Rural early learning services at significant risk as fee cap fails to reflect costs, Thrive warns

Tasmanian not-for-profit provider Thrive is calling for targeted changes to the fee cap attached to the Worker Retention Payment, saying rural services need greater flexibility to remain sustainable while protecting educator wages and family access.

For families in smaller Tasmanian communities, education and care depends on providers willing and able to operate where enrolments are modest, transport is complicated and alternative services may be unavailable.

Thrive Chief Executive Officer Ed Beswick says these circumstances need greater recognition in the conditions attached to the Australian Government’s Worker Retention Payment (WRP).

The organisation, which has delivered education and care in Tasmania since 1975, reports operating 26 services supporting around 1,200 children each day in early learning and outside school hours care and 1,750 including its family day care network.

Mr Beswick says Thrive is the sole provider in Queenstown, Scottsdale, Beaconsfield, Campbell Town, Bicheno, St Marys, Triabunna and on Flinders Island.

Mr Beswick says Thrive supports the payment itself.

“We support the Worker Retention Payment. It funded a pay rise our educators had earned, and we took it up without hesitation. This is about one condition attached to it,” he said.

When a national benchmark meets local costs

Participating providers must limit fee growth to remain eligible for WRP funding. For existing participants, the cap is 5.8 per cent from 8 August 2026 to 7 August 2027.

The Department of Education says the condition supports affordability and ensures families do not bear the cost of the funded wage increase.

Thrive’s concern is how that limit accommodates services whose costs differ substantially from national patterns.

The relevant ABS measure is the Childcare Services Cost Index, which tracks changes in the prices providers pay for labour, goods and services.

The ABS explains that larger parts of the industry, including centre-based care, contribute more to total expenditure and therefore have greater influence on the index’s weightings. It acknowledges that the results may not reflect the experience of individual businesses or service types.

“We are being measured against a market we do not operate in. The index was built around large city long day care centres, and the Bureau of Statistics says plainly that it may not reflect what any individual provider actually faces. We are one of the providers it does not describe or fit,” Mr Beswick said.

Thrive’s operations are predominantly outside school hours care and family day care. Mr Beswick points to split sessions, transport requirements and limited relief staffing options as costs that can be particularly difficult to manage in smaller communities.

One service operates a bus collecting children from six schools. Other locations face freight costs to Tasmania’s West Coast or barge and air transport to Flinders Island.

Thrive wants the benchmark and its application to better reflect these differences.

An operating shortfall absorbed by reserves

According to Mr Beswick, Thrive’s WRP-covered services generated an operating loss of just under $570,000 in 2025-26.

As a not-for-profit organisation, Thrive draws on reserves to meet that shortfall, reducing the resources available to sustain rural operations.

The organisation estimates that fee increases of 12 to 14 per cent would be required to reach break-even, compared with the current 5.8 per cent cap.

Mr Beswick says historical decisions to restrain fees have made the challenge harder. Thrive kept fees low through COVID and afterwards to support families, leaving a lower starting point for subsequent percentage increases.

“We kept our fees low for years, deliberately, through COVID and after it. A percentage cap turns that decision into a permanent disadvantage for our services in terms of viability.”

Small services still carry substantial responsibilities

Thrive says its consistent-fee approach is intended to prevent families in smaller communities paying more because of their location.

However, Mr Beswick says smaller services have fewer enrolments across which to spread essential operating costs.

“A service in a small town still needs a qualified leader, still must meet ratios, still must pay insurance and compliance costs, whether it has twelve children or fifty. Those costs don’t shrink when the town or the number of children attending each day is small,” he said.

“We are the only provider in Queenstown, Scottsdale, Beaconsfield, Campbell Town, Bicheno, St Marys, Triabunna and on Flinders Island. If we can't keep those doors open, no one else is coming.”

Thrive also reports an 18 per cent increase in insurance costs over a year and additional expenditure to maintain appropriate pay differences between service leaders receiving WRP increases and more senior positions outside the funding.

Mr Beswick says Thrive's Family Day Care compliance team, four managers and a director are outside the funded increase, despite all of them having close involvement with daily service operations. All need increases to maintain relativities, and the fee cap leaves Thrive no mechanism to recover the cost. 

What the determination showed

Thrive applied for an alternative fee growth cap in May and received the Department's determination on 21 September. Fourteen of its twenty-five services were approved for an alternative percentage, at two different rates. Eleven were declined. The decision is not reviewable.

Mr Beswick says the assessment was sound on its own terms.

"The Department looked at each service on its own numbers and applied the test it said it would apply. The difficulty is that we do not operate twenty-five separate businesses. We operate one."

Of the eleven services declined, ten returned a surplus last financial year. Those surpluses are what offset the losses elsewhere in the network.

Thrive sets its fees once and applies them across every service, so families in smaller communities do not pay more because of where they live. Mr Beswick says taking up the determination in full would mean giving that up.

"To use what we have been granted, we would have to charge different fees in different towns as the same service provider throughout Tasmania. We are not willing to do that, so  in practice the determination does not help us."

The approved percentages took effect from 21 September and run to 7 August 2027. No further increases may be made by those services before then.

Thrive is seeking clearer decision-making criteria, timely assessments and a review mechanism that gives providers greater certainty before financial pressures become critical.

Practical changes to protect access

Thrive wants to retain the benefits of the WRP while making its fee conditions more responsive to rural delivery.

Its proposed changes include:

• Assessing viability and relief at provider level, where a provider sets one fee schedule across all its services
• Tailored fee-cap arrangements for small rural and sole-provider services.
• For not-for-profit providers, whose constitutions already prevent surpluses being distributed, a test based on how surpluses are used rather than on fee growth
• A timely hardship process with clear criteria and a review pathway.
• Better representation of outside school hours care, family day care and regional costs in the index, including at the next ABS reweighting of the index.

The Australian Government has maintained that the WRP fee growth cap is designed to support affordability and ensure the cost of the funded wage increase is not passed on to families. Providers experiencing financial viability issues can request an alternative fee growth cap in limited circumstances. 

“The cap is more generous than the index it is drawn from and we certainly do want to keep costs lower for families. But a generous margin over the wrong measure is still the wrong measure for us," Mr Beswick said.

Thrive is now asking Minister for Early Childhood Education Senator the Hon Dr Jess Walsh to consider whether that framework sufficiently accounts for the operating conditions faced by rural, remote and sole-provider services.

“The cap is meant to protect families from fee rises. In the towns we serve, it is protecting them from a fee rise at a service that may not be open next year.”