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“The Victorian government was very clear the wage subsidy would end and wouldn’t be extended, despite the protests of many including Aruma,” he continued.
“The NDIA has provided no relief to be able to bridge the loss of the subsidy, so we are left with no choice.”
The Victorian government began transitioning control of its 500 state-owned residential disability homes to five private operators – Aruma, Scope, Life Without Barriers, Melba Support Services and Possability – in 2016 and in line with the creation of the NDIS.
The government homes also came with pre-existing public service workplace agreements that demand higher wages, staff ratios and standards of care than are covered under NDIS payments. To cover the shortfall, the Victorian government agreed to provide the five private operators with $2.1 billion in subsidies for eight years.
Despite years of pleading by the providers, unions and the families of residents likely to lose their homes, neither the Victorian nor federal governments agreed to fund the wage and services gap before the December 31 deadline.
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As revealed by this masthead, the funding standoff has already seen the five private providers close more than 60 supported independent living homes. Laverty warned more would quickly follow if costs could not be urgently cut.
Aruma’s Fair Work application seeks to terminate the current public sector-based agreement that includes wages up to 22 per cent higher than those offered under a standard NDIS agreement. The agreement also mandates higher staff ratios, including a house supervisor at each service, to care for residents.
Health and Community Services Union assistant branch secretary Rebecca Sprekos said it had been warning the state government of this impending crisis for years, but the funding was cut on December 31 without a clear plan to maintain services.
“This action now by Aruma creates a dilemma across the board for disability workers, for participants, for families,” Sprekos said.
“If the agreement is terminated, we’ll see staffing and safety levels decline. If Aruma has to maintain this agreement, then they’re going to be forced to close homes.”
The Fair Work decision could also have wider ramifications for the other residential services providers, who all confirmed to The Age in September that they were struggling and were operating with as little as one month’s cashflow.
During a December 11 confidential town hall meeting, Scope’s chief executive officer Lisa Evans told staff its services would have to be “right-sized for our revenue”, or risk becoming unsustainable within four years.
As the state government subsidies were set to end, Evans told staff the loss of the grants, as well as a higher-than-expected number of client deaths, would result in a projected $28 million loss of revenue in this financial year.
With funding now expired and the federal government refusing to increase allocations via the NDIS, Sprekos said the future of all 500 government-owned homes and the almost 2000 residents would be impacted by the Fair Work decision, regardless of what it is.
“The actions present a situation where we have two alternative outcomes that are equally as poor as each other,” she said.
“This is potentially the tip of the iceberg that we’re seeing. We can’t say with any confidence that other providers won’t have to take similar actions as well.”
A state government spokesperson said the negotiations were ultimately a matter for Aruma, the union and its members and said the federal government needed to keep the market sustainable.
“Market sustainability is the responsibility of the Commonwealth government, and Victoria consistently advocates for the need for proactive market management to ensure providers are viable,” they said.
“Contractual arrangements supporting the transfer of Supported Independent Living services have been in place since 2019, with all parties acknowledging these arrangements would conclude on 31 December 2025.”
Opposition disability spokesman Tim Bull said he was concerned neither the state nor federal governments were close to resolving the issue.
“We have a large number of supported independent living homes in Victoria caring for the state’s most vulnerable residents now facing potential closure, yet the state and federal ministers are not even talking to each other – it is disgraceful,” he said.
An NDIA spokesperson said the agency would not comment about the Aruma action, as it was a wages issue between the company and its workforce.
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