Childcare ‘underfunded’ impacting sector wide pay, Low Pay Commission finds

This year’s Low Pay Commission report states that childcare is underfunded and its workers bear the consequences of this.

The report published today (9 December 2020) unveiled its findings as well as the new mandatory minimum wages which were announced by the Chancellor last month.

NDNA provided the Commission with evidence of the pressure providers were under before the Coronavirus pandemic which were then exacerbated by the spring lockdown. The report notes the issues caused by flat funding rates or minimal increases for providers and has highlighted childcare as a sector “where government funding is vital.” 

On page 135 the report reads: 

“Social care and childcare remain underfunded, and low-paid workers within those sectors ultimately bear the consequences of this. Covid-19 has only accentuated the long-standing issues in those low-paying sectors where the Government is the main source of funding.”

Purnima Tanuku OBE. Chief Executive of NDNA said: “Over recent years the Low Pay Commission has increasingly recognised the impact of underfunding on childcare providers and the knock-on effect for the hard working staff in the sector. This year’s report needs to be a wake-up call for governments to address chronic underfunding of childcare and early education.

“With the National Living and Minimum Wages increasing, even at a slower rate, this must be factored into funding rates. In England we have already seen that proposed increases will not keep up with wage costs for the existing workforce.

“Governments need to factor year-on-year staff costs increases into funding rates, along with inflation and other cost pressures.

“The research on furlough estimated that almost 200,000 early years staff have been furloughed at some point, with many receiving top-ups to furlough payments from their employers. This shows how early years employers value their staff who may have seen earnings dip below Minimum Wage levels as a result of furlough. However, it has been an additional strain on employers and we know some employers have reported staff leaving the sector due to reduced earnings while on furlough.

“We know the vast majority of these will no-longer be furloughed due to staffing demands for settings to remain open. The Job retention Bonus for these have been deferred to next year with nowhere near the same access to the furlough scheme in early years as retail and hospitality businesses. The Treasury should advance that support to childcare providers so it helps providers in this financial year.

“Early years providers know the value of qualified, experienced and committed staff and the really positive impact they have on children’s learning in this crucial stage of their development.  It’s clearer than ever that without addressing underfunding in early years we will continue to see a workforce crisis in the sector.”

The Low Pay Commission also outlines:
  • Almost 200,000 childcare employees were furloughed during the period of lockdown with 45% having their furlough payments topped up by employers
  • Research suggested that lower paid and younger workers in childcare were more likely to be furloughed
  • The financial impact on the childcare sector of lower demand and higher operating costs
  • That low pay in the childcare sector remains an issue
  • Increases to the apprentice wage may have an impact on childcare providers but that apprenticeships provide an important route into working in the early years sector.

The report says about childcare specifically:

“Childcare has continued to face similar issues to the care sector, caught between a flat funding settlement (albeit with some extra funding in the most recent year) and rising employment costs (staff costs are typically 70 per cent of providers’ turnover). 

“The financial instability of many in the sector has been exacerbated by the pandemic. The lockdown from March onwards led to a collapse in demand for many childcare providers, with many settings closing temporarily, and reopening from June onwards to far lower numbers than usual. Demand did not recover during the summer holidays, the busiest part of the year for many. All of this, we heard, left many businesses with a considerable hole in their finances. 

“In addition, for those businesses who were open, the pandemic imposed extra costs, including the provision of PPE and additional cleaning. We have already noted the problems caused by the Government’s decisions around netting off money received under the CJRS from other funding. The National Day Nurseries Association (NDNA) shared survey data showing around 71 per cent of providers expected to make a loss over the autumn.”

About the increase in the mandatory minimum wages, it states: “We have noted before the need for additional support for the social care sector to enable it to fulfil its ambitions to pay workers a decent wage. This need has only become more urgent. We also heard this year about the acute pressures on the childcare sector, and would highlight this as a further area where government funding is vital.”

Read the report