Difficult Pay Rate Conversations with Independent Contractors

Difficult Pay Rate Conversations with Independent Contractors
August 30, 2022 Heidi Hancock

For people who are self-directing their NDIS Plans, the increase of independent support workers has no doubt been of great benefit.  Engaging your own support worker directly as a contractor certainly offers a lot more flexibility around who supports you.  You get to choose from a range of skillsets, backgrounds, common interests and hobbies that match not only your needs but your personality, interests and lifestyle.

One of the most frequent questions we get from people is how to manage the difficult conversations they have with support workers who are asking for maximum hourly rates as per the NDIS Pricing Guidelines.  To engage in this conversation with your independent support worker, it’s useful to have an understanding of how pay rates and pricing are structured within the disability sector, along with the pricing arrangements that are set by the NDIS for Service Providers.

difficult discussions

Paying Employees

The rates that organisations pay their employees in the disability sector are governed by the SCHADS Award, which sets out the pay rates for the social and community services and home care industries.  The Award provides protections and entitlements, including pay, hours of work, rosters, breaks, allowances, penalty rates and overtime. When organisations employ support workers, they will pay them under the guidelines of this Award or their own Enterprise Agreement.


Service Provider Charge Rates to NDIS Participants

Rates that organisations can charge NDIS participants for their services are governed by the NDIS Pricing Arrangements and Price Limits document (previously known as the NDIS Price Guide). This document sets out the relevant categories of support and the price limits that the NDIA has determined for a range of services supplied to NDIS Participants.  The NDIA state that the price regulation is in place to help ensure that participants receive value for money when they purchase supports that they need.

NDIS Pricing Limits for In-Home and Community Supports

The NDIS Pricing Limits for in-home and community support are set out to provide an upper price limit that service providers (organisations) can charge their clients.  These rates are designed to take into account the overhead costs for the organisation to run their business which includes office rental, administration, registrations, audits, insurances, vehicles and equipment.  Organisations pay their support staff a salary or hourly rate that is in line with the Award for their industry.  The employee pay rate is lower than the NDIS price limits that the organisation charges the NDIS participant.  This is how the business remains viable and profitable. 

Differences in How Plans are Managed

There are three different ways that NDIS Plans can be managed.  These are determined at your NDIS planning meeting before you get your first plan or when your plan renews.

Plan-Managed – NDIS Participants are able to engage a Plan Manager who claims and pays invoices on their behalf and provides participants with budget information.  Plan-managed participants are not able to pay more for their supports than stated in the NDIS Pricing Arrangements and Price Limits document.

Self-Managed – NDIS Participants have full access to their NDIS funding via the online NDIS portal.  They manage their own budget and pay for their supports via the portal.  They also have the flexibility to pay above the Price Limit for their supports if they choose to.

NDIS Managed – Participants have their funding managed directly by the NDIA.  They are only able to purchase supports from NDIA Registered Providers.

Missing Knowledge

Independent support workers that are new to the sector or who have stepped out of employment from a service provider often lack the knowledge of both the SCHADS Award or the NDIS Pricing Guidelines and its purpose. They can often be introduced to the sector or the idea of becoming a contractor through others and are not equipped to set up and run their own sole trader business.

Some have never run a business before and even the simplest of business structure bamboozles them and leads to unlawful mistakes.  They will turn to online discussion groups to assess and obtain information around the hourly rates they should charge their clients.  Many of these discussion groups are filled with misinformation, especially around support worker pay rates.  Word has permeated these groups that they should be using the NDIS Pricing Guidelines to set their own rates.

Is Your Contractor Asking for the Maximum Price Guide Rate?

If an Independent Contractor is asking for the maximum Price Guide rate you would expect them to be adhering to the same obligations and requirements of a service provider.

Does the Independent Contractor have:

  • the relevant Professional Indemnity insurance
  • Public Liability insurance
  • First Aid and CPR
  • Registration as an NDIS Provider
  • NDIS Worker Screening Clearance
  • Certificate of completion for NDIS Quality, Safety and You worker orientation module
  • Knowledge of NDIS Code of Conduct
  • Policy and Procedures Document
  • Privacy Policy
  • Complaints Management and Resolution system
  • Incident Management System
  • Yearly Quality audit (if NDIS Registered Provider)
  • the ability to provide referees or testimonials should a perspective participant request them
  • the ability to provide some form of photo identification to show the participants they are who they say they are
  • regular professional development at their own cost
  • Professional Service Agreement
  • The accounting software to produce professional and efficient invoicing
  • Relevant Firewall and Security to protect your data
  • Commitment to produce weekly progress reports for you
  • Registration with relevant industry bodies
  • up to date knowledge of NDIS Quality and Safeguards
  • Comprehensive vehicle insurance to cover use for work and business

Whilst an Independent Contractor may have some of these requirements and processes in place, it’s unlikely they’ll have them all. As a sole trader they do not necessarily need to meet all of these criteria in order to provide a quality support service to their clients.   These are, however, the obligations and requirements of larger organisations and this is who the NDIS Pricing Guidelines have been designed for. Charging full professional rates requires the independent contractor to be running a fully compliant and professional business.

What does this mean for you if you are facing difficult conversations with your support workers?

We hear very often that support workers have seen the NDIS Pricing document and have decided that they should be entitled to a ‘higher rate’.

  • Firstly, we would recommend you familiarise yourself with the relevant pay levels and classifications according to the SCHADS Award for the level of support that you require.This would be a rate that service providers pay their support workers for the level of support that you require.
  • Familiarise yourself with the NDIS Price Guidelines and Limits for this category of support.This will provide you with the maximum rate that the NDIS deem as reasonable for a service provider to charge you for providing their supports.
  • It is reasonable for an Independent Contractor to charge you a rate that is somewhere in between these two rates. Taking into consideration the level of support they provide, the qualifications, certification and professional safeguards and processes they have in place.
  • An independent contractor will pay their own tax, superannuation and any associated costs of running their business.
  • Take into consideration if they will be using their vehicle to transport you and if this is included in their charge rate or if they are charging for mileage in addition to their hourly rate.At the date of this article, the ATO state that sole traders are able to claim 72c per km back on their tax for business mileage. In which case they should not be charging you for mileage on top of their hourly rate.

Knowledge = Confidence

When you have a good understanding of the relevant SCHADS classifications and pay rates, NDIS Price Guidelines and the requirements and obligations of Independent Contractors, it is much easier to hold a conversation that has a positive outcome for both you and your contractor.

Scenario

Let’s suppose your independent contractor approaches you with a request for a rate that is the stated NDIS upper limit.  They have been advised that a colleague is charging this rate to their clients and feel it is only fair that they charge the same rate.

  • Ask your contractor to provide you with a breakdown of how they have arrived at the requested hourly rate.
  • Ask them to identify which level of support (as per the classifications in the SCHADS Award) they consider their skillset and experience to match for this role.

Once they can provide you with this, you can explain that your NDIS plan has budgeted for 12 months of your support based on rates that you are able to pay your supports.  If you do not have flexibility to increase your rate or do not feel that this support worker is providing the level of support that warrants what they are asking, you can simply let them know that your budget does not currently allow for this support rate to be paid.  Explain that paying this rate would mean you could not afford the hours of support that you require.

Remember, an independent Contractor still has the right to set their own rate.  You cannot tell them what you will pay them.  You can only suggest a rate that you are able to pay or that you are paying your other team members.

Most of the time, if your support worker understands how your support budget is specifically calculated to meet your needs, they will be willing to compromise.

If you value a support worker and feel that you would like to pay them an increased rate, you can choose to negotiate a rate that allows for an increase whilst still ensuring you are within your budget.  Explain to them that you will look at your budget and come back to them with a rate you feel you could afford to pay.

On most occasions, you will be able to negotiate a rate that will make you and your support worker happy.

Always make sure you have a professional Service Agreement drawn up that clearly states the service they provide, the rates charged and the termination of agreement details.

Written by Heidi Hancock
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More Resources

  • You can find the latest version of the Pricing Arrangements and Price Limits document on the NDIS Website here
  • If you are a paid Bespoke Lifestyles’ Subscriber, you can login and access the latest SCHADS Pay Guide for Casual Employees and its classifications in the resources library.
  • Visit Fair Work Ombudsman to access their Fair Work Pay and Conditions Tool.
  • Book a consultation with one of our HR experts to discuss your current support worker rates and gain assistance to navigate those tricky conversations.
  • Contact us for help to design a professional Service Agreement with your support worker.
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