**UPDATED 3rd March 2020 following budget announcement**
Remaining sustainable is always at the forefront of our minds, and more so than ever during the pandemic. Forward planning and budgeting are crucial when making sure that your business can continue to educate and care for children for many years to come.
Increases in the National Living Wage, many families choosing to keep their children at home when they would normally use childcare, and an insufficient funding uplift, make it crucial for you to ensure that you are up to date with all the changes.
Wage increases
Staffing costs are often one of your biggest outgoings. This will increase in April, when the National Living Wage (the Government’s national minimum wage for the over-25s) will rise by 2.2 per cent, from £8.72 to £8.91. This rate is also being extended to 23- and 24-year-olds for the first time, while the rate for workers aged between 16 and 22 will increase between 1.5 and 2 per cent. The rate for apprentices will rise by 3.6 per cent to £4.30.
These increases will also raise your employee overheads such as pensions, national insurance and tax. These also need to be factored into your 2021/22 budgets. Childminders will also need to bear this in mind if they have assistants working with them.
Sources of support
If there are fewer children in attendance than usual, the Government’s Coronavirus Job Retention Scheme could be an option to support your staffing costs. This has been extended and, following today's budget, will now run until at least 30 September 2021. Employees will continue to receive 80% of their salary for hours they cannot work, while employers will be asked to contribute 10% in July and 20% in August and September towards the scheme.
Support for the self-employed has also been extended until September, while aroud £600,000 newly self-employed people will be eligible to apply for it.
Furlough
When working out how much wage support can be claimed via the furlough scheme, providers should now:
- establish how much early entitlement funding they are currently receiving
- calculate what this equates to as a percentage of their usual income.
This is the proportion of your wage bill which cannot receive any furlough support, meaning that the rest of your wage bill is eligible for furlough support.
For example: if the normal total income is £10,000 and your Government funding is now £2,500. £2,500 is 25 per cent of the total income – this means 25 per cent of the setting’s payroll is not eligible. The remaining 75 per cent of the payroll is eligible for furlough support.
The Department for Education has also confirmed that providers can now base funding claims on usual monthly income (see FAQs).
Where you have lower occupancy due to families choosing to keep their children at home, consider ‘flexi furloughing’ team members to help support your cashflow in the last few months of this financial year.
Fees
Families which usually pay private fees but are choosing not to attend could also have an impact on your income.
Government guidance states, ‘The general principle is that providers should not charge parents or carers for services that cannot be provided. If there is a barrier to accessing childcare, based on government guidance or the law, the provider should not charge the parents or carers for this period. For example, where they are required by law to self-isolate if they test positive for coronavirus or are contacted by NHS Test and Trace. Accordingly, if a child is self-isolating having been contacted by NHS Test and Trace, the provider should not charge the parent or carer for this period.’
However, the Competition & Markets Authority (CMA) has advised the Early Years Alliance that, ‘The CMA is unlikely to object to the parties seeking to reach an arrangement that is mutually acceptable in the circumstances, provided that consumers are not left in a worse position where they have sought to find a resolution in this way.’
Other sources of support
On 25 November, the Government announced that the business rates multiplier will be frozen. Today it was announced that the business rates holiday for firms in England will continue until June, with a 75% discount for the rest of the year.
As the childcare sector was included in the 100 per cent relief for 2020/21, check that this payment has not been made.
Another source of support includes a state-backed ‘bounce-back’ loan worth up to £50,000, for which businesses now have until 31 March 2021. This was recently tweaked so that businesses can ‘top up’ if they didn’t borrow the full amount initially, and no repayments are needed in the first 18 months, though interest will be charged from 12 months.
Chancellor Rishi Sunak today announced a new Recovery Loan Scheme will replace this, providing loans of between £25,000 up to £10 million, through to the end of this year, with 80% of the loan being backed by Government guarantee. Note - restart grants, also announced today, are aimed at businesses forced to close due to the pandemic such as hospitality venues.
Remember, there are still several local small grants you can apply for. Look into local parish councils, home improvement stores and garden centres. Supermarket chains also often have funds of money available for the community the store is based in.
Do not be disheartened if you are not awarded funds following an application; seek feedback, reflect on the application and try again.
Sound budgeting is key to helping you make the right decisions on expenditure based on income and with the end of the financial year looming. If you have not started to plan for 2021/22, now is as good a time as any.
CASE STUDY: fundraising online
Interacting with families in settings has reduced, but fundraising does not have to be put to one side. Carol Houghton, play leader at PK Preschool in Grayshott, Hampshire, has raised £300 this year already online.
She says, ‘One of the biggest hurdles we’ve faced since the first lockdown is fundraising, which has never been more crucial or challenging. PK’s last event was back in February 2020, raising £1,600, so we are thrilled to finally be back in action. We are so grateful to have the support of a dedicated and very intrepid committee, whose members have been working hard to ensure we can continue to raise vital funds that help our lovely setting to deliver quality care for our fantastic children. In our latest fundraising drive, we asked supporters to guess how many Christmas lights were festooned through the village.’
FURTHER INFORMATION
Chancellor's budget speech, 3/03/2021 https://www.gov.uk/government/speeches/budget-speech-2021
Guidance from the Competition & Markets Authority https://bit.ly/3bfOLht
Sources of support, from gov.uk https://bit.ly/3jZvC7o
FAQs
1. What should I be charging?
A. Many providers set their fees based on those of other local providers and perceptions about what parents might be willing to pay. While these are important factors, it is best to start with the costs of delivery. A break-even analysis should be undertaken to establish the level of income needed to cover all expenditure. Once the break-even costs have been established, fees for places and additional services can be set at an appropriate rate. While it may be thought that offering services at a lower rate will drive demand, where high-quality provision is offered, a higher fee to reflect the improved services may make good business sense.
2. With changes to funding, can you clarify what income we can expect?
A. In January we saw the return of the normal process for early years funding, meaning this would have been based on those children in attendance. The DfE confirmed that for open settings, or those that had no choice but to close, ‘where a child is reasonably expected to attend early years provision, and that provision is made available to them by the provider, their expected hours should be recorded in the Early Years Census’. Therefore funding should be received from the local authority for children who had been expect to attend were it not for the impact of coronavirus.
3. Is there any funding support for PPE or testing kits?
A. The Government does not offer any funding for PPE to early years providers; however, you may speak to your local authority and parish councils for any local grants, or larger businesses to see if they can support this cost. Home testing kits were initially only made available to maintained nurseries and those based within a school, but the guidance update on 22 February says that PVI nurseries will also be sent these from 22 March.
4. Is there a way the sector can support parents with their fees?
A. Through Tax-Free Childcare, families can get up to £2,000 a year for each child, to help with the cost of childcare. You need to be signed up to the scheme, and make sure families are aware of it.