Nurseries under pressure from wage and pensions increases

By Gabriella Jozwiak

| 27 March 2019

Almost two in 10 nurseries in England will see their wage bill rise by up to 12 per cent next month as a result of increases in minimum wages and pension contributions, research has shown.

NDNA chief executive Purnima Tanuku called on the government to help nursery providers meet rising staff costs

The results of a poll conducted by the National Day Nurseries Association (NDNA) have led the organisation to warn that nurseries will close and parents will be forced to pay more for childcare because government funding rates has failed to keep pace with wage rises.

It says wage bills make up between 70 and 80 per cent of nurseries' operational and business costs. 

NDNA's most recent survey of 450 early years employers and professionals conducted in February and March found 16 per cent expected their wage bill to rise by between nine and 12 per cent from April, when new rates for minimum wages and pension contributions come in to force.

Workers aged over 25 will receive a 4.9 per cent increase in the statutory national minimum wage rate from 1 April, rising from £7.83 to £8.21 an hour. 

While from 6 April, minimum pension contributions for employees will rise from five per cent to eight per cent, with employers having to pay 3 per cent rather than 2 per cent of salaries.

The early years sector has consistently warned that funding to cover government-funded childcare for three- and four-year-olds is too low.

Following its introduction in September 2017, the government froze or cut the rate for 84 per cent of local authorities in 2018/19.

A year later, NDNA revealed the rate of nursery closures had increased by 66 per cent on the previous year, with 121 nurseries closing between the scheme's launch and August 2018, compared with 73 over the same period a year earlier.

In May 2018, independent research by Ceeda warned providers faced a funding shortfall of more than £500m.  

NDNA's recent research also revealed 58 per cent of nurseries would have to spend between five and eight per cent more as a result of the new policies.

NDNA chief executive Purnima Tanuku said the impact of such increases on nursery budgets "can be the difference between a nursery staying open or folding".

"While staffing budgets rise, the amount the government pays per child is staying the same or decreasing, which pushes up the deficit that nurseries have to absorb," she said.

"Really nurseries have limited options - they either charge parents of younger children more for paid-for hours, increase charges for additional services for funded places or reduce the number of funded places they can offer.

"None of these options are desirable for parents or nurseries. The government must invest more money in order for nurseries to be able to pay staff at least the minimum wage."

Coram Family and Childcare head Megan Jarvie backed the suggestion parents were bearing the brunt of rising costs, as the organisation's own research suggests childcare prices have risen by three per cent over the past year.

"Too many parents remain locked out of work by high childcare costs and low availability, and too many children miss out on high-quality childcare, and the benefits to their life chances that come with it," said Jarvie. 

"Recent government investment is welcome, but as prices continue to rise, families remain at risk of getting left behind."

A Department for Education spokeswoman said the current government was spending more on early education entitlements than any other previous government - about £3.5bn in 2019. 

"More than 700,000 of the most disadvantaged two-year-olds have benefited from 15 hours' free childcare since 2013, and more than 340,000 three- and four-year-olds benefited from our 30 hours offer in its first year, meaning parents are spending less on childcare or are able to work more flexibly," she said.

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