I own 2 private for profit services, ask me anything you like. If you want my views on the sector overall in Australia, these are no longer businesses that have scope to make great profits when compared to other sectors. The Government pushes more and more each year towards "universal childcare", whatever that means... They keep using the term but haven't actually defined what it looks like. One can assume though, it likely means fully Government subsidised childcare with a cap on fees. Most providers already have a large portion of their income paid by state and federal governments: E.g. childcare subsidy, fee relief, grants to provide the educational program, wage subsidies for trainees... so like it or not, there is a duty to the Australian public to have a big say in how the sector operates.There is still strong demand for more child care places in many parts of the country, however latest data has shown an overall easing in new enrolments. Workforce shortages are still the biggest issue for providers trying to meet demand. In my case, I have wait lists long enough to open 2 more services of the same size, however its been a constant battle over the past 3 years just to staff the current ones adequately. There are a lot of nuances around staffing numbers and qualifications in order to legally meet legislative requirements that much of the public don't understand. However there is no National regulation around staffing requirements, each state has their own, which also creates problems.
I have been fairly close to the process of getting to the announced 15% Government funded wage increase in December this year. Whilst we always knew they would want some sort of additional control in fee setting if we accepted this grant, for the majority of services that have been a part of this process since the start, we were completely blindsided by the blanket 4.4% fee cap in the first year the Government has mandated. We are all supposed to officially opt in next month with the money to start flowing in December, but there has been such minimal finer detail given to us to make a proper informed individual business decision. This funded wage subsidy really has the possibility to divide the sector even further. Many services are struggling to see how they will remain financially viable if they accept this grant and then cannot put their fees up more than 4.4% to cover expenses. It's retrospective to the day before they made the official announcement too, so you can't even increase fees now to try and mitigate risk. If they don't accept the grant, their employees are likely to walk up the road to the service that did accept it and can offer 15% better pay. The service that opted out then has no option other than to self fund the wage increase by increasing their fees so they can keep their staff. The families are the one's that lose out and those services look like the greedy bad guys because they increased their fees after the Government(and you know they will do this) bleated all through the media about how they have capped childcare fees at 4.4%!
A couple of facts to be mindful of:
On average, wages make up 70%+ of a services' expenses. If a service self funds the wage increase, this will be much higher.
Fairwork are also undertaking a review into historical wage undervaluation in the sector with their findings due in the next year or so. There is a chance this results in a mandated pay increase above the initial 15% subsidised by the Government. However the Government has said they will not fund the difference... yet the service will still have it's ability to increase fees capped...huh!?
There was an ACCC inquiry into childcare fees last year that found overall, the sector is not making excessive profits. It reported that there are a large portion of services breaking even, or even losing money. How does an enforced cap on fees affect services financial viability going forward?
For me personally, corporate profits don't belong in early childhood care and education, and I think the majority of society supports that sentiment. My businesses allow me to build some equity in the attached properties and pay me a modest wage for my modest lifestyle. I'm content with that. There are thousands of better businesses to invest in.
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