A lot has been discussed about pay increases in the early childhood sector, and much of it has centred on the federal government’s Worker Retention Payment for long day care. But for Victorian kindergartens and early childhood centres operating under the Victorian Early Childhood Teachers and Educators Agreement (VECTEA), the changes coming through are separate and significant in their own right.
This article is focused on early childhood centres covered by VECTEA as we understand them in July 2026. The changes to public school teacher pay are a different matter and won’t be covered here.
What is happening with VECTEA?
VECTEA is the enterprise agreement that covers early childhood teachers and educators in Victoria. Renegotiations have been underway for quite a few years, with educators going on strike at various points because agreement had stalled for so long.
A deal has now been reached in principle. It has not yet been formally signed, but the direction is clear: educator pay will increase substantially over four years, eventually bringing early childhood teachers in line with what their counterparts in primary and secondary schools are earning.
For the educators, this is amazing news. Many have stayed in the sector despite a persistent pay gap compared to school teachers, and that gap is finally being addressed.
For centre operators, the picture is more complex.
The pay increases: what the numbers look like
The proposed increases are staggered across four years. The exact percentages have not been confirmed, but the current expectation is something like:
- Year 1: 12% (the only confirmed figure as at July 2026)
- Year 2: approximately 12%
- Year 3: approximately 8%
- Year 4: approximately 4%
There are two streams and they are treated differently. Kinder teachers will reach parity with Victorian government school teachers, a total increase of approximately 28.3% over four years, while kinder educators will see a higher average increase of approximately 39% over the same period. The year-by-year split for years two through four has not yet been confirmed and will be set out in the final agreement documents.
The increase an educator receives depends on their level of education. This creates an incentive for educators to upskill, and it may also draw more qualified teachers into early childhood rather than primary or secondary schooling, since the pay gap that previously pushed people toward schools is narrowing.
The first increase is expected to take effect around October or November 2026, though the exact date has not been confirmed.
How the funding works
The Victorian Government will fund the wage increases for eligible services through VECTEA grants. In practical terms, this means the government covers the difference between an educator’s current base salary and the new higher salary.
If an educator is currently on $100,000, and the Year 1 increase is 16%, the government is expected to provide the $16,000 difference. That is good news. But the way the funding flows in practice introduces a real cash flow challenge.
Funded kindergartens versus long day care
Not all early childhood services sit in the same position here. Services that are fully funded by the Victorian Government under Free Kinder arrangements are directly covered by VECTEA and will receive the full government-funded wage supplement.
Long day care centres are in a different position. Because they receive parent fees and the federal Child Care Subsidy (CCS), the government views them as partially funded. They are still covered by VECTEA, but the funding arrangements for the wage increase are treated differently. If you operate a long day care centre, it is worth getting clarity on exactly what your entitlement is under the VECTEA grant and what, if anything, you will need to absorb.
The cash flow problem
The salary increase is expected to come into effect before the funding arrives. We expect this from experience because it has happened before.
On top of that, the federal Worker Retention Payment, a grant that has been keeping a cap on childcare fee increases for participating centres, has been extended to 30 June 2028, with the fee-growth cap still in place for participating centres. If your centre participates in the WRP, this means your fee income will remain capped while your wage costs are rising.
Then there are the oncosts. When wages go up, so do superannuation contributions and WorkCover premiums. A 16% increase in wages does not mean a 16% increase in your wage line alone. The oncost flow-on adds to the actual cost your centre needs to cover in the short term.
There is also a broader workforce pressure to factor in. As kinder teacher pay moves to school-teacher parity and educator pay rises by approximately 39%, expect pressure to increase pay for your award and WRP-floor staff too, in order to attract and retain qualified people. When you model your labour costs, look across your whole workforce, not just the VECTEA-covered roles.
Most early childhood centres track wages as a percentage of revenue. A sudden increase in that ratio, even a temporary one, can put real pressure on profitability. If the funding is delayed by even a few weeks or months, centres need to be able to cover that gap from their own cash reserves.
The frequency of the funding payments has not yet been confirmed either. Whether the reimbursement comes monthly, quarterly or annually makes a significant difference to how much cash you need on hand.
What to do now
There are a few things worth doing before the changes come in, even though some of the details are still being worked out.
Get your educator qualification records in order. The amount of the increase is tied to each educator’s qualifications. When the portal opens for VECTEA funding applications, you will need accurate and up-to-date information for each staff member.
Apply for the funding as soon as the portal opens. We will notify our clients the moment this becomes available.
Check your payroll is set up for the new structure. The new agreement introduces updated classifications, allowances (including educational and service leader allowances) and progression rules. Make sure your payroll system reflects these before the changes take effect.
Model your cash flow for October onwards. Even without the exact percentage confirmed, you can run a scenario based on 16% and map out what that costs you across your payroll and add the oncost impact. Work out how long you could sustain that increase without the government funding coming in. If the answer is not long, talk to us now about how to position your cash reserves.
Review the Worker Retention Payment conditions for your centre. If you have been participating in this arrangement, understand what happens when it ends. It may affect what you can charge in fees and how you manage costs in the transition period.
Hold off on major decisions until the final documents are released. The in-principle figures may still shift once the enterprise agreement is formally signed and the Victorian Government releases implementation guidance. Avoid locking your centre into commitments based on numbers that could change.
What is still unclear
Several things remain unanswered:
- The exact percentage for Year 1 and subsequent years
- The start date for the first increase
- How frequently the VECTEA funding will be paid
- The specific treatment of long day care centres under the grant
- What happens after the four-year period ends. There is no confirmed plan yet for what comes next once the agreement concludes in 2030.
A positive change for the sector
Once the transition period is through, this change is genuinely positive for the sector. Better pay attracts more skilled educators. More skilled educators improve outcomes for children. A sector that has long been undervalued in terms of pay will start to look more competitive.
The challenge is getting there without the cash flow uncertainty creating problems along the way. That is manageable, but only if you are prepared.
If you are a Slate Accounts client, we are keeping a close eye on this as the details come through. As soon as there is clarity on the portal or the payment dates, we will be in touch. If you want to get ahead of the modelling now, feel free to reach out and we can work through the numbers with you.
If you have any questions, get in touch.
