Childcare’s Wage Funding Cliff: What It Means for Owners

On 15 July 2026, early childhood educators across Australia are set to walk off the job. The strike is the visible part of a much bigger problem for centre owners: the grant funding the 15% pay rise educators won runs out on 30 November 2026, and nothing has yet been confirmed to replace it. For anyone who owns, runs, buys, or values a childcare centre, that date is the number to circle.

What’s actually happening

The United Workers Union has called a national walk-off for 15 July 2026, with educators pressing the Federal Government for certainty on whether it will keep funding the pay uplift past November, according to industry news outlet The Sector.

The pay rise itself came through the Worker Retention Payment — a two-year government grant that delivered a 15% increase to award wages in two steps: 10% from December 2024 and a further 5% from December 2025 (Fair Work Ombudsman). The union reports a Certificate III educator on the Children’s Services Award is now roughly $11,000 a year better off than in 2024. To receive the grant, a provider had to hold a legally enforceable workplace instrument committing to those above-award rates, and accept caps on the fees it charges families.

The catch sits in the timeline. The grant period ends on 30 November 2026. The wage obligations baked into operators’ enterprise agreements and workplace instruments do not.

Why a funding cliff hits childcare harder than most businesses

Labour is not just the biggest cost in a childcare centre — it is the business. Staff wages typically run at 60–70% of revenue (Productivity Commission), and the Australian Bureau of Statistics weights labour at around 70% in its Childcare Services Cost Index. Nothing else on the P&L comes close.

That concentration is what makes a wage funding cliff dangerous. When a single line item is two-thirds of revenue, a movement in it swamps everything else. As a rule of thumb, every one percentage point added to wages strips roughly one percentage point off the EBITDA margin. A centre running a 15% margin does not have many of those points to give.

The two scenarios after November

No one can tell you which way the funding lands, so the right move is to plan for both.

In the first scenario, the Government extends or embeds the funding — most likely with fee caps continuing in some form. For operators, that is close to the status quo: wages stay funded, fee growth stays constrained, margins hold roughly where they are.

In the second scenario, the grant simply lapses with no replacement. Then an operator faces three uncomfortable levers: absorb the 15% and watch the margin compress, pass it to families through higher fees (only possible if the caps lift), or attempt to unwind above-award rates — which is fraught given workforce shortages and the industrial instruments now in place. None of those is clean, and the workforce pressure that drove the rise in the first place has not gone away (see our piece on the educator shortage).

What it means if you’re buying a centre

For buyers, the lesson is simple: do not price a centre off the last 12 months alone. A trailing profit-and-loss statement right now shows wages partly underwritten by a grant and fees held down by a cap — a flattering, and temporary, picture.

The question to ask in due diligence is what the P&L looks like with the grant gone. Is the wage base sustainable at full cost? What happens to the margin if fees stay capped but funding stops? Reading those numbers correctly is exactly the work that separates a safe acquisition from an expensive one (how to read a childcare centre’s financials). The policy backdrop matters too, with reforms such as the Three Day Guarantee reshaping demand and funding at the same time (what the Three Day Guarantee changes).

What it means if you’re selling or valuing

Childcare businesses trade on a multiple of adjusted EBITDA, and the gap between stated and adjusted figures is where deals are won or lost (our full valuation guide). The funding cliff feeds straight into that adjustment. A careful buyer pricing in post-November uncertainty will model a more conservative wage line — and apply the multiple to a smaller number.

If you are thinking about selling, the practical implication is timing and preparation. Model your November position before you take a figure to market, and understand how exposed your wage base is once the grant rolls off. If your earnings still look clean on a trailing basis, that is the window in which the story is easiest to tell. Knowing your number before a buyer sets it for you is the whole point — a quick way to pressure-test it is the ChildcareLink Estimator.

What to do next

Confirm where your centre stands on its workplace instrument and grant compliance, then stress-test your P&L two ways: at full 15% wages with today’s fees, and with whatever fee movement the 2026 cap allows under the ABS Childcare Services Cost Index. Keep an eye on the funding decision, but build your plan as if you cannot rely on an extension. For the full cost picture behind all of this, start with our operating costs breakdown.

Key Takeaway

The 15 July strike is a headline; 30 November is the date that moves money. The 15% pay rise is permanent for educators, but the funding behind it is not — and in a business where labour is two-thirds of revenue, that gap flows directly into margins, buyer models, and sale prices. Plan for the cliff now, while your numbers still tell a clean story.

Wondering what the funding cliff does to your centre’s value — or whether now is the time to act? Talk to ChildcareLink for a confidential appraisal. Visit childcarelink.com.au or contact our team directly.

Sources

• The Sector — “Early childhood educators plan national walk-off amid ongoing funding uncertainty” (15 July 2026), 2026
• United Workers Union — Early Childhood Educators Union (15% pay rise; ~$11,000/year for a Certificate III educator; Worker Retention Payment), 2026
• Fair Work Ombudsman — Early Childhood Education and Care Worker Retention Payment (10% from December 2024, 5% from December 2025; eligible workplace-instrument condition; grant period to November 2026), 2024–2026
• Australian Bureau of Statistics — Childcare Services Cost Index (labour weighting; 2026 fee-cap basis), 2025
• Productivity Commission — Inquiry into childcare: costs and viability of childcare operations (labour as the dominant operating cost)
• IBISWorld — Child Care Services in Australia, Industry Report (market context and valuation multiples), 2025
• ChildcareLink transaction experience

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. ChildcareLink recommends seeking independent professional advice tailored to your specific circumstances before making any business or investment decisions.