Summerset lifts wage and penal rates to attract and keep nursing and care staff

Tuesday, 25 February 2020

Competition for quality nursing staff is driving the increased payment of penal rates in the aged care sector.

One of New Zealand's largest retirement village operators is increasing its wages and weekend penal rates to retain and attract staff saying penal rates 'were coming back into fashion'.

Summerset chief executive Julian Cook said the push for more penal rates in the aged care sector and in other sectors was coming from staff and their representatives, as he announced the company's annual result for the 2019 year, an 18 per cent fall in profit after tax to $175.3 million.

'They are definitely coming back into fashion,' he said.

Summerset chief executive Julian Cook says retirement village staff would rather have night and weekend penal rates than a higher hourly rate.

It was quite competitive for nursing staff across the health care and aged care sectors because of the higher pay settlement between district health boards and nurses a couple of years ago and because nurses had been removed from the long-term skills shortage list.

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Summerset, with 19 villages and 12 in development, had increased its nurses' wages between 2.5 per cent and 5.7 per cent to ensure it retained and attracted high quality staff.

It had also introduced additional penal rates for weekend work and would meet the company's objective of matching top payers in the sector, like Ryman Healthcare.

Summerset has 19 retirement villages, 12 in development and enough land in New Zealand and Australia to build another 5380 units and 826 care beds.

Wages for nurses were lifted from October 1 last year, nursing allowances from January 1 2020 and caregivers' wages would rise from July this year.

Feedback from staff was that for night and weekend work staff would rather have penal rates than an increased hourly rate with rostering for the occasional night or weekend work.

Cook declined to reveal the rise in the company's wages bill from higher pay to nurses and care staff.

'We just want good people who want to do the work well,' he said. It wanted to position itself as a top payer in the aged care sector and maintain that.

In the past few years it had also introduced health insurance for all staff and all staff received $800 a year in free shares in the company. Those benefits put it ahead of Ryman, Cook said.

Summerset chief executive Julian Cook says the company has well-developed isolation and protection controls in its villages if there was an outbreak of influenza or other viruses, like the Covid-19 coronavirus.

The company had pandemic plans and was watching the progress of the Covid-19 coronavirus closely. A couple of its doctors were 'plugged into it', Cook said.

The company had well-developed isolation and protection controls in the villages. If there was an outbreak of influenza or norovirus restrictions on movement of residents was standard, he said.

Summerset said the 18 per cent decline in profit after tax was largely due to not completing as many new properties in 2019 as in 2018.

In 2019 Summerset completed 100 fewer new retirement units, 354, down from 454 in 2018.

There had been a lot of construction work in 2019 but quite a large portion was still to be completed and would be this year. Significant progress had been made on two new main buildings that would deliver 152 retirement units in Christchurch and Hamilton, starting in March, Cook said.

However 'underlying profit', which excluded the movement in property values, came in at $106.2m, 8 per cent ahead of 2018.

Summerset did not expect growth in underlying profit in 2020 largely because of higher wages for staff and because the development margin on new units was dropping back to 20 per cent to 25 per cent and that had been signalled for some time. In 2019 it had been 28 per cent.

But Summerset expected profit to return to growth in 2021 and beyond.

The company also announced the purchase of a second site, 8.3 hectares, for a retirement village on the Bellarine Peninsula southwest of Melbourne. It follows the purchase of an 8ha site in Cranbourne North, Melbourne, in September last year.

Summerset bought seven sites in 2019 to strengthen its development pipeline. It has enough land in New Zealand and Australia to build another 5380 units and 826 care beds.