to the content of the course offered to AINs to reflect the change in nursing practice. The units of competence have increased in number. AINs are now required to have a greater knowledge of the aged care industry, ethical issues, patient advocacy and services to assist the client. Reporting and recording procedures in aged care have been expended to ensure accountability in the workplace. Modules are offered on resident classification systems and collecting data for quality audits. The current course reflects the greater understanding of medical conditions that AINs are required to have. In order to be able to assist clients with their personal care needs, student AINs must learn basic anatomy and physiology. They must have become familiar with health problems common to the aged, such a rheumatoid arthritis and dementia, and study the management of these conditions. The current course has also increased the number of skills that are required to be part of the AINs role. These skills include the taking and recording of blood pressure, blood glucose levels and simple dressings. The latter two skills are invasive and require a higher level of knowledge in the areas of anatomy and recording. AINs also need to have finer dexterity skills, greater knowledge of wound healing and management, and diabetes. Course content in the area of occupational health and safety has been expanded, with particular emphasis on infection control, manual handling and risk assessment. 126 Ms McKenna said in her evidence overwhelmingly facilities try to employ AINs who have Certificate III. Mr John Morrissey, Director of Nursing and Chief Executive Officer, Deniliquin Nursing Home Foundation, agreed that AINs are now trained and are expected to have the skills to perform a wider range of functions. All of Mr Morrissey's AINs hold Certificate III. 127 Reference was made to the fact that a number of short courses for AINs have been introduced by TAFE since 1997. A Certificate III is a prerequisite for entry to the courses. These courses include the following: · Assist with Self Medication · Basic Foot Care · CPR in the Workplace · Caring for Clients with Breathing Problems · Caring for Clients with Diabetes · Palliative Care · Responding to Challenging Behaviours · Wound Care · Continence Management · Evidence Based Practice\Health Care Recording and Reporting 128 There was evidence that many facilities have within the last five years introduced internal "competency" systems for AINs that identify and assess a range of skills and competencies. At Ms McKenna's facility (and within her group of facilities), AINs are formally assessed on about 20 different clinical skills. Uniting Care, one of the largest not for profit providers in Australia, developed a comprehensive set of AIN competencies which came into effect in 2003. 129 Dr Manwarring gave evidence as to the role of the AIN prior to the changes that came about in the nineties: What you noted here, what is changed, is years ago the Assistant in Nursing provided just personal care, and it would have been areas of bathing, toileting. They were also responsible for doing laundry, also responsible for doing cleaning. So it was very personal care. Basic personal. What is extended now is these student skills have increased. 130 The Association referred to Dr Manwarring's description of the changes to the AIN role as follows: These people are expected now to do what would have been done prior to 1997 by registered nurses. The reason I believe this is happening is, and again it's based on the consultation processes, that the registered and enrolled nurse ratios were much higher many years ago. Now what you notice, and you only have to walk into an aged care facility, and I haven't worked in one for a long time, but when you go there now there is a reduced number of registered nurses, very few enrolled nurses, and there are huge numbers now, many more Assistants in Nursing. 131 The Association described the nature of the changes to the work of AINs as follows: (a) The AINs are now the primary care givers in RAC. The AIN role is a critical one in that they are now the primary observers of the residents, and they must detect and assess (at least on a preliminary basis) changes to residents' condition. For instance, Ms Hunn, a registered nurse at Miranda Nursing Home, said that at her workplace there were two registered nurses on duty during the day and 53 residents. She said: [W]e rely on the assistants in nursing who are actually with the residents, looking at the residents, communicating with them, to observe whether they have rashes, whether they have sustained a skin tear. We rely on them to tell us if there is an odour from their urine, if they are more confused, if they are eating, if they are not eating. We rely on the assistants in nursing to tell us everything so we can then put something in place if anything happens or if there is a problem, because we aren't out there on the floor. (b) AINs have during the last decade, and particularly since 1997, taken on a significant range of direct clinical functions. As a result of Certificate III training, AINs now take resident temperatures and blood pressures and pulse. They perform urinalysis. They may now do blood glucose monitoring and simple dressings. For instance, Ms Flanagan's evidence as to her role as an AIN was: We do protective dressings such as bandaging, wound protections, creams and ointments … On nightshift, the AINs who have attained Certificate III monitor residents' blood pressure. AINs are required to monitor diabetic residents' blood sugar levels when working night shift. In the event that a resident experiences a TIA or a heart attack, the AIN must call the RN and must then administer the initial therapy, such as oxygen therapy in the event of a TIA. In the early 1990s, none of these therapies were initiated by AINs. While attending to the residents that they have been allocated, the AINs are required to observe the residents' condition and report any changes in a resident's physical state, such as skin tears, or behaviour, such as depression, to the RN. It is imperative that the AINs get to know the residents under their care and that for some, any change in their routine will distress them… (c) AINs are providing care to palliative residents which they were not involved in to any significant degree prior to 1991. In so doing they are required to have, and to apply, thorough knowledge of the clinical and human issues associated with the care of residents who are dying. Reference was made to Ms Flanagan's evidence as to the training provided to AINs to support families in times of grief: The consequences, with caring for someone with a terminal illness, is that we have a greater counseling role than previously, both with the person who is dying and in providing support to the families of those people. As well as much more intensive nursing care as they get to their end stages. ... Because the families are aware that we are the ones that give the hands on care and have most to do with their relative, it is often us they come to when they're requiring comfort and other information about their relative. And after the resident dies we often have the relatives come to visit us to talk. Yesterday I had a relative come in to talk with me because her father had passed away on my days off, and she came in to see me when she knew I going to be back at work. (d) The increased incidence of dementia has particular consequences for the work of AINs as the primary direct carers. They may be required to have underpinning knowledge including a basic knowledge of current research including relevant statistics, and the limitations and legal ramifications of physical, chemical and psychological restraint. Reference was made to Ms McKenna's evidence in this respect: Q. In terms of any specific skills that the AINs might require to assist dementia patients? A. They all need training in the care of dementia residents. They need specific skills in managing challenging behaviours. They need specific skills in understanding how dementia works and how dementia responds to a range of interventions. They also need really specific skills in understanding the needs of dementias as far as minor illnesses. For instance, with dementia sufferers, an increased level of confusion which is usually observed firstly by the AIN's is nine times out of ten an underlying acute illness which is not obvious at that time but if it is not picked up at that stage can lead to a serious event which leads to hospitalisation and that can be something like a urinary tract infection or a common cold but at that very early stage we rely heavily on the AINs to pick this up at that stage so they need to be very aware of the resident, the residents day to day needs and their normal behaviour and behaviour management is just critical. (e) The introduction of complex clinical procedures into RAC facilities has also had a marked impact on the work of the AINs. Reference was made to the evidence of Ms Susan Owens, a Director of Nursing, as to the reason for the expansion of the in-service education program at her facility: Because we are relying on the AINs now to do more than they would have done certainly back ten years ago…we are expecting that they would participate in lots more things like catheter tubes and PEG tubing, even dialysis, so it is a lot more technical that the AINs do (that) they certainly would not have been asked ten years ago. Ms Flanagan gave the following evidence as to her role as an AIN: As regards to their hygiene, having a catheter increases the risk of a urinary tract infection, so we have to take particular care of their hygiene needs. We change the bags, the catheter bags, and keep account of the output to ensure that there is a sufficient output as it can indicate a blockage in the catheter. We observe the quality of the urine also. There may be – if there's a problem the urine may be cloudy, have blood in it or have solid particles in it. And we also need to ensure that the required amount of fluid is taken by the resident, because the catheters need to be flushed sufficiently to reduce the risk of infection. Ms McKenna gave the following evidence with respect to PEG feeds: Q. Again with respect to AIN's, does the introduction of gastronomy feed have an impact on their work? A. Yes it does. Again the patient if the person has to be got out of bed, which is certainly the case in most nursing homes that most people are up, at least in a chair on a daily basis, again they are looking after a person with a gastronomic feeding apparatus attached to them, these people could quite likely have a catheter so you have two lots of tubes to be concerned with. There is also the resident care notes, the positioning of the resident because they are not eating their meals the way a normal person would sit up to eat. These people have to be propped up in bed so the feed won't drain back out of their stomach into their lungs so there a range of issues that the AINs need to be aware of to look after these people. (f) A further factor adding to the volume and value of AIN work is that AINs have massively expanded responsibility for clinical documentation. This is, of itself, an important net addition to the value of the work of AINs. It hardly needs to be said that accurate reporting of clinical matters involves both skill and a high level of responsibility. Reference was made to Ms McKenna's evidence that AINs are now involved to a significant degree in the assessment of residents and for the purpose of RCS assessments: The RCS is the main funding tool for the facility and the responsibility for that falls primarily with the nurses who are completing the assessment. Registered nurses have a huge amount of paper work to do and we rely heavily on the assistants in nursing to give the registered nurses accurate information that we require to document in the RCS. There is no way that registered nurses have the time to be able to do all these things themselves so they heavily rely on the assistants in nursing to assist with a lot of these assessments and some of the assessments we would rely totally on the AIN's to complete. Things like the bladder monitoring and bowel movements and sleep assessments. They would be all things that the assistant in nursing will be relied on to complete and if those are inadequate, we would end up in losing our funding and ultimately sliding into a cycle of serious problems. Mr Brouwers, Director of Nursing at Veronica Nursing Home, outlined the changes of the AIN's role in documentation in his facility: Q. You give some evidence in paragraph 30 about the increasing amount and complexity of the documentation. Do your AINs any documentation? A. They have ongoing daily responsibilities in terms of recording of physical events, such as bowel activity. During the assessment period for residents, when they are coming into Veronica Nursing Home, they have responsibilities in terms of documentation of particular behavioural traits, through an incontinence assessment programme, they have a report book that they document daily changes or changes that are where remarkable for a particular resident, that are out of the ordinary. They also, on a daily basis, are responsible for taking particular recordings in terms of blood pressures, pulse, weight of a resident on a daily basis. If there's any - that also includes urinalysis - if there's anything that looks to be abnormal, out of that particular resident's normal range, then the registered nurse will go over that again, just to make sure it's a correct reading, and if there is anything particularly abnormal with those, then other action is taken. (g) As well as care plans and progress notes, AINs now commonly complete a range of specific assessment tools. These include such assessments as: · Communication; · Sleep; · Pain; · Restraint; · Fluid balance; · Behaviour; · Bowel; · Bladder; · BGL monitoring; · Aggression; · Continence; · Wandering/location charts; · Vital signs and Observations; · Elimination; · Food and Fluid. 132 Other duties that since 1997, it was submitted, are being undertaken by AINs include: · participation in quality assurance committees; · write audits; · review policies; · quality co-ordinator; · occupational health and safety co-ordinator; · 'preceptor' to less experienced AINs; · supervision of students; · team leader. Specific Factors Affecting the Work Value of Enrolled Nurses 133 It was submitted by the Association that there is a small number of ENs in the RAC sector and they are employed overwhelmingly in high care facilities. Reference was made to Dr Manwarring's evidence regarding the changed role of ENs which she described as "fundamental" since 1992: The following are some of the specific functions which ENs are routinely called upon to perform today which they were not trained or permitted to do in 1991, and which have been incorporated into the training provided by TAFE: Checking of medications Drug calculations for medication dosages Contribute to the development of nursing care plans Dressing of drain sites and wounds Apply the wound field concept to cleaning of wounds Checking of drip rates and monitoring IV sites Use of anti embolic stockings Use of lifting mobility and patient lifting devices Blood sugar level monitoring Nursing clients who are on cardiac monitors. Nursing care for patients who are having ECGs Taking and recording neurological observations Reporting and recording of patient health status including their physical, social, emotional and spiritual needs Naso gastric drainage and feeding. 134 It was further submitted by the Association in relation to ENs: · ENs have shifted from a task oriented to a role oriented focus, where they are expected to exercise skills in an independent manner. · They can now provide far more care to individual patients without involving a RN. · They also have much more extensive involvement in conducting and documenting a range of clinical assessments, including such matters as neurological charts. · ENs are now more responsible for the supervision of AINs. · They have an expanded role in the management of wounds. · They contribute to the development of care plans. Specific Factors Affecting the Work Value of Registered Nurses 135 The Association submitted in relation to RNs that: Registered nurses have total responsibility for patient care, more so than in the acute sector. RNs have had to improve their clinical assessment skills as residents' conditions have become more acute. They have had to learn to manage the complex functions transferred from acute hospitals, including PEG feeds. They have had to learn to administer a wider range of drugs. 136 Reference was made to the evidence of Professor Pearson who stated: The role of the registered nurse has become more complex. Furthermore the proportion of registered nurses within the workforce has dropped and the proportion of untrained or technically trained assistants has risen so the registered nurse role is even more complex because they have to supervise a large young workforce… 137 In relation to managerial nurses, the Association referred to evidence given by a number of Directors of Nursing including Ms Owens who gave evidence about the changes to the Director of Nursing's role in the last ten years. In particular, she pointed to difficulties with rostering, increased paperwork, demands for training, occupational health and safety issues, counselling of residents' families and the requirements arising from auditing processes. WORK VALUE CLAIM - THE EMPLOYERS' CASE Increased dependency and acuity of residents 138 The employers conceded that residents are entering the aged care sector later than they did in 1990 and as a result they are more dependent. However, it was submitted in the 1980s/1990s residents did age in the nursing home/hostel and in time these residents did require increased care compared to their initial admission. 139 In respect of other factors relied upon by the Association to support its contentions regarding increased dependency and acuity the employers submitted: · Residents still required lifting in the early 1990's. · Some residents had catheters in the past but now the number of such residents has increased. · Some residents had gastronomy feeding in the past but the number of such residents has increased. · Residents in the past had complex wounds but there has been an increase in complex wound management and volume of wounds. · Residents had chronic and/or terminal illnesses in the past. · Residents suffered diabetes in the past. · Residents had continence issues in the past. · Residents on palliative care in the past. 140 In other words, whilst it was conceded that the changing dependency of residents on admission has meant an increase in the volume of work the evidence was that this was work performed by nursing staff in 1990; it was not new work and did not constitute a significant net addition to work requirements as to warrant the creation of a new classification or upgrading to a higher classification as the work value principle required. Increase in dementia 141 The employers conceded there has been an increase in the number of residents who suffer from dementia since 1990 as a percentage of total residents as a result of the fact that dementia increases exponentially with age. However, it was submitted there was no evidence that the proportion of the older population who suffer from dementia has increased markedly since 1990. 142 The employers also submitted: · The training provided to nurses in respect of dealing with residents with dementia has not changed significantly in the last 10 years. · Nursing homes had specific dementia wings in 1990. · Residents suffered dementia in the past. 143 Again, it was submitted the increase in dementia has meant an increase in the volume of work but based on the evidence this was work performed by nursing staff in 1990 and did not constitute a significant net addition to work requirements. Increase in the Complexity of Clinical Functions - RNs 144 In response to the Association's contentions regarding the increased complexity of clinical functions as they impact on RNs, the employers submitted: § Nurses in aged care have had to work with doctors for a considerable period of time. § Nurses have prior to 1990 been involved in nursing care and medication. § Nurses have since before 1990 had to prepare care plans for residents. § Skills in infection control and wound management are skills associated with being a registered nurse. § The role of an RN when a resident is returned from acute care did not involve the acquisition of new skills. § The administration of medication was part of the role of a nurse. 145 Whilst the employers conceded that the volume of complex clinical functions of RNs has increased since 1990, it was submitted that the evidence established that much of the basis relied upon by the Association to justify an increase in work value for RNs was work that was performed by RNs prior to 1990; it was not new work and such work formed part of the skills set that a RN has been required and able to exercise since 1990. Increase in the Complexity of Clinical Functions - ENs 146 In relation to the role of ENs in palliative care; medication/clinical decisions; PEG Feeds; insulin injections; wound management; when a resident is on oxygen; and provision of medication, the employers submitted the evidence did not show that the work value of ENs had increased as a result of any change in complex clinical functions performed by them when compared with the work performed in 1990. Increase in the Complexity of Clinical Functions - AINs 147 The employers referred to the evidence relating to an AIN's role in: palliative care; medication/clinical decisions; PEG Feeds; medication delivery; measuring blood sugar; insulin injections; relation to residents with catheters; taking urine samples; measuring blood pressure; wound management; taking the pulse of residents; taking the temperature of residents; providing care to residents; providing physiotherapy to residents; and in being supervised by RNs. It was submitted that the evidence showed that the role of the AIN in respect of these tasks had either not changed to any great degree since 1990 or that the work was performed under the supervision of an RN or, in the case of physiotherapy, under the direction of a physiotherapist. Other changes 148 Other changes referred to in the evidence of witnesses included: increased training including the acquisition of new skills; increased volume and complexity of documentation including new methods of record keeping and the introduction of RCS assessments; grief counselling; dealing with families; and new educational courses including the Certificate III course for AINs. The employers sought to deal with each of these matters as not constituting significant net additions to work requirements of nursing staff in aged care. Conclusions 149 The employers conceded that there had been some increase in the volume and/or intensity of work of all nurses in aged care that had arisen as a result in changes in the resident profile. It was also conceded that there had been some initial changes in the work of employees in particular Directors of Nursing (DONs) and Deputy Directors of Nursing (DDONs) that arose from the system of accreditation introduced by the Aged Care Act. However, it was submitted that the work associated with these changes was "largely a one off and therefore it was not appropriate for this to be the basis of an ongoing increase in wages." 150 It was further conceded by the employers that there had been other changes associated with the Aged Care Act such as RCS assessments and this assessment process has impacted upon the work of all nurses. However, the particular impact varied from facility to facility dependent upon what systems they had in place after the previous legislation and also dependent upon how the facility sought to implement the changes and, in particular, the documentation requirements. The employers submitted that the Commission should be "wary of basing any significant increase in work value on these changes". Further, given the announced federal Government changes to documentation requirements, the increased value of such work (if any) may be further reduced in the future. 151 As to the requirement for RNs to exercise their clinical skills more often given the legislative changes and the changes in the profile of residents, it was submitted these skills were skills associated with being an RN. Further, that the increases in work from RNs did not relate to new skills but a greater intensity of work. 152 As to the work of ENs it was submitted there was insufficient evidence before the Commission to form any opinion as to the change in their work value. 153 In respect of the largest group, AINs, it was submitted that the Association's claim of work value increases sought an increase in wages for changes in work value which had already been recognised and compensated by the Commission in Re Public Hospitals (State) Award (unreported, Cahill VP, Sweeney and Hill JJ, 1 August 1990). The basis of that earlier work value claim for ENs and AINs was, according to the employers, as follows: (a) significant changes in training requirements and further changes planned or underway; (b) increase in TAFE training to 360 hours; (c) increase in in-service educational programmes; (d) increase in range and complexity of roles performed by ENs; (e) total care being provided to patients by ENs; (f) introduction of outcome standards in nursing homes; (g) AINs in aged care are delivering task orientated nursing to an individualized, holistic, patient-centred modality delivered by primary/team nursing promoted by the Outcome standards legislation; (h) the delivery of patient centred care in a manner consistent with the Outcome standards; (i) the need to comply with standards; (j) the focus on patient rights and duty of care; (k) AINs performing higher level of nursing care; (l) AINs attending orientation programmes; (m) AINs attending in-service programmes; (n) devolution of responsibilities from ENs to AINs; (o) AINs undertaking duties and functions previously performed by ENs in a hospital setting; and (p) increased work caused by high dependency residents being the overwhelming majority of nursing home residents. 154 The employers submitted that the Commission should ignore any claims concerning changes in work value that were the subject of this earlier decision. 155 The employers conceded that nursing staff were completing more documents than they did previously but submitted that in the past the AINs were making similar observations that they reported to RNs, which they did verbally, rather than in writing. 156 The employers also recognised that the evidence revealed that in some facilities AINs perform a greater range of minor medical matters such as minor wound care, taking temperature measurements, taking blood pressure, taking blood samples and urine analysis. However, it was submitted, the evidence was that these duties were not performed uniformly across the aged care industry by AINs. 157 In concluding their submissions on work value the employers submitted: [If] the Commission is of the opinion that there has been an increase in work value and/or the grounds of a Special Case are made out by the Union in assessing any wage increase the Commission should have regard to the following matters: (a) the 6% increase awarded by consent in August 2003; (b) previous salary increases awarded to nurses as part of industry settlements since 1990 above and beyond safety net increases … the Respondents submit that this is consistent with the approach the Full Bench adopted in relation to wage increases in the public hospital system under the MOU (see Public Hospital Nurses (State) Award (No.3) (2002) 121 IR 28 at para 123); and (c) the Respondents' capacity to pay ... Finally, if the Commission were to award an increase for AINs the Commission when setting the rate should take into account that the most common qualification of persons in that role is a Certificate III and the Respondents submit that as such, any rate awarded should not be in excess of the C10 rate in the Metal, Engineering and Associated Industries (State) Award which is the rate associated with the holding of a Certificate III qualification. CONSIDERATION OF WORK VALUE CLAIM 158 We are satisfied the Association has made out a case for wage increases to all nursing classifications on work value grounds. All of the nursing classifications have been affected in work value terms by the changes that have occurred since 1990. The introduction of the Aged Care Act, which introduced a new Resident Classification Scale and established mandatory requirements for the purpose of accreditation of facilities, brought about very substantial changes in the work of nurses. 159 There have also occurred quite significant changes in the resident population. Residents now cared for by nurses in aged care facilities have become older, more dependent and require more acute levels of care. Whilst the employers recognised many of the changes in respect of the resident population, that is the increased dependency and acuity of residents, the increased level of dementia amongst residents, the increase in complexity of clinical functions, increased training and educational requirements and increased volume and complexity of documentation, they conceded that this involved some change in work value but substantially involved an increase in the volume and/or intensity of work that had formed part of the nurses' work for many years and not the acquisition of new skills or responsibilities. Further, the employers contended that many of the changes brought about by the Aged Care Act were one-off changes and it was not appropriate for this to be the basis of an ongoing increase in wages. 160 We do not accept the employers' interpretation of the effect of the changes on nurses' work. The changes translate, in our opinion, to a significant net addition to the work requirements of nurses and constitute the basis for a substantial wage increase for all nursing classifications. 161 In respect of AINs they have become the frontline carers, taking over part of the work of RNs and ENs as the numbers of these two classifications have declined. As Dr Manwarring observed: These people [AINs] are expected now to do what would have been done prior to 1997 by registered nurses. The reason I believe this is happening is, and again it's based on the consultation processes, that the registered and enrolled nurse ratios were much higher many years ago. Now what you notice, and you only have to walk into an aged care facility, and I haven't worked in one for a long time, but when you go there now there is a reduced number of registered nurses, very few enrolled nurses, and there are huge numbers now, many more Assistants in Nursing. 162 We consider that AINs now operate on a higher training base, perform expanded clinical functions including taking residents' temperatures, blood pressures and pulse. They now perform urinalysis and may now do blood glucose monitoring and simple dressings. AINs now play a greater role in palliative care and are the primary direct carers for residents suffering from dementia. AINs are involved in more complex clinical procedures as observed by Ms Owens in her evidence: Because we are relying on the AINs now to do more than they would have done certainly back ten years ago…we are expecting that they would participate in lots more things like catheter tubes and PEG tubing, even dialysis, so it is a lot more technical that the AINs do [that] they certainly would not have been asked ten years ago. 163 We are satisfied that since 1990 there has been a significant net addition to the work requirements of ENs. However, in assessing any wage increase based on work value change we accept the employers' submission that we should have particular regard to the basis of the work value claim for AINs (as well as ENs) in Re Public Hospitals (State) Award (August 1990) and to avoid any double counting where work value changes referred to in these proceedings have already been recognised by the awarding of wage increases for AINs and ENs. 164 Enrolled nurses have also taken on an expanded role and this is exemplified in the evidence of Dr Manwarring who identified an extensive list of specific functions which ENs are "routinely called upon to perform today which they were not trained or permitted to do in 1991, and which have been incorporated into the training provided by TAFE". 165 Professor Pearson gave evidence that ENs have taken on increased responsibility, partly because of the complexity of the resident population and partly because of the decline in the numbers of RNs. 166 In Public Hospital Nurses (State) Award (No 4), where the Full Bench considered claims for increases for ENs on work value grounds, the Full Bench found as follows: [153] The Association identified a number of changes that have been introduced since 1993 affecting the work of ENs including changes to the Advanced Certificate course and the introduction of a number of post certificate courses. As to the changes to the Advanced Certificate course, these should be taken into account to the extent that they enable ENs to acquire new skills and knowledge or enhance existing skills and knowledge. … [156] We consider that over the relevant period from 1993 the work of ENs has expanded into areas that traditionally belonged to registered nurses. We have concluded there has been an increase in the work value of ENs to the extent that it meets the test under the work value principle that the change constitutes a significant net addition to work requirements. 167 The changes to the Advanced Certificate course have enabled ENs in the aged care sector to acquire and use a range of new skills and responsibilities as identified by Dr Manwarring. It is also the case that the work of ENs in the aged care sector has expanded into areas previously the preserve of RNs. We are satisfied that since 1990 there has been a significant net addition to the work requirements of ENs. 168 In so far as RNs are concerned, there has been an expansion of their clinical skills in administering more acute care and the impact of changes wrought by the Aged Care Act have had a particular impact on RNs. RNs in aged care have also assumed greater levels of responsibility with the increase in residents whose conditions are more acute than was previously the case. As Ms McDowell stated in her evidence, RNs: …often need to be managing an acutely ill person for a lot longer than maybe their acute colleagues [in public hospitals], because they are waiting for maybe the doctor to come, so they don't have that colleague, that back up, so that's the responsibility that they need to take on. 169 Professor Pearson opined: The role of the registered nurse has become more complex. Furthermore the proportion of registered nurses within the workforce has dropped and the proportion of untrained or technically trained assistants has risen so the registered nurse role is even more complex because they have to supervise a large young workforce … 170 We are satisfied that since 1990 there has been a significant net addition to the work requirements of RNs. 171 As the Association submitted, all Directors of Nursing gave evidence of the increased responsibilities arising from such changes as accreditation and the wide range of areas for which they are responsible. We accept the evidence about the changes to the DON's role in the last ten years including increased paperwork, increased demands for training, more complex occupational health and safety issues, increased counselling of residents' families and the requirements arising from auditing processes required under the Aged Care Act. 172 We are satisfied that since 1990 there has been a significant net addition to the work requirements of DONs and DDONs. 173 In translating the change in work value for RNs, ENs, AINs and managerial classifications into wage increases we accept Mr Britt's submission that we should have regard to the following matters and we have done so: (a) The six per cent increase awarded by consent in August 2003 and the five per cent interim increase awarded in August 2004; (b) Previous salary increases awarded to nurses as part of industry settlements since 1990 above and beyond safety net increases. 174 We also observe that change, and the requirement to cope with it by coming to terms with new methods and new technology, is an inherent and accepted characteristic of the employment part of the evolutionary process of change which does not provide a basis to award pay increases. We have been careful to discount the value of any change where it is merely part of the evolutionary process. CAPACITY TO PAY Employers' case 175 As noted earlier (para [8]) the employers contended they did not have the capacity to meet the cost of the wage increases sought by the Association or the claim for retrospectivity in that regard. The employers referred to s 17 of the Act, which requires the Commission when varying an award after its nominal term to be satisfied that such a variation is not contrary to the public interest. Section 146(2) requires the Commission when setting remuneration to take into account the public interest and for that purpose to have regard to the objects of the Act and the state of the economy of New South Wales and the likely effect of its decisions on that economy: see Re Public Hospital Nurses (State) Award (No 3) (2002) 121 IR 28 at [120]. 176 It was submitted that it was consistent with the public interest for the Commission to consider the effect of a wage increase on the future operation of the industry based on a cross section of nursing homes across the State and the impact that such an increase would have on the residents of these nursing homes and the levels of employment in the industry. It was contended that it was not in the public interest that, as a result of any increase in wages awarded, a number of nursing homes may close and thus impact adversely on the residents, their families and on employees. 177 Reference was made to Re Pastoral Industry (State) Award (2001) 104 IR 168 at 184 and Re Health and Community Employees Psychologists (State) Award (2001) 109 IR 458 at [52] regarding the cost implications of granting wage increases in special cases. In the latter case the Full Bench stated: It is plain from the authorities that the onus rests on the applicant here to make out a special case based on the evidence presented in the proceedings and, in weighing such evidence, the Commission is obliged to take into account the cost of the claims, including the potential for flow-on to other employees (particularly in the public sector) and the public interest generally. Mr Blair's evidence attended directly to the cost if the applicant's claims were granted in whole and as individual components; that evidence, unchallenged as it was, disclosed the cost of the claims would almost double the present total costs, excluding on-costs, of employing psychologists. On any view, we do not think such a result could reasonably satisfy the special case criteria of "negligible cost". However, and given that that factor may, and probably does, indicate the quantum of the salary increases sought by the applicant was excessive and would, if granted, impose significant costs on the public health system in the State, an assessment must necessarily be made in terms of the "public interest" ground whether otherwise a special case had been made out. In other words, it seems to us, in discharging our statutory duty to make an award setting fair and reasonable conditions of employment the cost implications, whilst most important, are to be taken into account as one factor, but not decisively so in itself, which may cause the refusal of a claim. 178 The employers conceded that an argument based on economic capacity was weaker in the event that the Commission were to find that wage increases to nurses were justifiable under the Work Value Principle. However, even in these circumstances, if to grant such an increase was to have an adverse impact on the economy, it was submitted a case may exist for restraint: see Public Hospital Nurses (State) Award (No 4) at [233]. 179 Mr William Bourne, Financial Services Manager - ANHECA, gave evidence regarding the funding of the aged care industry. He said there were three main components of operating funding available. These were: (a) Care Costs (as at February 2004) (i) recurrent government subsidies (from $0 to $116.47 per resident per bed day) via the Resident Classification Scale (RCS); (ii) resident daily care fees up to $33.05; and (iii) income tested fees of up to $46.36 per resident per day (discounted from government subsidies). (b) Accommodation Payments (as at February 2004) (i) accommodation charges for high care residents up to $13.91 per day; (ii) accommodation bonds for low care residents or residents in extra service facilities; (iii) government supplements in lieu of accommodation payments by the resident; and (iv) some limited Federal capital funding. (c) Supplementary Payments (as at February 2004) (i) special care supplements (eg. Oxygen); (ii) viability supplement for smaller and remote homes; (iii) pensioner supplement of $5.96 per resident per day; (iv) concessional or assisted supplement of up to $13.49 per resident per day; and (v) other supplements. 180 The current RCS subsidies (Category 1 representing the most dependent, and Category 8 representing the least dependent) are as follows: CATEGORY SUBSIDY PER BED DAY $ 1 116.47 2 105.51 3 90.88 4 64.33 5 38.95 6 32.77 7 24.77 8 0.00 181 The subsidies are indexed annually. In this respect, Mr Bourne stated in his evidence: Subsidies are indexed each 1 July based on the Commonwealth Own Purpose Outlays (COPO) formula. This formula takes into account the Consumer Price Index ('CPI') movement from March to March and the increase in the national wage case as a percentage of average weekly earnings. The cocktail used by the government for residential care is 25% CPI and 75% of the Safety Net Adjustment ('SNA'). As stated above, the formula for calculating the COPO increase is to take into account the CPI movement from March to March and the increase in the national wage case as a percentage of AWE. The cocktail used by the government for residential care is 25% CPI and 75% of the SNA. The calculated increase is then adjusted by the Funding Equalisation Assistance Package (FEAP) or coalescence, if applicable. 182 Mr Bourne said that wages represent approximately 75 per cent of the subsidy and that wages for nursing staff represent approximately 80 per cent of total wages. 183 Mr Bourne referred to the 2004/2005 Commonwealth Budget, saying that it contained a number of initiatives for aged care and increased funding for aged care providers, these initiatives being: (a) more aged care places; (b) providing the right care in the right place; (c) streamlining administration for better care; (d) better skills for better care; (e) building better aged care homes; (f) streamlining administration for better care; and (g) investing in better care. 184 Mr Bourne said in his evidence regarding the Budget: The capital funding initiatives included increased accommodation charges, increased concessional supplements and a one-off payment to providers of $3,500.00 per place. The increased accommodation charge is applicable from 1 July 2004 and relates only to residents who are admitted on or after that date. The initiative also announced the open endedness of the accommodation charge. This also applies only to residents admitted on or after 1 July 2004. The increased concessional supplements, together with all other associated concessional supplements (e.g. assisted resident supplement), also commences from 1 July 2004 and is in relation to all residents eligible for that supplementation. The one-off payment of $3,500.00 per place is 'ear marked' for safety measures, particularly fire safety, and is to be paid to providers prior to 1 July 2004. It is anticipated that this will be paid on 22 or 23 June 2004. Another initiative in the federal Budget was to increase the number of aged care places by 27,900 new places over the next three years including 13,030 places in 2004. The main initiative in the 2004-2005 federal Budget affecting the operating income of aged care providers is the provision of extra funding totalling $877.8 million over four years to help ensure aged care providers are more efficient and financially secure. The additional $877.8 million is to be provided over the next four years effective from 1 July 2004 through the introduction of a new conditional adjustment payment. This will increase the average annual payment per resident by about $2,000.00 by 2007-2008. The payment is conditional upon each provider giving its staff information and opportunities regarding workforce training, making audited accounts publicly available each year and taking part in a periodic workforce census. The payment will result in an extra 7% growth in subsidy by 2007-2008 (1.75% cumulative each year over the next four years). The need for and value of that additional payment will be reviewed after the four year period. 185 Mr Bourne calculated the available future funding for wage increases (including the COPO indexation and the conditional adjustment payment) for the four financial years is as follows: 2004-2005 3.79% 2005-2006 4.4% 2006-2007 4.42% 2007-2008 4.44% 186 Of the funding arrangements Mr Bourne said they were: [E]xtremely complex and the formula for calculating the annual increase to those subsidies (based on Commonwealth Own Purpose Outlays or COPO) has no regard to actual wage increases for staff working in the industry. The COPO formula was implemented on 1 July 1996. Prior to the last increase under the previous formula, the subsidies met all wage increases paid to staff within the industry. The COPO arrangements allow only for the safety net adjustment as a percentage of average weekly earnings. Unless the government addresses the COPO indexation formula the industry will continue to be under funded especially in relation to wages. The 2004/2005 budget increase, paid as a conditional adjustment payment, simply clouds the funding issue and does not address the problem. 187 The employers filed a larger amount of evidence on the capacity of employers in the industry to pay a wage increase to nurses. This evidence was filed prior to the 2004/2005 Commonwealth Budget increases. The evidence relied upon was that of: · Lee-Ann Margaret Irwin, Whiddon Masonic Homes of NSW. · Jennifer Olwyn Eddy, Woy Woy Community Aged Care Limited. · Philip Charles Davis, Berriquin Nursing Home Foundation Limited. · Arthur George Brotherhood, Royals Nursing Home. · Paul Cook, H. N. McLean Memorial Retirement Village. · John Charles Morrisey, Deniliquin Nursing Home Foundation. · Michael Douglas Mooney, Canberra Nursing Home Pty Ltd. · Denis William Marshall, Crookwell Frail Aged Association Inc. · Raymond Samuel Neilson, Dungog & District Retirement Living Inc ('Dungog Association'). · Robert McPaul, Baptist Community Services - NSW & ACT ('BCS'). · Lindsay Doherty, Miranda Nursing Home. · Errol Curran, Nambucca Valley Care Limited. · Godwin D'Amato, Thomas Holt Memorial Village. · Carol Allen, ANGLICARE Aged Services Division. 188 The nature of the evidence regarding individual employer's capacity to pay wage increases can be illustrated by a number of examples: Ms Irwin of Whiddon Masonic Homes stated in her evidence: In the short to medium term, if increases in nurses' wages were introduced, the Association would remain viable. However, in the medium to long term, viability would be affected by: (a) reduced occupancy as the facilities would not be cosmetically acceptable; (b) reduced staffing levels and reduced service delivery across all areas; (c) the diminished ability to attract staff would cause a change in casemix of residents to be made, and lower acuity means less revenue from the Federal Government; (d) increasing workers compensation and public liability claims as the environment will not be as effectively maintained and controlled. For example, equipment that would not be able to be purchased or replaced (2003-04: $1.06m) are lifters, electric beds, air mattresses, water chairs, wheel chairs, and dining and lounge furniture, which could cause manual handling issues that result in staff injury and resident injury such as skin tears and falls or fractures; and (e) the potential inability to meet 2008 Certification obligations and subsequent sanctions leading to closure as a result of the diversion of funds from capital expenditure. The consequences of the matters set out in the proceeding paragraph include low morale that would reflect in absenteeism and ability to attract staff. Projected financial modelling with a 15% wage increase means that the Association would not be viable in 5 years, and a 10% wage increase mans that the Association would not be viable in 9 years. A 5% wage increase is sustainable, based on the current financial projections. 189 Mr Davis of Berriquin Nursing Home Foundation Limited deposed that: The impact of further increases in nurses' salaries would be as follows: (a) A further increase of 5% would add $54,233 to operating costs; (b) An increase of 10% would add $108,466 to operating costs; (c) An increase of 15% would add $162,699 to operating costs. Further increases in nurses' salaries would push Berriquin firmly into a loss-making position and would cause Berriquin to review all non direct care related costs. Some costs that could be reviewed are as follows: (a) A reduction in the quality of catering services; (b) A reduction in the availability of diversional therapy to residents; (c) A hold on plans for improvement in information technology; (d) A hold on additional building and capital improvements; (e) Dated equipment would no longer be replaced, but repaired; and (f) Staff training initiatives, such as the training of Enrolled Nurses, may be stopped. Combined, Berriquin and Ulupna hold around $1,400,000 (including operating funds) in cash reserves for normal operating expenditure and future capital works. Further increases in nurses' wages will adversely affect Berriquin's ability to allocate further funds for both now and in the future. Berriquin is indebted to the Commonwealth for $900,000 for at least the next 10 years. A condition of the rebuilding grant is that Berriquin remain in operation for at least this duration. … If Berriquin were forced to close, this would have a devastating effect on the local community. Staff would have difficulties in attaining other employment in the local area and residents would have to move to another town to attain suitable accommodation." 190 Mr Brotherhood of Royals Nursing Home stated: The Royals employs a total of 63 staff under the following categories: 14 Registered Nurses 31 Assistants in Nursing 15 General Service Officers 2 Diversional Therapists 1 Physiotherapist Aide Of these 63 employees, 2 are full time employees, 47 are permanent part time employees and 14 are casual employees. The total staffing costs for the Royals for 2002/2003 financial year was $1,682,911. Of this cost, nursing staff represented $1,288,427 (not including employment on costs such as workers compensation costs). Total staff costs to total operating costs equalled 53.9% while nursing staff costs represented 41.3% of total operating costs. … Any further or additional increases to wage costs will force a review of staffing levels, the delivery of services and operating costs as it will not be possible to absorb any additional increases is the same way that the 6% increase was absorbed. It will be necessary as a consequence of the wage increases outlined above, to review food costs and the use of utilities. The savings, however, may not be significant and would possibly only involve a saving of some $10,800 per annum. If any of the increase in wages outlined above were to take effect, the only way to absorb these increases will be to make significant decreases to staffing levels. Proportionate cuts to staff relative to each level of wage increase will have to be made in the order of at least 90% of each particular level of increase. If staffing cuts were to be made, there will be an impact on residents in response time by staff and by staff taking longer to carry out functions. Necessary care tasks such as medication rounds, bathing times, meal times, daily grooming, and other such activities will be delayed or not carried out at all. 191 Mr Morrisey of Deniliquin Nursing Home Foundation stated in his affidavit: The Foundation is a non-profit organisation which is registered as a charity, and is a community based provider of high level aged care. The Foundation owns and runs a nursing home called Navorina, which is a 40 bed nursing home with only high level dependency residents. Navorina has been in operation since 1986. Navorina is located in Deniliquin, which is a town with a population of approximately 8,000. There is one other aged care facility in Deniliquin, which is run by Southern Cross. It is a facility providing 'aging in place', that is, low care hostel accommodation. … In the event that Navorina is required to pay nurses a 10% increase in wages, its operations will begin to operate at a deficit. While Navorina would be able to carry the loss for a limited period of time by relying on retained profits, the loss of funds for capital expenditure will eventually lead to the inability to meet standards required for accreditation. An end result of the changes necessary to fund any further increases in nurses' salaries could be for Navorina to close down its operation. This would cause a huge impact on the local community. There is nowhere for the residents go. Some could be taken home to wait for beds in the other local facility. The hospital may take a couple, but that is highly unlikely. It would be next to impossible to find accommodation for residents. As Navorina is also a large employer in the community, its closure would also have a disastrous effect on the local employment figures and economy. Wages of $1.6 million would be lost to the local community as well as other economic activity generated by the nursing home in the local economy. 192 Mr Britt referred to the evidence of the Association witnesses who he said "recognised how crucial and tight funding was in the aged care industry". For instance, Ms Lunn's evidence in cross examination was as follows: Q. In the time that you have been engaged in aged care, you are aware that funding is tight? A. Yes. When I first started at Canowindra at Moyne, I was instructed to admit the highest category resident wherever possible and that's carried on right through my career in aged care. Q. And I don't think you say in your statement, correct me if I am wrong, was the nursing home at Canowindra a profit, or not profit nursing home? A. It was run by a religious organisation. Q. By that do I take it it was a not profit nursing home? A. Yes. Q. Was funding even more tight? A. It was very tight, because it was a small nursing home and it was considered to have insufficient beds to really be viable. So that little nursing home was always struggling. 193 Mr Britt also referred to the Hogan Review which analysed the financial health of the sector. The Review showed that the percentage of total expenditure on labour costs in NSW on average was 68 per cent in 2001/2002 financial year with higher labour costs where the resident mix was high care. Eighty-one per cent of services in NSW had a positive Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). Services with a high care mix recorded on average the lowest EBITDA. However, it was submitted: [C]are should be taken in equating a positive EBITDA with an ability to pay a salary increase given the nature of EBITDA. Further, the data collected for the Final Report of the Review of Pricing Arrangements in Residential Aged Care by Professor W P Hogan sought information on all income sources, but did not ask for all expenditure to be reported, excluded the category of capital costs (except for depreciation and maintenance) and the data is 3 years old and since that time in NSW there has been an interim award increase of 6 percent for assistants in nursing, RNs and ENs in the Award and a 4.5 percent increase for other personal care staff by the other awards that cover the industry. 194 Reference was also made to the Hogan Review's observations regarding the technical efficiency of the aged care industry. Professor Hogan concluded that, with optimal technical efficiency, the RAC industry (nationally) could on average become 17 per cent more productive without any extra cost and NSW/ACT could improve by 13 per cent. Professor Hogan concluded that appropriate economies of scale would realise a further eight per cent increase in productivity in NSW. 195 The employers submitted, however, the Commission should not award a wage increase assuming that the aged care sector will become more efficient and thus able to fund such a salary increase. The employers submitted: (a) at the time that evidence was being heard in the proceedings the Australian Department of Health & Ageing has not separately released either the KPMG survey results or the efficiency report from the Centre from Efficiency and Productivity Analysis, University of Queensland; (b) in his analysis of the efficiency of the aged care industry, Professor Hogan does not attempt to measure the quality of the aged care 'product'. Care of older people is about the time available for staff to have quality interactions with people – not just about abstract concepts like 'days of care provided.'; (c) Professor Hogan does not attempt to compare the level of technical inefficiency in aged care and other industries in the Report; and (d) it is not possible to truly measure the efficiency of the aged care industry without understanding what quality of service is acceptable. For example, an output measure of days of care tells you nothing about the amount of support each resident needs each day, and whether or not that it is being provided. 196 Further, it was submitted, the evidence was that a number of service providers do not believe they can make any further efficiency changes or at best make modest changes. 197 Having regard to what they considered were "affordable" increases, the employers made an offer to the Association during the course of the proceedings in the following terms: 1. Increases in Salary Enrolled Nurses, Registered Nurses and above 6 % from first pay period on or after 27 August 2003 (interim increase as awarded by Industrial Relations Commission of NSW) 5 % from first pay period commencing on or after 27 August 2004 5 % from first pay period commencing on or after 27 August 2005 6 % from first pay period commencing on or after 27 August 2006 Assistants in Nursing 6 % from first pay period on or after 27 August 2003 (interim increase as awarded by Industrial Relations Commission of NSW) 4 % from first pay period commencing on or after 27 August 2004 4 % from first pay period commencing on or after 27 August 2005 4 % from first pay period commencing on or after 27 August 2006 2. Other Matters ANHECA (NSW) and ACS (NSW & ACT) have also analysed a number of additional matters that would assist in recruitment and retention strategies for aged care nurses. ANHECA (NSW) and ACS (NSW & ACT) believe that these matters are also affordable in the context of aged care funding announced in the 2004 Budget and amount to a relatively modest cost when compared with the salary increases outlined above. (a) Accelerated progression for Registered Nurses choosing aged care A variation to the Award to provide that a graduating Registered Nurse who has an aged care interest, and who commences work in the aged care industry will be paid at a rate of pay equivalent to Registered Nurse, Year 3. Whilst such a Registered Nurse remains in the aged care industry, the equivalent of 2 years full time service will be credited to actual service for the purpose of calculating service for the incremental scale of Registered Nurse salaries. (b) Enrolled Nurse with medication endorsement An Enrolled Nurse who has successfully completed the medication endorsement will be paid at a rate of pay equivalent to Enrolled Nurse, Thereafter, regardless of actual service upon the completion of 1,000 hours utilising the medication endorsement in the aged care industry, such an Enrolled Nurse shall be paid at a rate equivalent to Registered Nurse, Year 1. (c) Assistant in Nursing, supervisory role An Assistant in Nursing who holds a Certificate Level III in aged care and who is designated by the employer as having the responsibility for leading and/or supervising the work of other Assistants in Nursing, shall be paid as an Assistant in Nursing Team Leader, at a current weekly rate of $550. 198 The Association rejected the employers' offer but as we noted earlier, the amounts proposed by the employers have been submitted as being the appropriate increases (and timing of the increases) to award given the industries capacity to pay. 199 As to the question of retrospectivity, the employers opposed any retrospective adjustment to the Award. It was submitted any such retrospective increases had not been funded nor had employers budgeted for them. Further, such a retrospective payment would cause considerable administrative difficulties in recalculating each weekly salary payment for each employee covered by the Award because of the need to recalculate loadings and overtime. Further, it was submitted that the cost consequences of a retrospective increase were such as to preclude a retrospective order being made. There is no evidence in the proceedings that employers have budgeted for such a backdated increase or could afford such an increase. 200 Mr Britt submitted there were no special reasons as to why the Award should be given retrospective operation: see Re Bank Officers (State) Conciliation Committee (No 1) [1929] AR (NSW) 61 and Re Crown Employees (Officers in Charge, Workshops, Forestry Commission) Award [1964] AR (NSW) 196. Further, justice and equity between the parties did not justify any retrospective increase: Re Cement Workers (Southern Portland Cement Co Ltd) Award (1949) 95 NSWIG 1016 and that, prima facie, awards should operate prospectively. ASSOCIATION'S RESPONSE ON CAPACITY TO PAY 201 Counsel for the Association submitted there was no identifiable public interest whatsoever advanced for the discounting of wage increases that would otherwise be payable to nurses in the residential aged care sector under the wage fixation principles. To the contrary, it was submitted, for the reasons outlined in the Association's submission in relation to shortage and parity, the public interest favours the payment of appropriate rates. As no other basis under the wage fixation principles was advanced for reliance on the financial evidence, it was submitted the evidence should be rejected as irrelevant. 202 Further, and in the alternative, it was submitted by the Association the financial evidence advanced by the employers should be rejected in total due to the following: (i) The residential aged care sector as a whole is fundamentally profitable and healthy; (ii) The residential aged care industry is hugely diverse, ranging from small remote single facility operators to large chains operating multiple facilities for profit; (iii) Reliable indicators of the true health of the industry overall are: 1 the robust secondary market for bed licenses, and 2 the high level of demand for new places issued by the Commonwealth. (iv) The profit margins of operators also varies hugely as shown by the respondent's own evidence; (v) The industry is in the midst of a massive restructuring and consolidation. Many within the industry agree that small operators are simply not viable because of such factors as: 1 the increased demands of the Aged Care Act ; 2 the more acute resident population; and 3 the need for economies of scale. (vi) The evidence relied upon by the respondent was overwhelmingly from small operators and accordingly did not give an accurate picture of the sector as a whole; (vii) The respondent's calculations of the impact of wage increases does not take into account the overaward payments currently being made by operators in order to retain staff; (viii) Professor [Robert] Walker's evidence showed that no safe conclusions could be drawn based on the evidence provided by individual providers even taken at its highest; (ix) The evidence concerning the capacity to pay of individual providers was shown to be largely unreliable and inaccurate; (x) The individual provider evidence when properly tested demonstrated in most cases that the providers concerned did have the capacity to pay substantial increases; (xi) There was no credible evidence that any facility would close because of a pay increase to nurses; (xii) The Commonwealth has in the past intervened where there are real issues of viability and community need has arisen, particularly in remote areas. Accordingly it cannot be assumed that any social need for residential aged care will not be met; (xiii) [Mr Peter] Mackinnon's survey [of ACS members conducted in 2003] was shown to be highly selective and suffering from many of the same deficiencies as the individual capacity to pay evidence. It was also based on inaccurate assumptions. It did not enable any conclusions to be drawn about the state of the sector nor its capacity to pay wage increases; (xiv) The most recent budget has substantially assisted the sector and additional funding was expressly targeted to wage growth. 203 Counsel proceeded to elaborate on the foregoing points. In particular, counsel made the following submissions: The Financial State of the RAC Sector as a Whole · The amount of Commonwealth funding per resident for residential aged care has increased substantially in real terms For high care residents the real increase between 1995-6 and 2001-2 was 27%, whilst for low care residents the real increase was 73%. Whilst it is acknowledged that some of this increase would be absorbed by increased acuity and care requirements of residents, these are very substantial real increases. · In addition to increases in Commonwealth funding, there are other significant increases to funding. For example, the amount paid by new residents to low care facilities by way of bonds increased from an average of $82,989 in 2001-2 to $98, 755 in 2002-3. In 2002-3 68% of all facilities derived income form bonds, compared with 64.5% in 2001-2. Most of the new RAC places released by the Commonwealth in recent rounds have been low care beds. · Professor Gray in 2001 concluded that the industry as a whole was fundamentally healthy and viable, and able to achieve a 12% return on investment, even if substantial rebuilding towards the 2008 certification requirements was required. The Hogan Review · The following facts emerge from [Professor] Hogan's analysis of the state of the aged care sector: (i) Financial accountability and reporting in the sector is generally undeveloped; (ii) In general the sector is healthy with high levels of EBITDA; (iii) There are substantial differences between the most successful participants and the weakest performers in the sector; (iv) Labour costs and associated on costs make up on average about 66% of the total expenses of aged care providers, with a range from 49% to 77%; (v) There is significant inefficiency (in a technical sense) within the sector; (vi) The demand for aged care services is projected to increase. The Market for Bed Licenses · Professor Hogan said: There is a secondary market in bed allocations. Its existence is evidence of the profitability of the residential aged care and the willingness of some to bid for beds at prices reflecting net present values of expected future income streams. · It is clear that the price of bed licenses has increased significantly over time, demonstrating an overall trend of increased profitability. In 1997 bed licenses could be bought for $27,000. Mr Brotherhood, one of the witnesses advanced in support of the respondent's incapacity to pay argument, had only two years ago purchased a number of bed licenses for $70,000.00 each. Mr Morrissey agreed that his bed licenses were worth in the vicinity of $80,000.00 each. · A second indicator of the health of the sector is the high level of demand for new Commonwealth places. There has been a significant increase in the number of RAC places in NSW since 1995. In the 2002 Approvals Round 1,481 RAC places were allocated in NSW. In 2003 the number of additional places allocated was about 1,556. These places are not purchased, but are allocated on a tender basis. Over recent years, every one of the additional RAC places offered by the Commonwealth has been taken up, and indeed there has been overwhelming overbidding for places. Restructuring in the RAC Sector and the Viability of Small Operators · It is inevitable that a number of providers will cease to operate. This has already occurred and is continuing. Between 1995 and 2000 the number of organisations operating high care (nursing home) facilities reduced from 860 to 790 Australia wide, whilst the number of facilities offering high care places increased from 1650 to 1693. The number of operators in the low care (hostel) sector decreased slightly, whilst the number of low care facilities increased from 1,361 to 1,455. It appears that a significant proportion of that movement occurred in NSW. · As at June 2002 in NSW 8.8% of facilities had less than 20 residents, 30% had 21 – 40 residents, 30% had 21 – 60 residents, and 23% have greater than 60 residents. There has already been a significant decline in the number of facilities with less than 20 beds, and in those with 21 – 39 beds. The number of operators operating only one or two homes is also declining. · The then Commonwealth Minister for Health, Mr Kevin Andrews, said on 4 September 2003: No less than seventy-five beds will be required for a facility to remain viable in the long term. Smaller operators should look toward amalgamations with other operations. · Ms Macri gave the following evidence: Q: You would agree it is a commonly held view in the industry a facility with less than 40 beds would not be viable? A: Their viability is under greater threat. It is much more dependent on whether it is a high care or low care facility. Q: Certainly with high care 40 beds would be difficult to maintain? A: That is exactly right. Q: Indeed, many in the industry hold the view anything under 60 high care beds would not be viable? A: That's correct. · Mr Sadler agreed that small, rural and remote facilities generally faced difficulties that were exacerbated by the trend towards increased acuity of residents. He frankly agreed that at least some facilities of less than 30 beds simply wouldn't be viable in the future. · The Commonwealth's policy in respect of rural and remote facilities was summed up by Mr Sadler as follows: I would be astonished if they made a decision that's coercion to parties to suffer closure of beds to rural areas. It's more probable that what they will do is to continue to keep the lid tight at funding levels so that it forces providers to consider joining with other providers or trying as far as they can to get their beds to become larger in their particular geographic areas, actually would be where they are going. · The Commonwealth expects, and wishes, restructuring of the industry to continue. · Any discounting of pay rises would, at best, temporarily prop up small unviable players in the industry, whilst giving a windfall to affluent providers, all at the expense of nurses. Professor Walker's evidence · Professor Walker is an eminent specialist in corporate accounting [Professor of Accounting, University of NSW], ideally qualified to assess the collective and individual claims made in the respondent's material. Professor Walker notes that both the Hogan Report and the earlier [2001] Gray Report ["Two Year Review of Aged Care Reforms"] concluded that overall the industry was in a healthy financial position. · Professor Walker considered the 18 individual capacity to pay affidavits [tendered by the employers] and concluded that they were unrepresentative of the industry as a whole. For example: (i) The total beds represented were less than 7% of the NSW industry; and (ii) Private operators, which collectively constitute 29% of all NSW beds, were represented only by three very small providers. The majority of those giving evidence (and the overwhelming majority of the facilities represented in the sample) were from the non profit sector. · The following should be noted about the individual 'capacity to pay evidence'. (i) The evidence is not typical of the industry in that the private sector is substantially unrepresented and the facilities are generally small. Many are so small as to be potentially unviable by virtue of their size alone (many being below 60 beds); (ii) The evidence and the 'accounts' are not generally advanced with respect to any employer, but rather with respect to individual facilities. They are unhelpful in providing a true picture of employer circumstances; (iii) The focus is almost entirely on high care facilities, often by artificially excluding co-located low care facilities from the analysis. It is widely acknowledged in the industry that high care facilities are relatively disadvantaged under current funding arrangements because they do not receive bonds; (iv) A significant number of the operators are presently undertaking or have future plans for the building of new facilities which accommodate increased bed numbers. This will have obvious effects of improving their future viability because of economies of scale. It is also a telling indicator of the real health of the sector that the very operators advanced to show financial difficulty are in the midst of expansion; (v) The evidence does not take into account the impact of the 2004 budget; (vi) The accounting methodology used in most cases to arrive at 'deficits' is fundamentally flawed, as demonstrated by Professor Walker, in a manner that distorts the true financial picture; (vii) Professor Walker analyses the claims of each witness and demonstrates that either the operators concerned do have the capacity to pay the increases sought or that it is not possible, from the evidence advanced, to reach any conclusions. 204 Counsel for the Association summarised Professor Walker's analysis of the employers' evidence regarding the capacity of individual enterprises to pay wage increases. It is unnecessary to canvass the whole of that lengthy summary. We have, however, recorded the main aspects of Professor Walker's analysis of the four enterprises referred to earlier, namely: Whiddon Masonic Homes; Berriquin Nursing Home Foundation Limited; Royals Nursing Home; and Deniliquin Nursing Home Foundation. Frank Whiddon Masonic Homes of NSW · The document that shows the modelling on which the "dire predictions" were made as to the effect of a 15 per cent pay increase contained a number of fundamental errors which made it grossly inaccurate in the following respects: (i) The Association [Whiddon Masonic Homes] makes over award payments to some of its nursing employees. The calculations of the effect of increases were based on 15% of total 2002-3 wage costs including current over award payments . (ii) The projection applies a 15% increase with effect from 1 July 2004 to every wage and salary group, including administrative, maintenance, cleaning. Personal care, physiotherapy, Head Office, etc. Consultants' fees (for IT and other consultancies) are also included as wage costs and increased by 15% for the 2004-5 financial year. (iii) On costs for all these groups appear to be increased by over 20% between 2003-4 and 2004-5. (iv) Further, for each year after 2004-5, a further 3% per annum is added to all wage and salary expenses and on costs (Association's emphasis) . (v) Thus a 15% increase to nurses would have cost something in the order of $2,000,000.00 (based on Ms Irwin's figures including on-costs but discounted slightly to take into account the over award component). However the cost … for Total Wages and Total Wages On-Costs is calculated to be almost $6,000,000 for the first year. This discrepancy is then magnified by the cumulative 3% annual increases which are applied for successive years. (vi) The calculation based upon a 10% increase show the same deficiencies. · Accordingly, it can be concluded that on the basis of properly adjusted figures the Association [Whiddon Masonic Homes] can without difficulty afford very substantial increases of at least 15%. This of course is without taking into account the effect of the increased beds or the 2004-5 budget increases. Berriquin Nursing Home Foundation Ltd · Professor Walker's identification of substantial positive EBITDA and cash flows for the years since 2000 supports his conclusion that Berriquin could comfortably absorb increases in nurses salary even at the (overstated) figures relied upon by Mr Davis ... This is without consideration of the fact that the two entities are merging, and Ulupna is the more profitable of the two in operating terms. Royals Nursing Home · Mr Brotherhood and his partner, Ms Natasha Chadwick purchased Royals in July 2002 through their company ("Coastalbreeze"). Coastalbreeze paid $70,000 for each bed license, an amount Mr Brotherhood considered to be the going rate at the time. · Mr Brotherhood agreed that, having purchased the business in July 2002, Coastalbreeze had paid $266,724 as a one off cost, paid a commitment fee of $40,000, which was also a one off cost, stamp duty of $150,000 - $160,000, paid Coastalbreeze $60,000 for management services, paid the directors $6,000 and still made an operating profit of $141,488. · Mr Brotherhood and Ms Chadwick also own and operate another business, Innovative Business Improvement System ("IBIS") … · In order to facilitate the purchase of the Royals, Coastalbreeze Pty Limited received a loan of $330,000 from IBIS in order to purchase the Royals. There is no paperwork at all available in relation to the loan between IBIS and Coastalbreeze. · Ms Chadwick and Mr Brotherhood, as directors of IBIS, provide consultancy services to Coastalbreeze … Coastalbreeze pays IBIS $5,500 per month for these services. IBIS owns two eighteen month old Mercedes vehicles which are driven by Mr Brotherhood and Ms Chadwick. Coastalbreeze paid IBIS $5,655 for the use of these vehicles. There are no invoices to record these payments. · There is nothing in Mr Brotherhood's financial statement to suggest that Coastalbreeze cannot afford to pay an increase to nurses. However, as Professor Walker noted: [W]here the affairs of a series of businesses are interrelated (as is the case with Coastalbreeze, IBIS and other entities) it is difficult to express an informed opinion about the validity of claims made about the profitability of these businesses without seeing detailed financial statements and tax returns for all of those businesses. Deniliquin Nursing Home Foundation · Professor Walker summarized Deniliquin's position: …Deniliquin is capable of paying wage increases to nurses. Further, Deniliquin can expect to improve its financial position if expansion improves its operating results. · This facility, like so many others brought by the Respondent to support its incapacity to pay argument, is simply not characteristic of the industry. Far from being likely to close, it is considering expanding its operation. As well, Mr Morrissey agreed that the bed licenses are worth approximately $80,000 per license and that there were expanding operators in the field who may well buy Navorina and its licenses. 205 In support of their case the employers relied on a survey conducted by Mr Peter Mackinnon a Director of Wallace Mackinnon & Associates Pty Limited. The survey, of 82 nursing homes in the not for profit sector, was commissioned by ACSA. The survey sought financial information. 206 In responding to the survey the Association contended that it contained a number of fatal flaws some of which were as follows: (a) The survey did not include the 'for profit' sector, and accordingly excluded almost 30% of the industry. (b) The participants were invited by ACSA in its newsletter to fill in the survey. The purpose of the survey was stated to be "to provide evidence in support of our incapacity to pay argument". This would be highly likely to bias the survey in favour of those operators who were experiencing financial difficulty. (c) The survey was of high care facilities (nursing homes) only. Mr Mackinnon, on the instructions of ACSA, deliberately excluded low care facilities and mixed facilities which are known to be the more profitable segments of the sector, particularly because of the availability of accommodation bonds. (d) The survey did not look at the financial accounts of any employer. It only looked at accounts for individual facilities. Accordingly it cannot give any accurate indication of the financial state or capacity to pay of employers . (e) The projections of the impact of pay increases assumed: (i) that pay increases would be operative from 1 July 2004; (ii) that non nursing staff would get identical increases at the same time; (iii) that the full amount of the increases would be applied – i.e., there would be no absorption due to existing over award payment. (f) There is no basis established for any of these assumptions. The second assumption, in particular, causes Mr Mackinnon to substantially overestimate the impact of pay increases to nurses. (g) Rural facilities were over represented in the survey. Of the 82 facilities surveyed, only 33 were of a size widely considered within the industry to be viable. Only 19 out of 82 were of a size considered by the Commonwealth to be viable. (h) There was a significant degree of overlap between the facilities providing individual capacity to pay affidavits, and the facilities represented in the survey. Given that many of the accounts provided in the individual evidence were shown to be unreliable … the source material from the 83 facilities must be assumed to be equally unreliable. (i) The accounting methods used by Mr Mackinnon for the purpose of assessing the income of participants were unreliable and significantly underestimated income. See Professor Walker's evidence in this regard. Mr Mackinnon used a measure described as " operating results " which is not recognised in accounting. Further, items of revenue described as ' non operating income' (and deducted from the figures provided by survey participants) would properly be regarded as operating revenue. These items included the following: 1 Accommodation Bonds 2 Accommodation Charges 3 Confessional/Assisted and Transitional Resident Supplements 4 Interest 5 Donations 6 Bequests (j) " Non operating income " is not a concept recognised in orthodox economics. As a result of excluding these items, the revenue of operators was significantly understated. (k) Accommodation bonds in particular are one of the most significant sources of revenue for low care facilities. They represent substantial contributions and their quantum has increased substantially over recent years. The operators have the use of the funds until a refund is required, but may draw down and use 5% of the bond per annum for the first five years of residence, and may also use the interest component. (l) Contrary to the frequent suggestions by the respondent's witnesses, the use of accommodation bonds is not limited to capital works, but extends to a range of purposes: s 57(1)(n) of the Aged Care Act provides that the income from bonds must be used in the following ways: · to meet capital works costs relating to residential care; · to retire debt relating to residential care; or · where no capital expenditure is reasonably necessary to comply with matters specified in the certification principles for the purposes of 38-3(3) and meeting accreditation requirements – to improve the quality and range of aged care services. (m) Professor Walker correctly observed that the breadth of the words used in s 57 means there is little practical restraint on the use of bond revenue. In any event, even where operators choose to spend the revenue on 'capital works' the revenue frees up money that would otherwise have to spend on, or avoids the necessity to borrow for, capital works. As Professor Walker concluded, those funds should be treated as ordinary revenue. (n) By utilising EBIDTA and Cash Flow to measure financial performance for the 2002-3 financial year, Professor Walker demonstrates a completely different (and highly profitable) picture of the performance of the five facilities selected from the survey participants. The Profitable End of The Market 207 The Association referred to what it described as "the profitable end of the market" and an analysis of the financial position of one such operator, DCS Amity, by Professor Walker. Ms Howell submitted: The picture is of acquisition of bed licenses at a cost of almost $45 million, to a total value of $76,692,000 as at 30 June 2003. Substantial amounts have also been paid for "goodwill" in the acquisition of facilities. The Directors note that bed licenses are not amortised: as the Directors believe that they have a long indeterminate life and are not expected to diminish in value over time. Mr Sadler also gave evidence that Amity had been purchasing a number of smaller operators in NSW and elsewhere as going concerns. The respondents' broadbrush approach to capacity to pay in this very diverse industry gives such highly profitable companies a windfall profit at the expense of nurses. Over Award Payments 208 The Association conceded there was no comprehensive evidence as to the level of over award payments in the industry. However, it was submitted that a number of providers currently make such payments, predominantly to assist in attracting and retaining staff. Reference was made to the evidence of a number of witnesses. For example, Ms McKenna gave the following evidence: Q. You've said in paragraph 138 [of Ms McKenna's affidavit] "Currently the staff at Palm Grove are paid 7% above the rate in the nursing home wards"? A. Yes. Q. That applies to the other facilities? A. Yes and to all of our nurses. Q. And you have the view that that has assisted in retention of staff--? A. Definitely. … Q. What factors did you take into account in coming to the conclusion that that over award payment has assisted in retention for recruitment. A. Staff tell us. They actually say: "We wouldn't leave here because we get better pay here than anywhere else". The 2004 - 2005 Budget 209 The Association noted that all of the employers' incapacity to pay evidence, including the Mackinnon survey, was submitted before the 2004-5 Budget was announced. It was submitted the Budget provided very substantial financial assistance to the RAC sector. 210 The Association referred to Mr Bourne's evidence as to the effect of some of the Budget measures. The Association submitted Mr Bourne's analysis was inaccurate for the following reasons: (i) It overstates his assessment of wages as a proportion of total operating costs within the industry. He assumes that wages are 75% of total costs, based on "historical" information. This assumption is no longer correct, if it ever was. Even in high care facilities, according to [Professor] Hogan the average is 72%, with the average in low care being 61%. The overall average for NSW is assessed by [Professor] Hogan to be 68%. ANHECA's national figures are even lower at approximately 62% for nursing homes only . (ii) Secondly, Mr Bourne bases his assessment of the impact of the subsidy on wages upon nursing homes only, and disregards the impact on low care or mixed care facilities. Mr Bourne assumes for the purpose of his calculations and conclusions on the impact of the subsidy that nurse wages are 80% of all wages. Even on his own evidence, the 80% figure applies only to nursing homes. However, it appears to be overstated. In 1998 ANHECA assessed the figure for nursing and personal care staff as being "75% - 80% of all staff costs in nursing homes". As discussed above, the ratio of nursing staff to other staff has declined since this time, reducing overall and relative costs. (iii) A further important issue is that Mr Bourne's calculations do not take into account the one-off payment of $3,500 per resident. He asserts that the one-off payment of $3,500 per bed "is earmarked for safety measures, particularly fire safety". In fact, the payment is not limited to fire safety. It is available for investment in building upgrades and to ensure that high care residents who are aging in place are accommodated in buildings of appropriate building classification. Importantly, where fire safety and certification requirements are met, the $3,500.00 may be used: · To improve the quality and range of residential aged care services as defined under the Aged Care Act 1997; and/or to · Retire debt relating to residential aged care in respect of which a subsidy is payable under the Aged Care Act 1997. Even if the payment were limited to capital purposes, it would have the obvious effect of freeing up money that employers would otherwise be required to spend in order to achieve certification standards by 2008. The payment constitutes a very large, albeit one off, payment to employers. (iv) Mr Bourne also takes no account of the impact of increased viability supplements for struggling facilities. (v) These factors have the effect that Mr Bourne significantly underestimates the impact of the increases in subsidy and other budgetary measures on the capacity of employers to pay increases. The Employers' Assessment of Capacity to Pay 211 The Association referred to what the employers described as the "maximum increases that would be affordable across the industry" that we recorded earlier in this decision. 212 The criticisms of the employers' position were that: (a) The increases set out above would leave RAC nurses substantially behind their colleagues in public hospitals over the next two years (even without taking into account future increases in the public hospital sector during the next two years). (b) The increases would not address the concerns about shortage and the need for parity set out above, particularly in light of the likely further increases that will occur in the public hospital sector over the two year period. (c) There was no basis in the evidence for an assessment of the way in which "affordability" was determined, and no opportunity for the Association to test the assertions made. (d) The employers have put an entirely untested and untestable document up with respect to what the industry can "afford" to pay. (e) Generally the employers so called capacity to pay evidence has focussed, not on the industry as a whole, but on that part of the industry that is most disadvantaged – small operators running high care facilities predominantly in rural and regional areas. CONSIDERATION OF EMPLOYERS' CAPACITY TO PAY 213 There was a distinct bias in the employers' evidence regarding capacity to pay and, as the Association contended, it was towards small operators running high care facilities predominantly in rural and regional areas, a significant proportion of which were said to be likely to become unviable. There was a conspicuous absence of material representing the larger private providers who the Association submitted constituted 30 per cent of the industry and who it was claimed, "… are making very substantial profits under the current funding arrangements". The Association provided the example of DCS Amity in respect of whom Professor Walker had undertaken an analysis of the financial position. 214 The employers conceded that its capacity to pay evidence was an "incomplete cross section because the profit sector is under-represented and there is no evidence filed from a large for profit provider". There was every opportunity, of course, for such evidence to be adduced and it might be assumed that capacity to pay the increases sought by the Association was not an issue for the large and, for that matter, many of the not-so-large, "for profit" providers. 215 As for the sector of the industry represented by the capacity to pay evidence, we did not find it wholly convincing. This was especially so in respect of the evidence relating to individual enterprises' capacity to pay in the face of Professor Walker's analysis - almost entirely unchallenged - which in most cases found there was capacity to pay wage increases or that it was not possible, on the material tendered, to reach any conclusions. 216 The Mackinnon survey of 82 nursing homes in the not for profit sector regarding their financial circumstances did not improve our opinion of the quality of the employers' evidence in respect of capacity to pay. The Association's criticisms of the survey were soundly based and we consider that the purpose of the survey was not to reflect an objective analysis of the industry's capacity to pay (it could not possibly have, given that it did not represent 30 per cent of industry) but rather set out to portray a negative picture in that regard. Consequently, we have not accorded the survey results the weight that otherwise might have been appropriate. 217 The employers submitted that: … it is within the public interest for the Commission to consider the effect of an increase awarded to the Union on the future operation of the industry based on a cross section of nursing homes across the State and the impact that such an increase would have on the residents of these nursing homes and the levels of employment in the industry. The Respondents submit that the Commission should seek to ensure that any decision concerning an increase in wages under the Award is such that a considerable majority of nursing homes continue to operate for as long as possible. The reasons for doing so are self evident, the ongoing employment opportunities in nursing homes and the provision of care for the residents. The Respondents contend that it is not in the public interest that as a result of any increase in wages awarded for a number of nursing homes to close and thus impact adversely on the residents, their families and on employees. 218 In respect of this submission the Association responded: (a) There was no evidence that a single nursing home will close as a result of pay increases of 15% or any other quantum; (b) The process of industry restructuring is such that many homes will close prior to 2008 irrespective of pay increases; (c) The question of ongoing employment opportunities has no relevance where the number of beds is continuing to expand and there is already a shortage of nurses; and (d) There is no evidence that any Commonwealth funded bed will not be utilized and, to the contrary, there is presently excess demand for beds. Accordingly, the provision of care for residents is not a relevant consideration, as the same amount of care will be provided irrespective of pay increases. 219 We regard the Association's response as essentially correct. The fact, however, that no nursing home is likely to close if the Association's claim was granted in full, or employment will not be adversely affected, is no justification for awarding the full claim. Nevertheless, we consider that nothing the employers have put regarding their capacity to pay would prevent an increase in wages for nurses in the aged care industry that achieves fair and reasonable pay rates that properly reflect the work value of nurses. QUALIFICATION ALLOWANCE 220 The Association sought a qualification allowance in a materially identical form to that claimed in respect of public hospital nurses. The claim was in the following terms: Continuing Education Allowance (i) A Registered Nurse or Enrolled Nurse who holds a continuing education qualification, in addition to the qualification leading to registration or enrolment, shall be paid an allowance set out below subject to the following conditions: (a) The allowance is only payable where a component (at least) of the qualification is relevant to the employee's current area of practice. Relevance is to be determined by: (i) the nature of the qualification held; (ii) the classification and position description of the Registered Nurse or Enrolled Nurse; and (iii) whether the qualification would assist the Registered Nurse or Enrolled Nurse in performing his or her role and/or assist in maintaining quality resident care and/or assist in the administration of the ward or facility in which the Registered Nurse or Enrolled Nurse is employed. (b) A Registered Nurse or Enrolled Nurse holding more than one relevant qualification is only entitled to the payment of one allowance, being the allowance of the highest monetary value. (c) The employee claiming entitlement to a continuing education allowance must provide evidence that they hold that qualification to their employer. (ii) A Registered Nurse who holds a relevant Post-Graduate Certificate or a relevant Hospital Certificate shall be paid a weekly allowance as set out in Item 1 of Table 3, Continuing Education Allowances of Part B, Monetary Rates. Provided that the relevance of a Hospital Certificate will be agreed by the employer and the Association. (iii) A Registered Nurse who holds a relevant Post-Graduate Diploma or Degree (other than a nursing undergraduate degree) shall be paid a weekly allowance as set out in Item 1 of Table 3, Continuing Education Allowances of Part B, Monetary Rates. (iv) A Registered Nurse who holds a relevant Masters Degree or Doctorate shall be paid a weekly allowance as set out in Item 1 of Table 3, Continuing Education Allowances of Part B, Monetary Rates. (v) An Enrolled Nurse who holds a relevant Certificate Level IV qualification (other than the qualification leading to enrolment) shall be paid a weekly allowance as set out in Item 2 of Table 3, Continuing Education Allowances of Part B, Monetary Rates. (vi) These allowances shall be included in the employee's ordinary pay. (vii) A Registered Nurse or Enrolled Nurse who is employed on a part time or casual basis shall be paid these allowances on a pro rata basis. (viii) The rates for these allowances shall be adjusted in accordance with increases in other wage-related allowances contained in this award. (ix) Where a disagreement or dispute arises concerning the eligibility of an employee for payment of a continuing education allowance, negotiations between the employer and the Association should occur prior to referral to the Industrial Relations Commission for determination. 221 Continuing Education Allowances have been awarded to public hospital nurses: See Re Public Hospital Nurses (State) Award (No. 5) [2004] NSWIRComm 326 In that decision the Full Bench determined at [6]: We do … propose to introduce a Continuing Education Allowance (CEA) provision into the Award. We are satisfied that such a provision is warranted in this Award although we intend to take a measured and limited approach in order to avoid any unintended consequences and because of our concern at the cost impact of introducing such a provision soon after the substantial across the board wage increases for nurses in public hospitals. The provision is reviewable in 12 months for the purpose of examining whether the provision has proved to be an appropriate one or requires amendment, including the amounts of the various allowances we have determined. In deciding to introduce a CEA provision we have had regard to the parties' submissions in the substantive proceedings as well as the additional written submissions relating specifically to the allowance claim. 222 The Full Bench considered that: [8] The environment in public hospitals has changed significantly in the past 15 years and there is a greater need for highly qualified nursing staff with postgraduate qualifications, especially in specialty areas. We consider additional payments that recognise postgraduate qualifications will assist in encouraging nurses to increase their knowledge and skills to meet the demands of a more acute hospital environment and will assist in the attraction and retention of nursing staff. 223 The Full Bench was concerned to avoid any double counting: [11] In deciding to make provision for a CEA we have been concerned to avoid any double counting arising from our assessment of the increased work value of nurses and the introduction of a CEA. Given the approach we have taken in introducing a CEA we do not consider any double dipping occurs. The fact we found that nurses had fallen behind other professional groups provides no basis to conclude that we gave consideration to post graduate qualifications. The comparison was merely between degree-qualified professionals. 224 It was also decided, at least initially, to limit the post graduate qualifications attracting the CEA to those in a clinical field and to exclude Clinical Nurse Educators, Clinical Nurse Consultants and Clinical Nurse Specialists as well as Nurse Managers at level 3 and above from receiving the allowance. However, the Full Bench recognised that there may be situations in small facilities where managers were involved in clinical work for a significant part of their time and so where that time exceeded 50 per cent the relevant allowance would be payable. 225 In identifying the elements of an award provision relating to the Continuing Education Allowance the Full Bench stated: [21] The elements of the Continuing Education Allowance provision will be as follows (together with certain further observations we have made that are included in square brackets): 1 The allowance will apply to RNs and ENs who hold a continuing education qualification in a clinical field in addition to the qualification leading to registration or enrolment. [This element accepts the applicant's claim except that it limits the qualification to a clinical field]. 2 The qualification must be accepted by the employer to be directly relevant to the competency and skills used by the nurse in the duties of the position. [This adopts the approach in the Queensland model and provides an appropriate constraint on the obligation of the employer to pay the allowance. Any claim that the employer has unreasonably withheld its acceptance of a qualification may be addressed through the grievance procedure referred to in paragraph 21.12 below]. 3 The allowance is not payable to Nurse Unit Manager 3 and above unless it can be demonstrated to the satisfaction of the employer that more than 50 per cent of the Manager's time is spent doing clinical work. [This excludes nurses in senior management positions unless they are involved in clinical work for more than 50 per cent of their time. This adopts the approach in the Queensland model except that it is recognised that there may be situations in small facilities where Managers are involved in clinical work for a significant part of their time]. 4 The allowance is not payable to Clinical Nurse Educators, Clinical Nurse Consultants or Clinical Nurse Specialists . [We are concerned at the prospect of double dipping given that the rates of pay for these classifications are already based on post-graduate qualifications]. 5 An RN or EN holding more than one relevant qualification is only entitled to one allowance, being the allowance of the highest monetary value. [This reflects the claim]. 6 The employee claiming entitlement to a qualification allowance must provide evidence to the employer that they hold that qualification. [This reflects the claim]. 7 An RN who holds a relevant post-graduate certificate in a clinical field (not including a hospital certificate) that is accepted by the employer to be directly relevant to the competency and skills used by the nurse in the duties of the position shall be paid an allowance of $15.00 per week. [We recognise that the allowances we have determined are set at levels considerably lower that those applying in other States. We see no intrinsic merit in matching at the outset the other States in relation to the CEA. This reflects a cautious and conservative approach to the introduction of the CEA. The amounts will be reviewed in 12 months time]. 8 An RN who holds a relevant postgraduate diploma or degree (other than a nursing undergraduate degree) in a clinical field that is accepted by the employer to be directly relevant to the competency and skills used by the nurse in the duties of the position shall be paid an allowance of $25.00 per week. [See comments in par 21.7]. 9 An RN who holds a relevant masters degree or doctorate in a clinical field that is accepted by the employer to be directly relevant to the competency and skills used by the nurse in the duties of the position shall be paid an allowance of $30.00 per week. [See comments in par 21.7]. 10 An EN who holds a relevant certificate 4 qualification in a clinical field that is accepted by the employer to be directly relevant to the competency and skills used by the EN in the duties of the position shall be paid an allowance of $10.00 per week. [See comments in par 21.7]. 11 The allowances in 21.7, 21.8, 21.9 and 21.10 are not included in the employee's ordinary rate of pay and will not constitute part of the all purpose rate. [This is different to the claim but it reflects the limited and measured approach we have taken in introducing the CEA and may be subject of review in 12 months time]. 12 W here a dispute arises concerning the eligibility for payment of a CEA that is not resolved by the process contained in subclauses (i) to (iv) of clause 44, Disputes, negotiations between the Health Department and the Association must occur prior to referral to the Industrial Relations Commission for determination. [This reflects the claim]. 226 In the present proceedings the Association acknowledged that there was no evidence as to the number of nurses within the RAC sector currently holding relevant postgraduate or post certificate qualifications. The Association submitted: To the best of the Association's knowledge no such evidence exists. The cost of the claim will be minimal – the number of RNs and ENs in the industry is small and declining, and it may be assumed that, without the benefit of study leave, the number of these nurses with post graduate or post certificate qualifications is also presently quite small. 227 It was submitted there has been a significant expansion in recent years of courses relevant to aged care in nursing education. Reference was made to the evidence of Professor Pearson: The field of gerontic nursing has expanded over the last decade. It is now at least a small part of undergraduate courses in which I have been involved. There is a plethora of post-graduate courses but little incentive in the industry for staff to undertake them. In the next 20 to 30 years, we will need a committed group of highly qualified registered nurses in aged care, supported by much larger numbers of experienced enrolled nurses who are able to perform the more routine of nursing tasks. Yet this sector has no available study leave, and fewer opportunities for professional development than the public or private hospital sectors. Qualifications allowances will assist in attracting better-qualified staff and encourage those in the sector to engage in further study. 228 The Association observed that a graduate certificate in Aged Care Nursing offered by the College of Nursing currently costs $3,300.00 and submitted that "[t]here is currently no incentive and a large disincentive to the acquisition by nurses of the specialised skills that are increasingly required." 229 The employers submitted there was insufficient evidence before the Commission to support the inclusion of a clause in the Award dealing with continuing education allowances; the evidence did not show that such an allowance was in fact warranted. 230 Further, the employers submitted that as a general rule in awards covering professional employees, allowances are not separately prescribed for the possession of specific qualifications: see Professional Rates case (Re Public Hospital Nurses (State) Award, Cahill VP, Bauer J and Sheils CC (1989) 32 IR 316) and Re Public Hospital Nurses (State) Award (No 4) (2003) 131 IR 17 at [274]. 231 Mr Britt submitted that merely because a nurse holds a Masters Degree or Doctorate, the work being performed may not require them to exercise any of the knowledge they gained from such a higher degree. Further, the effect of the qualification allowance was that two nurses may be performing the same work, but merely because one of the nurses has such further qualifications, that that nurse would be paid differently than the other nurse for doing the same job. This meant that a nurse would be paid more, based on a personal attribute, rather than the work value of the job they are performing. 232 The employers contended that in the event the Commission were to vary the Award to provide for such allowances, there was potential for double dipping or double counting, because of those additional qualifications. 233 Further, it was submitted, if the nurses, as professional employees, were granted an allowance for choosing to seek and obtain post-graduate qualifications, that would have the real potential for flow-on to other professional groups (particularly where the allowance was payable, regardless of whether the qualification was necessary to hold that particular position). 234 In relation to the allowance for ENs this was an allowance for holding a TAFE Certificate Level IV. It was submitted the claim for an allowance for ENs was misconceived. This was a claim for an allowance for holding the minimum qualification held by those commencing as an EN since 1992. The claim, apparently designed to benefit those who started before 1992, would give a windfall to all those who started after 1992. For those nurses the allowance would be, in effect, an allowance for being an EN. 235 Given that the parties have not had the opportunity to consider the Full Bench decision in Re Public Hospital Nurses (No. 5), we propose to direct the parties to confer on the implications of that decision for the claim for a continuing education allowance in these proceedings. In the absence of any agreement, the parties will be provided with an opportunity to make further brief submissions regarding the claim in the light of the decision in Re Public Hospital Nurses (No. 5). AMOUNT AND TIMING OF INCREASES 236 We have concluded that all nursing classifications under the Award should receive wage increases on both special case and work value grounds. These increases will be in addition to the interim increases already awarded. It is arguable that different increases should apply to different classifications of nurses because of the different effects of change and, for instance, the fact that it is only in respect of RNs that a wage increase is justified on the grounds of a nursing shortage. 237 Although the employers have called for differential increases if the Commission were to find such increases were justified, we have decided to take an averaging approach in assessing, in money terms, the impact of work value change and the relevant special case factors and to apply the same increases to all classifications. 238 In assessing the amount of increase we should award we note that at a hearing before the Full Bench on 17 March 2005 the parties made submissions as to recent movements in nurses' salaries in the public sector (see Re Nurses' (Department of Ageing, Disability and Home Care) (State) Award [2005] NSWIRComm 19) and the possibility of further salary increases for nurses under the Public Hospitals Award where negotiations are currently proceeding. In that respect, we understand a central element in those negotiations is an agreement reached between the Public Service Association and Professional Officers Association Amalgamated Union of New South Wales and the Public Employment Office for salary increases of four per cent occurring over three periods commencing respectively 1 July 2004, 1 July 2005 and 1 July 2006. That agreement is now reflected in a new Crown Employees (Public Sector - Salaries 2004) Award: Crown Employees (Public Sector - Salaries 2004) Award [2005] NSWIRComm 53. There is also a collateral agreement between the parties to that Award arising out of a memorandum of understanding that will result in the making of a second consent award providing a further four per cent salary increase operative from 1 July 2007. 239 In reaching our conclusions as to the quantum of increases in the Nursing Homes Award, we have had regard to the submissions of both the Association and employers about the developments in the other Awards to which we have referred and, in particular, we have noted the increases granted in the public sector nurses' award referred to in para [238] and the real possibility there will be further increases in the Public Hospitals Award during the term of this Award. As we earlier made clear we also propose to take into account that nurses under the Award have already received an 11 per cent increase (substantially by consent) since August 2003. 240 We have decided to increase the rates of pay for all nursing classifications under the Award by six per cent from the beginning of the first pay period to commence on or after 30 March 2005 and a further six per cent from the beginning of the first pay period to commence on or after 30 March 2006. The Award will expire on 29 March 2007. The increases mean that an RN 5th year will increase from the current rate of $845.10 per week to $895.80 from 1 April 2005. The rate for a 5th year RN in aged care will increase by a further six per cent from 30 March 2006 when the rate will become $959.50. The current rate for a 5th year RN under the Public Hospitals Award is $892.80. We have decided no backdating is justified. ORDERS AND DIRECTIONS 241 The Commission makes a new award in terms of the following orders and directions: 1 Rates of pay for all nursing classifications under the Nursing Homes &c., Nurses (State) Award are increased by an amount of six per cent from the beginning of the first pay period to commence on or after 30 March 2005. 2 Rates of pay will be further increased by six per cent from beginning of the first pay period to commence on or after 30 March 2006. 3 Allowances shall be adjusted accordingly. 4 The expiry date of the Award shall be 29 March 2007. 5 The Nursing Homes &c., Nurses (State) Award is to include a leave reserved provision in respect of the Association's claims for: paid maternity, paternity and adoption leave; entitlements for Association Branch officers; continuing education allowance for assistants in nursing; and reasonable workloads. 6 The Nursing Homes &c., Nurses (State) Award is to include a leave reserved provision in respect of the employers' claims: (a) To insert a definition for a seven day shift worker in the Award; (b) To provide a definition of ordinary pay; (c) To increase the span of hours for the working of day shift; and, (d) To insert a clause dealing with leave without pay. 7 The Association is directed to file and serve a draft award reflecting orders 1 to 6 inclusive hereof within 21 days of today. 8 In accordance with the terms of this decision, the parties are directed to confer on the terms of whether the Award should provide for a continuing education allowance and, if so, the terms of such a provision. The parties will report on the progress of their discussions at a Directions Hearing at 9.30 am on Friday 22 April 2005 before a Member of the Full Bench. ______________ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.