How human capital management can mitigate understaffing issues

An aging population, regulatory change and the rising cost and limited availability of labour are fuelling consolidation across Australia’s aged care sector. This upheaval turns the spotlight onto aged care providers’ management of people and money, and their ability to plan dynamically and effectively. In particular, this highlights the fact that better management and planning make for happier, more engaged and better-skilled workers who, in turn, provide a higher quality experience for the people in their care, writes JO-ANNE RUHL, Managing Director and Vice President, Workday Australia and New Zealand.

In line with worldwide trends, Australia’s population is getting older. The Australian Institute of Health and Welfare cites the Australian Bureau of Statistics forecasts that the cohort of Australians aged 65 and over will grow from 16% of the total population in 2020 to about 23% by 2066.

This trend is increasing the strain on the country’s aged care system and prompting providers and authorities to transition to new models and technologies to better support older Australians.

The aged care sector is also in the midst of far-reaching regulatory reform prompted by the recent Royal Commission into Aged Care and the government’s response. New models give residents far more say over the aged care services they use, increasing pressure on providers to deliver excellent services and build a reputation for quality.

Unleashing a wave of consolidation

These far-reaching changes are prompting smaller providers, no longer able to operate profitably under the new regime, to seek merger or acquisition by larger aged care providers, typically with similar values and cultures to their own.

At the same time, larger organisations are in the market for smaller businesses with property and other assets that can augment their own portfolios.

This surging M&A environment also provides fertile ground for private equity firms that see opportunities in the consolidation of the highly fragmented sector. In fact, Workday predicts that the industry will rationalise down to five to seven core aged care providers that will dominate the market.

A single source of truth delivers a key competitive advantage

For aged care providers seeking long-term growth, full transparency and a single source of truth — spanning people and money — is a key competitive advantage.

Fortunately, there is increasing recognition of the value digital transformation can add to improve quality of care and ensure reliable and sustainable service delivery.

Providers increasingly recognise that 30-year-old applications are ill-equipped to manage the growth that has taken place to date, let alone forecast expansion.

While most providers have basic payroll and legacy financial management systems in place, many have no systems in place to manage their people. As a result, the introduction of a sophisticated human capital management system can deliver immediate, highly visible results.

What are the benefits?

By attaching human capital management to employee experience, providers can mitigate the understaffing issues that plagued the sector prior to and post the coronavirus pandemic, due largely to low pay, workload and the danger of infection.

A sophisticated human capital management system can also help ensure compliance with stringent new regulations. For example, providers can understand obligations versus demand in relation to care hours, a particularly important metric given that healthcare authorities are now mandating the number of nursing and care hours per resident. To comply with the new regime, a provider may need to plan to recruit an additional nurse or carer to help cover a ward previously overseen by one staff member.

In addition, without appropriate planning in place for absenteeism due to illness or leave, or peaks and troughs in demand, a provider may be forced to engage agency nurses at a considerably higher cost, driving up costs for residential beds at aged care facilities.

New-generation human capital management systems can also help providers effectively manage wage compliance and contingent labour costs, a task that can outstrip the capabilities of traditional payroll systems.

With effective finance, payroll and human capital management, providers can obtain a consolidated, accurate view of money and people, typically the biggest costs and drivers of value to their business. They can use this view to drive efficiencies, identify opportunities and recruit, retain and engage the people who can help deliver next-generation aged care. Combining this with agile, accurate planning will position providers to thrive in the new environment.

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