Interview: Terry King Childcare Holdings CEO talks about the CCS transition
The transition to the Australian Government’s Jobs for Families Child Care Subsidy (CCS) has been onerous on all early childhood education and care providers, but none more so than small childcare providers with limited resources and scale to deal with the additional work involved. Owner of two childcare centres, Childcare Holdings CEO Terry King recently spoke with The Sector Founder Jason Roberts about his experience in managing the transition to the new subsidy.
Interviewee: Terry King – CEO
Organisation: Childcare Holdings Pty Ltd
Date: 7 Aug 2018
Topic: CCS transition
Jason: I’m here with Terry King, CEO of Childcare Holdings. We’re going to be talking about the CCS transition from the perspective of an operator. So just kicking off, how do you actually feel about the CCS now that we are a month from launch?
Terry: I guess if you look at it through broadly either positive, negative or neutral, I’m slightly positive of neutral, if that makes sense.
Jason: I see. And for your families? How do you feel they have responded to CCS?
Terry: Initially, the families were frustrated because of the difficulties they had with Centrelink. So as we know, they had to log onto MyGov or even visit Centrelink. They had to determine the hours related to their activity tests. That whole process was frustrating for them. They got through that which was fine. But then they had to go back to Centrelink either through MyGov or directly, and confirm their details once they had been input into the third-party software system. That would be via a message sent by Centrelink that said, “this is what you’ve told us, this child has care in centre X, is this correct?” You confirm. That was the piece they didn’t know how to do.
Jason: I understand.
Terry: So we had to walk families through that. I guess the point that I’m making is they had to jump through a few hurdles to get to what they thought was the end, and it wasn’t actually the end. They had a couple more hurdles to go through.
Jason: I see and you as an operator were clearly on the front foot here, with regards to advising them of the process, is that right?
Terry: Yes, that’s correct. We took it upon ourselves to educate the families because we had a bit more visibility of CCS before the families did. We could see that it was complicated before it was implemented. So we said, “okay, we’re going to engage with our families,” and actually start walking them through this stuff now, because come 2 July it’s going to be too late. In order to give that assistance, we would sit down with families in the office, log on to the MyGov website, and walk them through how to do it. It was that granular actually.
Jason: I see.
Terry: With human nature being what it is, we all leave things to the last minute. We are great procrastinators especially when dealing with something that we don’t quite understand or has some complexity to it. You take it right to the very end until you’re forced to do something.
Jason: Yes, that’s right. But now it’s done, it’s out of the way, how do you think your families feel about it?
Terry: My families undoubtedly felt it was a pain the backside but now it’s done it’s all good.
Jason: Yes, that’s great. In terms of your families at both of your centres – are they now signed up and receiving their subsidised hours now?
Terry: Yes, mostly. There would be no families at Beenleigh and two families at Kallangur that are outstanding.
Jason: Do you have any idea what’s behind those two families?
Terry: One of them is related to the Joint Education Trust and studies.
Jason: I see. That’s now covered in Additional Child Care Subsidy isn’t it?
Terry: Yes. I can’t remember the details of the second one. But they weren’t normal CCS applications.
Jason: I see.
Terry: Although there were some difficulties in the transition, overall, I’d say that the transition went smoothly. I give it seven out of 10. If you compare it to other major transitions by government institutions, for example the nurses’ payroll change and the census, the government does not have a great track record on this stuff but this transition went OK.
Jason: Great. And what about from a debtor’s perspective? Did you find your debtors rising over the transition?
Terry: Yes a little bit. We made a business decision to try and help families where we could. So those families that should have received the CCS but didn’t were just charged their gap. Some operators would say, “Well, no we are not carrying those debtors, you pay us full fees and that is the way it is.” Other centres, like ours, are saying, “No, we’ll carry that, we know you’ll get through the CCS hurdles eventually and when that happens, fine.” So, we are charging the few families that needed it what we estimate the gap is going to be.
Jason: Yes, I see. The other area of interest to me is whether a family is better or worse off as a function of the transition. From your perspective, looking at your families, were they overall, better, worse or the same?
Terry: Good question and I guess I have to preface the answer with where you operate in terms of socio-economics. Let’s use a scale of 1 to 10. 10 being as affluent as it can be, you know your Paddington or Red Hills in town, and 0 being your very, very poor areas. We have a centre in North Brisbane that is 6 out of 10. The centre in South Brisbane is 4 out of 10. In that context, no family at the centre in North Brisbane is worse off under the new CCS. In the centre in South Brisbane, 10 per cent of the families are worse off.
Jason: Okay, so let’s focus on two things from here, are those families who are not worse or a bit better off, are they aware that they are better off?
Terry: Yes and no. Families that are worse off know it. The families that are better off, may not. But our strategic intent is to engage with those families that are better off and may not be aware of it, and make sure that they are aware of that and get an understanding from them whether they’re aware of their options on how to use that additional funding. For those families that are worse off, we engage with them to understand why they are worse off and either help them get more funding or change the operational parameters within the centre to allow them to access more care by using sessional care.
For those families that are worse off, we engage with them to understand why they are worse off and either help them get more funding or change the operational parameters within the centre to allow them to access more care by using sessional care.
Jason: Ok noted. On the more funding piece, is there more funding available or is that simply around reworking the activity test?
Terry: The latter.
Jason: I see.
Terry: For example, many families don’t know that they can claim on a certain type of activity, or that they can claim transport time from whatever that activity is.
Jason: That’s right.
Terry: Some people are stuck in traffic for very, very long periods of time so that could be a significant portion of their activity. So those are the types of things that we explore with our families to determine whether they are maximising the amount of subsidies that are available to them.
Jason: Yes, that’s right. How do the families feel about the CCS, do you think? Given we are eight weeks, has it now been assimilated into the collective subconscious to such an extent that it is just like its business as usual?
Terry: Correct, exactly. That’s where we are now. Four weeks, five weeks down the track, that’s where we are. For those families that are better off or exactly the same, it is just a memory. It is bit of a speed bump in my life but I am past it and life goes on; I’m doing other things now. For those families that are worse off, it’s still a challenge. It’s still a challenge because they have had to make structural changes in how they manage their families because of it.
Jason: I see.
Terry: So yes, there’s two subsets there.
Jason: Yes, that’s an important distinction to make. Let’s continue on with this, you have two centre managers, both experienced and both capable, what’s their impression of the CCS? What do they think?
Terry: They have been at the very pointy end of it obviously.
Jason: Around the process?
Terry: Correct. Specifically, when parents had challenges they would come to the manager but often that challenge wasn’t caused by the centre. It was usually caused by Centrelink but it’s easy for a family to blame a centre manager or a centre because that’s the person they are talking to: you are there in front of them. Of course, the other side of it is that the centre managers have to make this work with the third-party software system within the centre. Out of all of the people that the transition has impacted in terms of the amount of work and juggling, is been the centre managers.
Jason: I see. And now, four weeks in, are things settling down or are they still wrestling with it?
Terry: Yes, things are settling down absolutely and that’s behind us now. There are a few niggling issues that pop up now and of course given the number of updates that QikKids have done to our third-party software for the past four weeks things are always changing. Almost more than once a week there’s been some kind of update in response to the new CCS and trying to make it work. This report doesn’t work, or this report needs to be written.
Jason: So still some issues.
Terry: There is but 80 per cent of the friction is past us now.
Jason: That’s really good. Have your perceptions of the CCMS provider you used changed over the course of last six weeks, in terms of how they handled this and in terms of the quality their platform?
Terry: No, the quality of their platform has not changed.
Terry: I believe they have done the best they can do with goal posts constantly moving on them. They’ve been absolutely slammed, I know that. We’re ringing up the helpline easily on a weekly basis. You can wait in the queue for half an hour because I’m sure I’m one of thousands that are ringing their helpline. So, I would imagine their help desk has been absolutely slammed. I imagine their product development in coding has been absolutely slammed. So they’ve been stretched to the max. To their credit, it’s been all right. Things still work. There haven’t been any catastrophic failures which is pretty amazing given the fact that we had such change.
Jason: Ok noted.
Terry: I imagine the guys that are doing the programming and the coding have been in dark rooms with pizza boxes getting pushed under the door for a very long time. I’m sure there are that those individuals on the government side of the equation as well. Comparatively, the Government has done a pretty good job in the face of some previous monumental screw ups in other government IT projects.
Jason: Yes. So looking back then, from your perspective as an provider, if you identified a parent who was worse off due to the CCS, you would then engage with them proactively to try and improve their positions through the management of hours and session.
Terry: Yes, both ways, making sure that they have been able to claim the maximum amount. That’s one aspect of it. The other aspect is changing the internal management practices within the centre to make sure that they’re getting everything they can and are entitled to.
Jason: I see. So, I’m interested, from your perspective, did the introduction of the CCS influence how you determine what your final fees would be?
Terry: We review our fees on an annual basis in July. We would be increasing our fees typically somewhere around CPI or just north of CPI. We suspected that a lot of operators would increase their fees because there was lot of confusion around the CCS and we felt they were going to take advantage of that noise.
Jason: I see.
Terry: So we made a strategic decision before the introduction of the CCS not to raise the fees. That was a competitive and strategic decision on our behalf. If there were families that were at the receiving end of fee increases at other centres, we wanted to be seen as providing an alternative. We were positioning along the lines of “hey we are looking after you, we understand there are difficulties in this transition, we understand a lot of families are worse off with the CCS, therefore we’re making a competitive and strategic decision not to revise our fees”, and that’s what we did.
Jason: Yes, I understand. So a high-level question, has the CCS in your opinion, precipitated an increase in bookings since its introduction on the 2 July?
Jason: Okay. Therefore the increase in bookings that you are seeing is coming from completely different reasons – seasonality for example.
Terry: Yes. Reset of funding.
Jason: I see. When you engage with those new families, is there any commentary around CCS at all?
Terry: No. See the new families don’t understand the CCS. After they have completed their tour and commit to the centre, the funding question comes and they ask how much it’s going to cost and how to access this funding.
Jason: I understand.
Terry: It’s all secondary.
Jason: Okay, so another high-level question, as an operator, do you think the CCS is going to benefit your bottom line?
Terry: Yes. I think it will, but only on the margins.
Jason: I see.
Terry: And let me qualify that. It won’t improve our bottom line initially because we didn’t take the fee increase. Otherwise, it could have immediately. It won’t increase our bottom line because we’re getting more bookings because families are coming because they know CCS. The only way it’s going to increase our bottom line is by us engaging with families who are eligible for more care than they used to be and for them to take up more care as a result of that.
Jason: I see.
Terry: That’s right. I guess one further answer to that question is, it could impact the bottom line positively over time in a longer period – 6 months, 12 months – plus if the original objective of the CCS of increasing female workforce participation is realised, then yes, it may have a better longer-term impact on the bottom line because there’d be more mothers or families seeking care.
Jason: That’s right.
Terry: That’s right but as of now there is little lift.
Jason: Okay. Well, let’s talk a bit conceptually here. How do you see sessional care models evolving over time?
Terry: I see them becoming much more flexible than the current sessional care offerings in the typical landscape. So, the current sessional care models as you suggested are a 10-hour day, 9-hour day, an 8-hour day, and in some providers, it’s an 8-hour day that starts between 6am and 8am or whatever that might be, but it’s fairly rigid. I see that evolving to something completely flexible. So, families can start whenever they want. They can finish whenever they want. They can finish within 8 hours and there’s typically a buffer period on either end that allows that.
Jason: I see. Do you see two-hour sessions, four-hour sessions, six-hour sessions?
Terry: There’s no reason that you couldn’t offer less. But it comes down to the question: is there any demand from families for that? And typically, at this stage the answer to that is no.
Jason: I see.
Terry: The other change that this CCS may do related to sessional care is drive is the casualisation of the workforce in the long day care sector.
Jason: Yes, agreed.
Terry: Because the inputs – the times or sessions of care – are more flexible, the way we manage it needs to be more flexible, and the only way we can be flexible is by having a casual workforce where we can turn the tap on and shut the tap off in response to the changes in the inputs.
Jason: So if you roughly look at your workforce at the moment, you have a full-time contract component, a permanent part-time contract component, and a casual contract component. Do you have any idea what that split looks like?
Terry: Full time is around 50 per cent of our workforce. Permanent part time is around 30 per cent of the workforce, and the remaining 20 per cent would be casual.
Jason: Okay, so given what you just shared, we’d expect that to evolve over time. Is it fair to say that the permanent full time workforce will become less? And the casual would become more?
Terry: No. I don’t think that will be the case. I think it will impact the permanent part timers.
Jason: I see.
Terry: The full timers are typically your early childhood teachers (ECTs) and your centre managers. And that’s not going to change. It’s the permanent part timers that are working less than a full day of work, a full 8-hour day of work, that will likely be impacted as centres will need the flexibility to ‘trim’ this.
Jason: OK, let’s go back a bit now. When did you actually start planning for the CCS change?
Terry: In December 2017 it hit our radar to the point where we were seriously looking at it and trying to come up with strategic responses to it. In terms of actually doing anything, that didn’t happen until March and the reason for that is in December it was still very nebulous from the government’s point of view of how the CCS would actually look. The government gave the broad outline but there really wasn’t any detail or meat on the bones. By March 2018, we were actually able to make strategic decisions and take action to prepare for the transition.
Jason: And that was precipitated by the Department of Human Services’ Provider Digital Access (PRODA) registration process that you knew you had to engage in to qualify for the CCS.
Jason: Can you talk to us to a little bit about PRODA and your experience around it?
Terry: Yes. If I refer to one centre that has been in our ownership for some time, we were able to register well in advance. You had to jump through some hoops but it wasn’t that difficult.
Terry: For another centre – Centre B – we had the complication of change of ownership at around about the same time that we had the new CCS coming in. That required a different timetable than our other centre and meant we didn’t get our CCS payments for this centre until two weeks after the ‘go live’ date.
Jason: So that means you were funding the business in the interim?
Terry: Correct, yes. We were fully funding the business. We still had salaries and wages to pay, we still had rent to pay, and we had no income. Virtually no income. We were charging families the gap, our estimated gap, which of course is a fraction of what the total revenue is.
Jason: Yes. If you look back on that period, let’s think about the Government and the way they managed it. If you were to score the government from a 1 to 10 on two metrics: the first one is communications; and, the second one is systems – where would you mark them?
Terry: I would score them 6 or 7 out of 10 on communications. I think they didn’t know what they didn’t know. There were so many moving pieces to this that hadn’t been bedded down yet that the communications were very generic. So, you really didn’t get much out of it. You knew it was coming and that’s about it. Once the Government actually started to lock things down, the communications were pretty good from that point forward.
Jason: I see.
Terry: So, that’s the communications side of things. The system side of things, overall probably 7 out of 10.
Terry: It was seamless. Now, I’m sure if you ask the CCS providers they’d have a completely different experience. But from a user perspective, it wasn’t that bad.
Jason: And tell me, if you were to gauge QK as your third-party software provider?
Terry: Yes, they on the communications side of things they’ve been very good. They’ve had consistent webinars, they’ve had consistent communications, they’ve been on the front foot as best that they can. You could access any number of training programs to be able to get up to speed. So, big tick there. On the programming side of things, on the actual interface itself, I rate them a little bit lower because some things didn’t work initially. The plus point is that they were very responsive in fixing them.
Jason: I see. If there’s anything you would change to the CCS, what would it be?
Terry: Yes. I say this from my own social heart: the only thing that I would change is to have no families worse off.
Terry: But that flies in the face of what the Government was trying to do with the CCS and that was to increase female workforce participation, and I believe in that cause. I believe that’s right and good and the proper thing to do. There will absolutely be people at the fringes that are worse off and I would hope that we have adequate safety nets to capture those.
Jason: That’s terrific. Thank you for taking the time to share with me today.
Terry: My pleasure.