Issue number:
Date Issued:
20 Nov 2017
Issued to:
This circular applies to all Public Hospitals and Health Services delivering Public Mental Health Services.
To update hospitals and health services on funding for the implementation of the proposed new enterprise agreement.


The Fair Work Commission approved the Victorian Public Mental Health Services Enterprise Agreement 2016-2020 (the '2016 Mental Health EA') on 20 April 2017 and it came into operation on 27 April 2017.

The seventeen affected public hospitals and health services ('Public Mental Health Services') named in the 2016 Mental Health EA have had an obligation to provide the pay and benefits described therein since it came into operation.

Release of Funding

Public Mental Health Services will receive supplementary funding adjustments through the Budget Payment System (BPS) from October 2017. Users of the Healthcollect portal will be able to view details of the adjustments via the portal.

Basis of Funding

Supplementary funding is provided for enterprise agreement implementation costs above those covered by normal budget indexation levels and/or any incorporated savings or offsets put forward by the VHIA and agreed during the relevant round of enterprise bargaining.


Under the Departmental Funding Model (DFM), 2.5% pa indexation for wages movements is deemed to have been provided in price and is expected to be offset against the cost of an EBA prior to the provision of any further supplementation funding. Deemed DFM indexation is calculated on the relevant wage base at the point of expiration of the previous EBA and is applied to the compounding wage base annually thereafter.

Further to the above, while the 'old' enterprise agreement reached its nominal expiry date on 31 March 2016, the last pay increases payable under the 'old' enterprise agreement were payable on 31 March 2015 (nurses and other direct care staff) or 1 April 2015 (health professionals, allied services staff, administrative workers and managers). The first annual salary increase under the 2016 Mental Health EA will have effect from 1 October 2016, meaning Public Mental Health Services had no new salary increases to pay to relevant staff in the 2015-16 financial year.

This has been factored into the Department's calculations of Public Mental Health Services' capacity to meet the costs of the implementing the 2016 Mental Health EA, including payment of the once-off, up-front lump sum payments under the agreement.

Use of Workforce Profiles

For the current enterprise bargaining cycle, the Department has referred more directly to each affected public hospital's or health service's workforce profile in its budget modelling than in previous cycles where budget modelling focussed more on 'whole of sector' profiles. This removes some of the more severe 'swings and roundabouts' that might have arisen under the previous approach.

The more 'localised' method of modelling also means a more direct linkage between EBA costs and the application of DFM indexation for each public hospital or health service when determining appropriate levels of supplementary funding. This in turn means that where the Department has calculated DFM indexation as matching or exceeding EBA-related costs in a given financial year (or years), there will be no supplementary funding in the corresponding year (or years).

Other Revenue Sources

Public hospitals and health services are reminded that the Department does not fund 100% of their activities. Hospitals and health services typically have other revenue streams including -- but not limited to -- Commonwealth funding and grants (e.g. residential aged care bed-day funding), private practice revenue and business unit revenue.

The Department only provides indexation on State funding. Public hospitals and health services are expected to set aside funding from these other sources to support enterprise agreement costs.

Method of Funding

The Department will release supplementary funding in 2017-18 and 2018-19 as Specified Grants.

The Specified Grant for the 2018-19 financial year will incorporate the impact of the wage increase applying to some Registered Psychiatric Nurse classifications from 1 April 2019. Details of this will be provided in a separate advice ahead of payments in 2018-19.

It is anticipated that supplementary funding will roll into budgets from 2019-20.

Funding Queries

Any affected public hospital or health service that does not believe the funding it received properly reflects the costs it faces to implement the 'new' enterprise agreement outcomes is able to present its case to the Department for review. (As a first step, public hospitals and health services should undertake their own calculations along the lines outlined in the example above.) The Department will review any such local calculations on request.

The Department will not consider a case for review of funding for this enterprise agreement unless the public hospital or health service has clearly and fully identified the nature and relevance of what is regarded as an 'un-funded' cost. Further, the public hospital or health service must demonstrate that it has identified and applied all available sources of funding and revenue that could contribute to the meeting of the cost(s) in question.

Requests for funding review should state whether they are to address temporary cash flow issues or recurrent budget issues.

Further Information

Public Mental Health Services with queries relating to funding arrangements outlined above should contact Simon Chant on telephone (03) 9096 2555 or by email addressed to

Greg Stenton
Chief Finance Officer