Nursery managers sometimes struggle to keep their pay increases in line with the National Minimum Wage while meeting staffing ratios and maintaining fees at affordable rates for parents.
A solution adopted by the MY Nursery chain in Yorkshire, which is owned by the Mid Yorkshire Chamber of Commerce and Industry, has been to introduce annualised hours contracts for its nursery assistants. The staff are paid at a higher hourly rate but have lost the benefit of company sick pay.
Martin Bradley, manager of the MY Nursery chain, says that staff retention and absenteeism have improved as a result of the new contracts. However, organisations representing both nursery staff and employers voiced their concerns about them.
'I would not encourage our member to accept this sort of contract,' says Tricia Pritchard, senior professional officer at the Professional Association of Nursery Nurses. 'Our experience, particularly with the private and independent sector, is that once you get these sort of clauses in a contract, then the next year it will be something else that's eroded and the year after, something else again.
'We would not encourage this sort of thing. It is not exactly withholding employees' rights and benefits but it is certainly not enhancing them, which is what employers should be aiming for even if they do not always achieve it.'
A Unison spokesman says, 'I have not come across this, but then our members work in the maintained sector where they just would not have this sort of contract.'
Purnima Tanuku, chief executive of the National Day Nurseries Association, says, 'Many nurseries are struggling to pay better wages without raising fees for parents. However, we have concerns about contracts for employees that give a yearly number of hours, and take away rights such as sick leave in return for a slightly higher hourly rate.
'This raises issues for stability for staff in terms of wages and security when they are ill. It also raises wider problems around recruitment and retention of staff, as employees could be tempted to leave for a job with better pay, conditions and a guaranteed number of hours per week.
'NDNA can understand how the financial pressures on nurseries are leading to nursery owners looking for new ways to support the cost of wages, but such contracts could create further issues in the longer term. NDNA believes direct investment is needed in the sector so nurseries can pay staff the wages and conditions they deserve, without making fees unaffordable to parents.'
'The most successful nurseries I work with keep their staff and try to reward them with as many benefits as possible, such as sick pay,' says early years consultant Laura Henry. 'I have come across nurseries where the children are on term-time contracts and some of the staff only work term times too.'
CASE HISTORY: NEW SYSTEM, OLD SYSTEM
'Our nursery managers, deputies and nursery officers are on normal management contracts', says Martin Bradley, manager of the five-strong MY Nursery chain. 'These contracts are for the non-management grades. The reason we introduced them is because nursery opening hours are longer than a working day. Our full-time staff work a 35-hour week.
'There are always times when a manager needs to have a degree of flexibility, particularly first thing in the morning and last thing at night, and you have to maintain your ratios. A manager needs flexibility to say we need three members of staff in now, not the five who would otherwise have been paid to stay until 6pm.
'We work to a set number of contracted hours per year: 35 hours a week over 46 weeks - 1,610 hours. We do not include bank holidays or four weeks' holiday.
'The hours that staff work are logged weekly and add up to their annual total. Our contract year starts on 1 September. We keep the pay people receive spread over the year, so their pay across the months is basically at the same rate.
'We look at the logs monthly and quarterly and if somebody is getting behind on their contracted hours, for whatever reason, their manager is made aware of the fact. She would then encourage that staff member to put in some extra hours to get back on track.
'I think our turnover is less than average for nurseries and certainly we have noticed since we introduced the annual hours contracts that our turnover has dropped as result.
'There are two downsides as far as staff are concerned. If they work more than their contracted hours, we don't pay overtime. They only get paid for those extra hours at the end of the year when we do a reconciliation. They then get their entitlement in a lump sum.
'The other potential downside is that we don't pay sick leave. When our nursery nurses are off sick they just get statutory sick pay.
'When we went through the consultation process on introducing the contracts, we explained about sick pay. We had a full consultation process because we wanted to make sure this would be beneficial to us as owners of the nurseries and that the staff felt it was fair, too.
'If someone gets ahead on their hours they can continue to build them up and get a lump sum at the end of the contract year, or they can take some time off. They can't carry hours over into the next year.'
Angela James, manager of the MY Nursery in Barnsley, says the contracts enable her to be more flexible. 'Some weeks we may not need all our staff in, so people can get time off. If I need more staff they are quite prepared to work the extra hours. Before, we couldn't juggle staff around to ensure that ratios were met so easily. It means that if parents want extra sessions for their children we can accommodate that. It enables us to run more efficiently.
'At the start we were all a bit confused, but now the staff know I can sort it if somebody needs time off. We do our numbers every Monday so everybody knows what hours they are going to be working that week. At the moment we are full so we can't be that flexible. The staff work either an early or late shift.
Jane Bennett, who has worked at the setting for ten years, says it has good points and bad points. 'Before they changed the contract we had sick pay, which was a bonus, but they have taken that away. Over the years you got a day's extra holiday for every year you worked. I had 25 days holiday and they have reduced it to 20 days. But we got a pay rise.
'Personally, I would go back to the old system. I am 48 - the younger ones wanted to go for the increase in money, but the older ones like me wanted the longer holidays.'
ANNUALISED HOURS CONTRACTS
Annualised hours contracts are most common in industries that have peaks and troughs of demand, and can be a way of getting round the need for overtime, according to Flexibility, which promotes innovations in employment practice.
In recent times it has become more popular in the banking and financial services industries, as they have moved towards call-centre based operations and try to align operations more towards consumer expectations.
There are several types of scheme, but typically the annual hours are based on a 35- to 40-hour week multiplied up to an annual total, less annual leave and public holidays.
Scheduling work takes various forms: there may be an average monthly total to be worked, or it may take the form of periods of intense working followed by periods of rest, for example, the two weeks on, two weeks off pattern found in the oil industry.
Annualised hours have caused concern in trade union circles due to the possibilities of exploitation, health and safety issues related to periods of intense working, and the erosion of overtime opportunities.
For more information, visit www.flexibility.co.uk.