The SCHADS Award continues to undergo significant change, and while there is currently significant media attention has focused on disability services and the NDIS, the broader community services sector is also likely to feel the impact of these changes.
From the first full pay period on or after 1 July 2026, minimum pay rates under the SCHADS Award increased by 4.75%. However, this is unlikely to be the end of the story. The Fair Work Commission has already confirmed further changes, including an interim pay increase of approximately 15% for some employee groups from 1 October 2026, followed by a substantial overhaul of classification structures and minimum pay rates from 1 October 2027.
These reforms are being driven, in part, by findings that work across the social and community services sector has historically been undervalued due to gender-based factors. As a result, organisations should be preparing for the possibility of further increases in employment costs over the coming years.
Potential Financial Impact
Although the full financial impact of the 2027 reforms is not yet known, organisations should be aware that similar gender undervaluation reviews in other sectors have resulted in significant wage increases.
For example, Fair Work’s recent reviews of the pharmacy and early childhood education sectors delivered average wage increases of approximately 14% and 16% to 29% respectively. While it cannot be assumed that community services employees will receive increases of a similar magnitude, these examples highlight the potential for material increases in employment costs over time.
Funding Challenges for Community Services Organisations
Unlike some NDIS providers, many community services organisations do not operate under funding arrangements that automatically adjust to reflect increases in labour costs.
Organisations that rely on:
- Government grants
- Fixed-term funding agreements
- Donations and philanthropic funding
- Fundraising activities
- Fee-for-service arrangements with fixed pricing
may not receive additional revenue to offset higher employment costs arising from Award increases.
As a result, wage growth in the coming years may outpace revenue growth, placing pressure on operating margins, financial sustainability and service delivery capacity.
Example:
In the 2026 financial year, Organisation A received grant funding from a government department under a three-year funding agreement to deliver community support programs. The grant provided $500,000 in 2026, with annual indexation of 4% applied in 2027 and 2028.
Organisation A’s employees are covered by the SCHADS Award. Wage costs in 2026 were $350,000. Assuming the same workforce is maintained over the three-year period, and wage costs increase by 15% in 2027 and a further 5% in 2028, while other operating costs increase by CPI at 4% per annum, the financial impact is as follows:
| Year | Grant income (indexed at 4%) |
Employment costs (assume 15% increase in 2027 and 5% in 2028) |
Other costs (assume 4% CPI increase) |
Surplus/(deficit) | Margin |
| 2026 | 500,000 | (350,000) | (100,000) | 50,000 | 10% |
| 2027 | 520,000 | (402,500) | (104,000) | 13,500 | 2.6% |
| 2028 | 540,800 | (422,625) | (108,160) | $10,015 | 1.9% |
While grant funding increases by 4% each year, the program surplus declines from $50,000 (10%) to around $10,000 (1.9%) as wage costs rise faster than funding. Donation-funded organisations are likely to face similar challenges, often without guaranteed revenue growth.
Key Considerations
Organisations should begin assessing the potential impact of the SCHADS Award reforms before the 2027 implementation date.
Areas for consideration include:
- Financial modelling and forecasting
Assess the impact of both confirmed and potential future wage increases on labour costs, including superannuation, leave entitlements and other employment on-costs. Multiple scenarios may help provide insight into the potential financial implications for your organisation.
- Reviewing workforce and remuneration structures
Consider how future classification changes may affect salary bands, internal remuneration frameworks and workforce costs.
- Evaluating program sustainability
Where funding agreements or grant budgets are fixed, assess whether current programs and service offerings remain financially viable after allowing for increased employment costs.
- Grant and funding applications
Ensure future grant applications and funding submissions adequately reflect anticipated SCHADS Award increases and associated workforce costs.
- Fundraising and revenue strategies
Organisations that rely on donations or fundraising may need to reassess revenue targets and fundraising activities to support higher operating costs.
- Workforce planning
Review workforce structures, recruitment plans and service delivery models to understand how increased employment costs may affect future resourcing requirements.
- Budget assumptions
Update medium and long-term financial forecasts to reflect the likely impact of Award reforms and ensure sufficient financial capacity to absorb future cost increases.
Looking Ahead
The SCHADS Award reforms represent one of the most significant workplace relations developments for the community services sector in recent years. While the precise impact of the 2027 changes is still emerging, organisations should not wait for final details before undertaking scenario modelling and strategic planning.
Early consideration of workforce costs, funding adequacy and program sustainability will place organisations in a stronger position to manage the changes and continue delivering essential community services in an increasingly challenging operating environment.
