Employers of care and support workers who will receive a big pay boost in the pay equity settlement say the flow-on effects of the deal may force many of them to go bust or have to make workers redundant.
Many of the impacts of the settlement for 55,000 workers will not be fully funded by the Government, MPs on the health select committee were told by the chief executive of the New Zealand Disability Support Network, Dr Garth Bennie.
"There are providers who are seriously wondering about their continued viability as the bill currently sits," he said.
When the new pay rates take effect on July 1, many managers and supervisors would be paid less than the staff they supervise.
"We estimate that that is going to cost providers in the vicinity of another 3 per cent of operating costs per year over the five year period of implementation.
"These are expenses that providers simply don't have at hand."
Those managers were key to issues of quality and safety.
If the impacts were not properly addressed in the bill, the financial viability and sustainability of the sector was very much as risk, he said.
The Care and Support Workers (Pay Equity) Settlement Bill sets the pay rates for the 55,000 workers and recognition of training and qualifications under the settlement, which is worth $2 billion over five years.
The Government does not employ them but funds the care and support providers.
Bennie also said there would also be relativity issues related to the fact the care and support workers were employed from various income streams but the settlement applied only to workers funded by the Ministry of Health and ACC.
"This means there will be support workers earning different rates of pay for doing the same work with the same provider and in some cases employed in the same staff teams.
"Providers have no capacity to meet these new wage differentials."
The executive director of Geneva Healthcare, Peter Wilberfoss, said margins in the sector were very small and an increase in labour cost of just 2 per cent could wipe out a provider.
"What we are talking about in the [Ministry of Health] pushing the industry off a cliff and we don't know if we are going to end up with a broken leg or a broken neck."
An underfunded sector would mean reduced services and more people in institutions rather than cared for in the community, which would cost a lot more in the long run.
He said the industry could end up with many workers trained to level four but not funded to that level by DHBs or ACC which would want to fund them for the lowest they could.
"If that means it doesn't cover a level four worker, and if we end up with a very high percentage of our workforce being level four, we have two choices: go out of business or stop giving work to level four workers, and look for that influx of untrained worker.
"What we need is legislation that reflects the real world."
All submitters, including employers, welcomed the pay equity settlement but wanted its effects to be fully funded.
Rest home worker Kristine Bartlett, whose union, E Tu, took the pay equity case though the courts, also appeared at the committee with assistant national secretary John Ryall.