The committee is considering the Wage Justice for Early Childhood Education and Care Workers (Special Account) (Extending Support and Strengthening Safety) Bill 2026. The amendment on sheet 4098 has been moved by Senator O'Sullivan. The question before the chair is that the amendment be agreed to.

I want to address the details of the amendment that the opposition is proposing that the Senate agree to today. The government first announced that family day care and in-home care will be included in the expanded scheme, and, as I said in my second reading speech, we welcome that. I think it was good that the government was going to do that. However, the government has retained eligibility requirements that mean that many of the educators working in those sectors will remain unable to access the payment.

Under the current arrangements, providers must engage their workers through a compliant workplace instrument, and this creates a significant barrier for services that rely on lawful contractor and sole-trader arrangements. These arrangements are not unusual or incidental within home based care. Family Day Care Australia told the Senate inquiry that virtually all of Australia's approximately 8,500 family day care educators operate as self-employed sole traders and independent contractors. In-home care also relies on a mix of employee and contractor arrangements to provide flexible care to families experiencing geographic isolation, complex needs or non-standard working hours.

Forcing these services to change their entire operating model would be commercially unviable for many of these providers—that's the evidence that we heard through the inquiry process—and it would impose significant administrative costs and undermine the flexibility that allows them to meet the needs of families. Without this amendment, the government can continue to say that family day care and in-home care are included while retaining grant conditions that actually exclude much of their workforce. This is, in fact, not genuine inclusion.

This amendment prevents the terms and conditions of a worker retention payment grant from requiring a recipient to engage workers through a particular kind of workplace instrument or industrial arrangement. It also prevents the grant conditions from dictating the broader manner in which workers must be engaged. Importantly, the amendment does not weaken workplace protections. Paragraph (c) expressly preserves the requirement that all workers be engaged in accordance with relevant Commonwealth, state or territory laws. Providers would still be required to comply with the Fair Work Act and every other applicable workplace law. They would still be required to demonstrate that Commonwealth funding reaches eligible educators. This amendment simply ensures that access to Commonwealth funding cannot be used to force providers to abandon lawful engagement arrangements.

There is already a clear precedent for a much more practical approach. The government permits labour hire workers to receive the worker retention payment without requiring providers to prove that the labour hire agency has a compliant workplace instrument. Instead, providers must demonstrate through invoices and reporting that the funding has been passed on to eligible workers. This would be far simpler and enable these providers to receive it.

The government has not adequately explained why a similar auditable pathway cannot be used for family day-care and in-home care educators. If the purpose of this program is workforce retention, then the program should reflect the workforce that actually exists. I accept as shadow minister that the number of workers in this space is obviously much smaller compared to those working in centre based care, but, for those families that have to choose that service provision—be it family day care or in-home care—or it's just simply their preference to, then, while the numbers are not as significant for them, that individual family and that individual child, it is significant and it matters. The system should not favour one lawful operating model over another. It should not entrench a two-tiered system in which educators and centre based services can benefit from the payment while contractors performing equally important work in other approved care settings are locked out.

This amendment provides a very practical solution. It maintains legal protections and accountability for taxpayer funding while removing an unnecessary barrier that would otherwise exclude much of the family day-care and in-home care workforce. My question is around how the government has announced that family day care and in-home care would be included in the workforce retention payment. How many additional educators does the government expect will receive the payment as a result of this change?

The government announced, when we announced the extension of the worker retention payment, that we would be extending the payment to employees in in-home care and in family day care. That is exactly what we are doing. We have implemented the worker retention payment thus far by requiring providers to have a workplace instrument in place that can be an individual flexibility arrangement, or it can be a collective agreement. An enforceable instrument is a critical protection for workers. It's a critical protection for the government as well. It is essentially a safeguard to make sure that the payments that we provide go to workers. It's a safeguard for workers, it's a safeguard for taxpayers, and we are continuing with this extension of the worker retention payment to all employees in long day care, family day care, in-home care and eligible employees in out-of-school hours care as well. We are continuing the use of requiring an enforceable instrument to ensure the integrity of the program.

In relation to the new eligibility, under the expanded worker retention program, I can advise that there are currently 215,000 early educators at services across the country who are benefiting from the pay rise, and Jobs and Skills Australia estimates that there are around 274,000 workers in early education and care, including preschools. So we are, with this expansion and extension of the worker retention payment, including employees in home-care settings and in family day care along with those employees in long day care as well. We have seen that this pay rise of $255 a week for the average full-time educator has been a game changer. It's helped them stay in the jobs that they love, and it's helped build a strong and stable workforce, which of course is the basis for quality early childhood education and care in this country.

Minister, you gave us the overall workforce numbers. I specifically asked how many additional educators are going to be able to receive this payment as a result of, specifically, the change to allow employees in family day care and in-home care to be able to receive the payment.

We are investing $3.6 billion in providers that would like to pay their workers higher wages, providers who would like to keep fees down for families and providers who value safety in early education and care. As I said, there is a pool of employees across the country who are eligible for the payment. That pool, according to Jobs and Skills Australia, is 274,000 workers in early education and care. That includes preschool. Ultimately, it's a decision for providers whether they would like to sign up for the worker retention payment which over the last period of time, since the pay rise was announced in August 2024, has helped us stabilise the workforce. It's provided a $255-a-week pay rise, and it's resulted in a workforce that can stay in the sector.

We have seen job vacancies in the sector decline by 30 per cent at the same time as the workforce itself has grown. Having those stable relationships between educators and children is the foundation of quality early childhood education and care in this country. That is exactly what we are delivering with this legislation.

Minister, you haven't given me the number of additional employees within these centres, within family day care or in-home care, that will be eligible. How many employees are there and how many operate as independent contractors within those two separate categories?

I'm advised that the best way to get further information about the numbers that you're interested in is to consider the entire pool of early educators—which, as I said, is 274,000, according to Jobs and Skills Australia—and then to consider the proportion of services that are family-day-care services and the proportion of services that are in-home care services. I'm advised that around 4.8 per cent of services, of family-day-care services, provide care for around 62,000 children—about 4½ per cent of all children in CCS approved care. From some of the work that we've done recently in relation to in-home care, we know that that is a much smaller sector. From memory, there are just over 20 providers in that sector, serving around 800 families. As we know, it's quite a small sector, and it is ultimately a decision for those providers as to whether they want to sign up for the worker retention payment. Of course, the worker retention payment is available to providers in family day care and in in-home care should they wish to transition from a contractor model to an employee model. But, again, that is essentially a matter for those providers as to whether that is something that works for them and whether that's an opportunity that they would like to take up.

I've asked this question several times now. I'm not getting the answer in terms of the number of educators that are employees within these sectors. Maybe you don't have that answer; that might be the case. But, if the government doesn't know how many educators are employees and how many are contractors, on what basis did you assess the number of educators who would benefit from this expansion?

The full costings of the extension of the worker retention payment will be published in MYEFO. This is an announcement that was made after the budget, and further information will be available at MYEFO. More generally, the government has been aware that there is a mix of employees and contractors in in-home care and in family day care. What we are doing with this bill is locking in the pay rise for over 215,000 educators and making the pay rise available for up to an estimated 273,000 educators. The way that providers can access the worker retention scheme is by having an eligible workplace instrument in place. As I said earlier, we believe that that is an important way to ensure integrity in the scheme. Of course, I think it's important to note that the worker retention payment itself is, as described on the label, a worker retention payment. Eligibility for it extends to employees and to providers with employees. But we recognise that there are also operational challenges and constraints for in-home care providers and for family day care providers who operate on different models, and the worker retention payment is not the only scheme that is available to assist these providers.

We recently announced an in-home care sustainability package of $11 million to the in-home care sector, which comprises funding for the extension of the worker retention payment to employees in that sector. It also comprises CCCF funding. That, as well as a dedicated in-home care sustainability grant, has been provided to the in-home care sector. That whole sustainability package for in-home care has been welcomed by the sector. It's been called 'monumental' by the sector as an intervention by the government to support what is a critically important sector for those families who are unable to access mainstream long day care. We also provide operational support for family day care. In the recent round 5 of the Community Child Care Fund, there was $14 million in operational support provided to the family day care sector and family day care providers.

With this worker retention payment, we are supporting those providers in the sector who have employees. It is a historic commitment to a 15 per cent pay rise. We think it is important that the worker retention payment applies to employees in the sector and that there is an enforceable instrument to support workers, providers, taxpayers and the Commonwealth in knowing that the money is being directed exactly where it is needed. At the same time, as I say, this is not the only support that is being provided to small businesses that operate in the sector and small providers who operate on a contractor model. The Commonwealth is providing significant operational support to the sector—to in-home care and to family day care. It is support that has been welcomed.

Minister, you talk about what's on the tin and that it's titled the 'worker retention payment'. I put to you that the parent who deeply values the work that's provided by their family day care operator or their in-home care provider and what they get from that doesn't, frankly, particularly mind whether they're an employee or an independent contractor. What's valuable is the service that they deliver. So why is the government differentiating on the status of employment rather than on the quality of service that's delivered and the need that's actually been met by that provider? That's the first question.

The second question is this. When you read the submissions—hopefully, you've had the chance to look at those submissions that came through, with the short inquiry that we had—and you hear from, for example, Family Day Care Australia, who told the Senate inquiry that virtually all of Australia's approximately 8,500 family day care operators operate as self-employed sole traders and independent contractors, what consideration and concern do you have for their viability going forward, given that they may not be eligible unless they change their model? Again, evidence that we got from the inquiry was that they consider it too onerous and too significant to be able to upend their whole model and change how they operate.

Thank you, Senator. We value the children in families who are supported by in-home care and family day care. I was really pleased to meet a little girl called Cece and her mum Jen in regional New South Wales recently and to meet the in-home care educator who supports that family and provides great quality early childhood education and care for little Cece. That is why we have provided sustainability support to the in-home care sector. We have provided $11 million in funding to support the operational costs of the sector.

There are some unique costs associated with delivering in-home care. We recognise that, and we acted, and we are pleased to have been able to provide operational support, which I can confirm can be dedicated to covering costs associated with providing early childhood education, which is a service reliant on a workforce of early childhood educators. The same is true for family day care, where we value the children and families who attend family day care. We support family day care through the Commonwealth childcare subsidy, and we also support family day care through CCCF. In the latest round of CCCF, a number of family-day-care providers were successful in getting operational support, and that operational support is important for them, to cover all of the costs that they accrue. We were pleased to be able to provide $14 million of operational support to family day care through round 5 of CCCF.

In relation to the worker retention payment, the vast majority of early educators in the workforce are employees, and all employees of the providers who are eligible for Commonwealth childcare subsidy, which I outlined before, are eligible for the worker retention payment. More than 215,000 early educators are currently receiving what is a historic 15 per cent pay rise, on top of significant minimum wage rises, supported and advocated for by the government. This is a game changer for early childhood educators. It is an extra $255 a week for the average early childhood educator. As I travel around the country and visit services on a regular basis, I make sure that I listen to the educators that I meet and hear what a difference the worker retention payment and the 15 per cent pay rise are making in their lives. What I am hearing is that they feel valued, they feel respected, they can afford to pay their bills, and they can afford to plan for the future. That is being reflected in the retention numbers that we are seeing in the sector.

It comes after a workforce crisis that we inherited after almost 10 years of coalition government refusing to invest in the workforce. Educators were leaving the sector in droves. Turnover was as high as 30 or 35 per cent in many parts of the country. For many providers, providers were having to rely on staffing waivers rather than fully staffing their services.

Through this historic pay rise, we have seen a workforce that is now much more stable. We are seeing a workforce that is growing. We are seeing job vacancies decline and we are seeing the use of staffing waivers dramatically decline. All of that adds up to higher quality early education for children, and that is what matters. We know that secure relationships between educators and children are what deliver quality early education in Australia. In order to have those secure relationships, we need a secure, strong and stable workforce. That is exactly what we are delivering with this historic 15 per cent pay rise, with the worker retention payment and with all of the support that we provide to ensure high-quality early education and care for the nation's children.

Minister, if the principal concern is to ensure that that pay rise is supported by the worker retention payment and that that's where it actually ends up going, then, if a worker is an independent contractor or a sole trader, the individual—the worker, the one performing the service—is the one who would be receiving the payment. How is there any risk at all that the worker retention grant is not passed on? They themselves are the recipient. They don't need to pass it on because they are receiving it themselves. Why has the government made this decision? Is there, in fact, a different reason the government is going down this path, other than ensuring that the payment goes to the individual who is performing the service?

There are a number of different arrangements, if you want to put it that way, for labour in early childhood education and care, including where we have umbrella family day care providers and umbrella in-home care providers. They can secure the workforce that they are providing to families by using a contractor model or by using an employee model. As I think I have explained in a number of different ways now, the worker retention payment has been extended to employees in in-home care and employees in family day care. It is a worker retention payment. It is an employee retention payment. That is exactly how it has been characterised by the government, including in the announcement that we made to extend the payment.

To change topic, what's the government's long-term funding plan once the extended worker retention payment ends in June 2028?

Let me step that out for you. In the middle of next year, the award underpinning the sector will reach the 15 per cent pay rise that we are providing through the worker retention payment. That will continue through to the middle of 2028. From the middle of 2028, there are, on average, further significant pay rises as part of the gender undervaluation decisions of the Fair Work Commission. There is work underway in the Department of Education right now as part of the service delivery prices project to understand the true cost of delivering early education and care, and the changes to the children's services award which I just described to you will form part of that analysis over the next few years.

The findings from that work will come to government at the end of this year, and that service delivery prices project work will allow us to consider longer term funding arrangements once we have that information. This funding, this extension of the worker retention payment, essentially makes sure that workers are paid fairly and keeps costs down for families while we do this important work.

I want to go to quality and safety. The bill allows grant conditions to address quality area 2, relating to children's health and safety. What specific safety requirements does the government intend to impose through those grant agreements?

As you've outlined in your question, we have added a new safety requirement as part of the worker retention payment. We do require providers to meet quality area 2 under the National Quality Standard in order to be eligible for the worker retention payment. They will need to meet that standard of quality area 2, which describes child safety and wellbeing, by the middle of next year in order to be eligible for the payment. Around 95 per cent of services already meet the national safety standard, but we do want that number to be higher. We know that that's what parents expect, and it's what children deserve. The reason we want to make compliance with quality area 2 part of the worker retention payment is to continue to drive the really important safety work that we're doing in the sector.

Last year, we passed legislation that gives the Department of Education the power to cut off funding to operators that don't meet the quality, safety or compliance requirements under the national law, and we have been using those powers. There's always more that we can do to raise quality and safety standards, and this bill is part of that effort.

So will those conditions be prescribed consistently across all worker retention payment recipients, or are they determined separately through individual grant agreements?

The department has published a framework for this question to assist providers to comply with the provision, so there is a consistent framework that applies. It is the case that services that fail to meet the national standard from July 2027 could have their funding cut, under the legislation. The department encourages services that are not meeting the standard to address concerns as soon as possible and also contact their regulator for a reassessment. There is assistance available to providers to comply, and the framework that the department has published has information that may be of assistance to providers.

Thank you for that answer, Minister. I had some feedback that, while that information is there, there was some confusion about it. So hopefully the answer you've provided will give that clarity to those that were confused by it.

Who will determine whether a provider has breached a safety related grant condition, and what review or appeal rights will be available given the different layers of jurisdiction that we have here? With the grant coming from the Commonwealth and the regulator being at a state level, or vice versa, there are different layers. Can you just provide some clarity there.

It's just the standard process. Services across the country participate in assessments and rating visits which are conducted by the state and territory regulators. Those visits assess the performance of providers on quality area 2 under the National Quality Standard. That is the rating that needs to be achieved.

I understand that the original sustainability grant for in-home care did not include provisions to use the grant funding for worker retention. Minister, you've since changed that and now in-home care can use the sustainability grant for a worker retention payment. Does the worker retention payment go to employees only in this grant, and why is it now changing?

My recollection is that the in-home care sustainability grants have been available for operational costs. Clearly the costs of educators themselves are a significant part of an in-home care operation or any early learning operation. The sustainability grants can be used for operational costs. Operational costs include early education.

Can you confirm that that was a change that you made recently? That wasn't the original design. That's been a subsequent change.

I have not made that change, and I have just asked the department to check that that's the case and the in-home care sustainability grants are as has been described.

Minister, noting that this bill makes it possible for meeting quality area 2 of the National Quality Standard to be a condition of receiving the worker retention payment, how is the Commonwealth ensuring that state and territory regulators are adequately funded and resourced to make sure they have the capacity to regularly and thoroughly assess every early learning service against those standards?

Last year, when education ministers stood up and announced the national child safety package, there were commitments made about regulatory visits and funding for regulators. Assessment and rating visits are to be conducted with a certain frequency, and there are more visits for services that are, on those visits, rated as working towards a national standard. Those arrangements were agreed as part of the national child safety package. What I can say is that, in the last quarterly data that is available, there have been more regulatory visits than have ever been conducted before, and that is a reflection of the commitment of the jurisdictions—the states and territories—and their regulators to making sure that there is strong regulation, regular assessment and rating visits, and regular follow-up visits to those services that are assessed as working towards the standard.

Who's funding that added regulatory activity? Is it the Commonwealth, or is it providers via annual regulatory service fee increases?

Your question is reasonable. It's somewhat outside of the scope of the bill. I'll tell you what I know and see if I can get more information. The regulators are funded by the jurisdictions under the arrangements that we have. There are various fees that providers pay. There are different types of fees that providers pay, and my recollection, unless I get different information via the department, is that jurisdictions decide how to attribute those different regulatory fees. It's my recollection that some jurisdictions attribute those fees directly to regulators. For others, it goes to general revenue. That is my recollection.

Minister, what specific discretion will be given to the department when considering ongoing eligibility for the worker retention payment of centres not meeting quality area 2, especially where centres may, in fact, need to rely on the additional funding the worker retention payment provides to retain quality staff and not let those standards slip further?

As I said, the department has published a framework for some of these matters, which may be of assistance to providers. Services not meeting the standard are advised to address any concerns as soon as possible and to contact their regulator to seek a reassessment by no later than 31 March 2027. However, there will be transition provisions in place to ensure that funding continues for services trying to do the right thing, and I understand that this information has been published for providers, so I can confirm that services that request a reassessment before 31 March 2027 and are still awaiting a reassessment as at 1 July will continue to receive the funding until the reassessment is completed.

We want to assist services to meet the quality standard. Our preference, of course, is that they do meet the quality standard and that they do achieve eligibility for the extended worker retention payment. But the other side of that is that services that don't meet the quality standard and are not doing the right thing will not be eligible to receive the payment.

Minister, do you anticipate that more services will take up the worker retention payment during this extended period to 2028, or is the extension primarily intended to allow those services already accessing it to continue doing so?

We have been really pleased with the take-up of the program; 215,000 educators receiving the payment is a huge number of educators, and 80 per cent of services are covered by the worker retention payment. We encourage providers to engage with the department and to sign up to the worker retention payment. We want more educators to get the benefits of the payment. Ultimately, it's our expectation that providers and workers will continue on in this next round of the worker retention payment. Again, we encourage more providers and more workers to join. Ultimately, that is something for workers and providers to consider and work on together.

Just to clarify—if new centres do sign on, there is budget allocated to accommodate new sign-ons?

Yes.

Is the government investing any funding through this bill to help services prevent breaches of quality area 2 and to lift the quality of their service, or is the mechanism simply to withdraw funding after a service has failed to meet the standard?

We do fund and provide support to services to help them meet standards in general. One of the ways that we'll do that with this extension of the worker retention payment is through the government's $10 million worker retention payment engagement program. Support will be provided through that mechanism. It's important for us all to be reminded that 95 per cent of services are meeting the standard already, but, of course, all of us want that to be higher.

Will services that are currently receiving the worker retention payment have to reapply to continue receiving this funding next year? If yes, what, if anything, is being done to reduce the administrative burden, especially on the smaller not-for-profits and community-run centres that don't necessarily have the administrative resources of larger centres but are especially in need of this funding?

I have had some initial advice on this from the department, but I'm going to check where that is up to. Providers who are currently part of the worker retention scheme will essentially be sent a new agreement rather than having to apply all over again. They will be notified to continue on, and there is a much lower threshold and a simple administrative process for those providers who are already part of the grants program.

The question that's before the chair is that the amendment on sheet 4098 that has been moved by the opposition be agreed to. It being after 6.30 pm, we'll have to defer that division to a later hour. As the bill cannot now proceed until votes can be taken, I shall report to the Senate.

Progress reported.

Further consideration of the bill in Committee of the Whole made an order of the day for the next day of sitting.