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Aged care employment

Terms of reference

I, the Hon Josh Frydenberg MP, Treasurer, pursuant to Parts 2 and 4 of the Productivity Commission Act 1998, hereby request that the Productivity Commission (the Commission) undertake a Study to examine:

  • employment models in aged care, and the effects that policies and procedures to preference the direct employment of aged care workers would have on the sector.


The Royal Commission into Aged Care Quality and Safety (the Royal Commission) was established on 8 October 2018 and the Final Report: Care, Dignity and Respect was released on 1 March 2021.

The Australian aged care system provides subsidised care and support to older people. It is a large and complex system that includes a range of programs and policies. In response to the Royal Commission there will be significant reform to the aged care system. These reforms will be underpinned by a new Aged Care Act, which is intended to commence from 1 July 2023, subject to parliamentary processes.

The Royal Commission noted a trend in recent years has been the increased use of ‘independent contractors’ in aged care.

The Royal Commission’s Final Report noted numerous submissions over the course of the Royal Commission inquiry had made the claim that quality care was more likely to be delivered by direct employees than by contractors. However, some stakeholders consider these subcontracting models deliver better consumer choice and flexibility, which is also desired by the sector.

Scope of the study

The Commission will undertake a study to examine employment models in aged care, and the effects that policies and procedures to preference the direct employment of aged care workers would have on the sector.

When examining these issues, the Commission should also consider recommendation 87, as well as submissions and evidence provided to, the Royal Commission.

In undertaking this Study, the Commission should:

  • examine the extent of the aged care personal care and nursing workforce who are not directly employed by aged care providers
  • taking into account the wide scope of duties within the aged care sector, ranging from low level care such as grocery shopping and gardening through to high level personal and medical care, examine how different employment arrangements might impact on:
    • quality of care
    • consumer choice
    • job creation and availability of workforce
    • employment conditions for the workforce
    • worker preferences
    • flexible and innovative models of care
    • accountability of aged care providers for care delivered on their behalf
    • costs of providing care
    • viability of aged care providers
  • explore any preconditions in personal care and nursing workforce supply that would be required prior to any potential policies and procedures to preference direct employment
  • consider whether new policies and procedures would impact other care sectors, such as disability and childcare.

The Commission should support analysis with modelling using quantitative and qualitative data.


The Commission should undertake broad consultation with consumers, the aged care workforce, unions and aged care providers.

The Commission could release a draft report in June 2022, and provide a final report to the Australian Government in September 2022.

The Hon Josh Frydenberg MP

[Received 23 February 2022]