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Government publishes new National Living Wage, but smaller nurseries could suffer

29-Nov-17
Article By: Michaela Chirgwin

Today the Government has accepted new recommendations from the Low Pay Commission report, which will apply from April 2018. The suggested increases, however, have come in for some criticism from the nursery sector.

Credit: Shutterstock.com/ Halfpoint

In the report the National Day Nurseries Association welcomed that lower paid nursery workers will get a pay increase, but are also critical of what they see as the Government’s inability to cover the cost of funded places; putting a squeeze on nursery profit margins by adding to their highest outgoing – staff costs.

Purnima Tanuku, chief executive of National Day Nurseries Association (NDNA) is quoted within the Low Pay Commission’s National Minimum Wage 2017 report. She says:

“If the Government requires all employers including nurseries to pay workers these fair wages, they need to make sure this is reflected in the hourly rates paid to the sector for funded childcare.”

“These wage increases are obviously good news for our lowest paid workers. However, the childcare sector is particularly badly affected in its ability to meet this obligation because the Government investment in its scheme which offers parents ‘free’ childcare is woefully insufficient.”

The new overall rate sees an increase to £7.83 an hour; the 21-24-year-old rate has been increased to £7.38; 18-20-year olds will see an hourly increase of £5.90, and 16-17-year olds will get £4.20. The apprentice rate has been increased to £3.70.

The NDNA states within the recommendations that smaller nurseries will have more of a problem with the new rates. This is because they can’t capitalise from cross-subsidies and economies of scale that larger operators can. They are then hit the hardest when staff recruitment costs rise.

In the report, figures suggest that small firms constitute 78 per cent of child nurseries, but the NDNA believes that there is an increase in big nursery chains who are trying to ‘consolidate the sector’.

The report also highlights the difficulty of nurseries to reduce staff levels to absorb higher wages due to statutory adult to child ratios, although there are some nurseries that have reduced staffing levels where possible.

Ms Tanuku said: “The average nursery gets paid an hourly rate per three and four-year-old of just £4.37 in England, with similar poor rates paid in Scotland and Wales.

“For nurseries, staff wages is their biggest bill so this will have a huge impact on their sustainability. There is no flexibility because providers have to adhere to strict child to adult ratios and also need to maintain differentials in pay for higher qualified practitioners."

Nursery managers have also complained that due to the NLW they have had to remove staff from salary sacrifice arrangements whereby employees can request that their part of their salary be exchanged with extra benefits such as childcare and healthcare.

click here for more details or to contact National Day Nurseries Association

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