The ECEC Worker Retention Payment Grant, introduced by the Australian Government, aims to supplement wages and address workforce shortages in the early childhood sector. The grant will support a 15% wage increase for the Early Childhood Education and Care (ECEC) workforce over 2 years for those providers that ‘opt-in’ and meet the eligibility criteria. It’s a significant development that will impact childcare operators, buyers, and sellers alike. Below, we explore how the grant affects various aspects of running a childcare centre, together with some practical considerations when buying or selling a childcare centre.
Introduction to the ECEC Worker Retention Payment Grant
The ECEC Worker Retention Payment Grant is designed to support wage increases for eligible ECEC workers. Running from December 2024 to November 2026, the grant aims to enhance the professionalisation of the sector and address retention challenges, providing much-needed relief to centres struggling with workforce shortages. With a total allocation of $3.6 billion, this initiative will play a key role in shaping the financial landscape of childcare operations.
How the Grant Impacts Day-to-Day Operations for Childcare Centres
For operators, both small and large, the grant offers an opportunity to manage wage increases without significantly impacting their bottom line. The grant can be used exclusively for wage supplementation and eligible on-costs, including superannuation, leave loading, workers’ compensation insurance and payroll tax.
Small centres may find this particularly beneficial in retaining qualified staff without pushing their operational costs too high. Larger centres, on the other hand, need to strategise how the grant integrates with their existing payroll structures across multiple locations while ensuring they comply with the annual childcare daily fee growth cap of 4.4% in the first year, which is a key condition precedent to receiving the grant.
Opportunities for Small and Large Operators: Managing Wage Increases
- Small Operators: The grant provides financial relief, enabling smaller centres to offer competitive wages in a sector that has historically struggled with undervaluation. This can significantly improve staff retention and make the centre more attractive to both new hires and families looking for stable, high-quality care.
- Large Operators: For larger childcare providers with multiple locations, the grant will help manage wage increases across a broader workforce. However, with increased scale comes the responsibility of ensuring that all centres comply with the grant’s terms, particularly in relation to daily fee increases and wage disbursement.
The Role of the Grant in Childcare Centre Transactions
If you’re involved in buying or selling a childcare centre, the ECEC Worker Retention Payment Grant adds a new layer of complexity to the transaction process.
- Buying a Centre: When acquiring a centre, buyers must take into account the existing grant arrangements and ensure that compliance is in place. The grant could positively affect profitability by covering wage increases, but buyers will need to closely examine the grant’s impact on future revenue and operational costs. Additionally, as new owners, buyers will need to apply for the grant and ensure their services remain eligible, particularly with regard to maintaining CCS approval and adhering to the fee growth cap. Through due diligence, buyers should also ensure the service is compliant with all grant conditions to avoid potential liabilities.
- Selling a Centre: For sellers, it’s essential to demonstrate that all grant conditions have been met to preserve the centre’s value in the sale process. Non-compliance with grant conditions, such as fee caps or wage increases, could affect the centre’s financial appeal to prospective buyers. Ensuring that the grant funding has been properly allocated to wages and on-costs will help maintain trust and value during the transaction.
Strategic Considerations for Future Growth and Financial Planning
With the grant’s funding period lasting until November 2026, both buyers and sellers should incorporate the grant into their short and medium-term financial planning. Understanding the wage supplementation formulas, fee growth constraints, and operational reporting requirements will be crucial for maximising the benefits of the grant while ensuring compliance. Centres that strategically use this funding can better position themselves in a competitive market, whether they’re planning to grow or preparing for sale.
One of the main considerations for all operators who opt into the program, will be the uncertainty at the end of the grant period in November 2026. With little guidance provided on this point to date, the fee to wage ratio may be out of ‘lock-step’ by virtue of the 4.4% fee cap, and therefore operators may be required to increase their fees proportionately in December 2026 in order to absorb the increased payroll costs.
Summary: Navigating the Grant’s Impact on Your Childcare Business
The ECEC Worker Retention Payment Grant represents a substantial investment in the early childhood education sector, with far-reaching implications for childcare operators and those looking to buy or sell a childcare centre. Whether you’re operating one centre, or overseeing multiple centres understanding how this grant impacts your financial planning, operational compliance, and future transactions is critical. For those involved in buying or selling a centre, navigating the grant’s requirements is key to securing the best outcomes in the transaction process.
For personalised legal advice on how this grant affects your childcare business or transaction, contact the childcare specialist team at McTaggart Grant Lawyers for expert guidance.