The Early Childhood Education and Care (ECEC) sector is finally seeing long-overdue recognition of its workforce — but for providers, the path to fairness is layered with complexity, uncertainty, and growing financial strain.
A Win for Educators, A Challenge for Employers
In April 2025, the Fair Work Commission released a provisional decision confirming that educators under the Children’s Services Award have been historically undervalued – a fact well known across a workforce that is 97% female. The decision sets out a new classification structure and wage rates, including a 5% increase from 1 August 2025, layered on top of the 1 July CPI adjustment, which could bring the total uplift to around 8% in just a few months.
The Role of the Worker Retention Payment
The Worker Retention Payment (WRP), a Federal initiative, offers partial wage relief over two years (10% in Year 1 and 5% in Year 2) to services that meet specific eligibility requirements. However, a key condition of accessing the WRP is that participating services must cap fee increases to:
- 4.4% from 8 August 2024 to 7 August 2025, and
- 4.2% from 8 August 2025 to 7 August 2026
Does the wage increase and the fee cap create a funding shortfall for those providers accessing the WRP and what impact will that have? While an alternative fee cap can be requested in special circumstances, this adds more paperwork to an already onerous process.
Not All Services are Starting from the Same Place
While intent behind the reform is to lift the sector as a whole, the impact varies widely depending on each service’s circumstances:
- Services covered by the ECEC Supported Bargaining Agreement (2024 – 2026)
These providers are well positioned. The agreement incorporates WRP funding, aligns with the proposed wage increases, and was negotiated with support from unions and government. For them, the transition has been deliberately structured.
- Services with individual enterprise agreements or IFAs who have secured WRP funding These services have taken steps to lock in funding support, though the administrative burden remains high particularly those using IFAs. Their immediate risk is lower, but compliance and reporting expectations are significant.
· Services that have applied for WRP but are still waiting approval
Many providers are in limbo – preparing for wage increases without confirmation of funding. The uncertainty, coupled with the cash flow risk, is leaving them exposed.
· Services that already pay above award
While it was hoped the WRP would create a level playing field, providers already committed to higher wages may now find themselves financially penalised. The guidelines are explicit and state that the WRP cannot be used to offset or absorb wages already being paid above award. With these restrictions in addition to the fee cap, services will be forced to absorb significant cost increases which cannot be passed on to families threatening their financial stability.
· Services paying award rates
Often smaller operators, these services are being asked to navigate IFAs and grant applications all while being told they must either absorb wage increases or limit fee growth. For some, especially those without dedicated HR or finance teams, the burden is becoming too great. Are we unintentionally pushing these services out of the sector?
A System That Works Better for Some Than Others
There’s growing concern that the current approach favours providers with the resources to manage complex funding and compliance processes – typically larger organisations with in-house HR and finance teams. Meanwhile, smaller services and early adopters of higher wages may be stretched by the administrative load, limited cost recovery options, and lack of tailored support — despite their longstanding commitment to staff and quality.
What Should Providers Do?
Two major wage changes are looming, and the implementation roadmap is still unclear. Providers can take steps now to prepare:
- Audit your payroll systems and classification levels – ensure you can apply changes accurately and stay compliant.
- Model your costs under different scenarios – account for the July CPI increase and the additional 5% from August — with or without WRP funding.
- Push for clarity – sector voices need to ask: when will final implementation guidance be issued? How will funding support equity, not just compliance.
A Sector in Transition - But to What?
This is a transformative moment – and one that educators absolutely deserve. But the path forward must be one where every service, not just the most resourced, can survive and thrive. If government and sector leaders are serious about fairness, the implementation of these reforms must match the ambition of the decision behind them.
Need help navigating the changes?
Talent Now partners with services of all sizes to simplify staffing and support compliance — especially in times of change. We’re here to help you stay informed, act strategically, and keep putting your educators and families first. Please call us today to discuss 1800 840 889.
