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NEF - Revealed: How government’s 30hr childcare scheme could force nursery workers' wages down

For Government’s new 30-hour free childcare to be sustainable, nurseries would have to pay their staff below the minimum wage to break even, new research shows

This would mean a pay cut for 62% of the least-qualified nursery workers in the country.[2] Of nursery workers with at least A-level equivalent qualifications, 85% might expect a pay cut

Nurseries will almost certainly look to make savings elsewhere, either by charging more for ‘extras’ or cutting services

The Government’s new 30-hours free childcare scheme is so underfunded that in theory nurseries would have to pay their staff below minimum wage to make it work, new research revealed yesterday.

From 1 September most parents in England are entitled to 30 hours free childcare a week for children aged three to four. The government reports that more than half of parents eligible have now applied to take part in the scheme.[3]

On average, parents are currently charged £6 per hour for under 2s, £5.30 for 2 year olds and £5.10 for 3 and 4 year olds.[4] But the government is offering providers just £4.27 per hour for this same care, leaving nurseries with a significant gap in their finances.

According to new research by the New Economics Foundation, for nurseries to break even without passing on costs they would have to pay their staff just £7.33 an hour.[5] This is below the national minimum wage for 25-year-olds and over.[6]

That would mean a pay cut for 62% of the least-qualified nursery workers in the country. Of nursery workers with at least A-level equivalent qualifications, 85% would face a pay cut.

The amount of money government gives providers per hour of “free” childcare is fixed, regardless of location and age of the child. But providers say that the amount doesn’t cover the true cost of childcare and that parents currently subsidise the difference.

Whilst the government has said that it is illegal for nurseries to ask parents to pay ‘top-ups’ on their per hours fees, they are able to ask parents to pay for ‘extras’ like food, nappies, trips or activities. In this way, many parents are left to fill the funding gap. Alternatively, some nurseries may consider cutting services in order to meet the shortfall in funding.

These findings raise wider concerns about the way in which childcare is funded in the UK.

Lucie Stephens, Head of Co-Production at the New Economics Foundation, said:

“It’s right that the Government is looking at ways to deal with the crippling cost of childcare for parents. But they have to put their money where their mouth is.

This research shows that the whole system for funding childcare in this country doesn’t really work. Nurseries will either pass on the extra cost to parents, cut services or squeeze their workers’ wages. None of that is good news.

We need to support new and better ways of doing childcare. When parents have real control over the design and delivery of the care their children receive, it becomes more affordable and more suitable for their needs.

At the New Economics Foundation we are working with parents to develop new models of childcare, which combine decent pay and conditions for staff with real control and affordability for parents.”

The New Economics Foundation is partnering with parent-led co-operative childcare providers such as Childspace in Brockwell and Grasshoppers in the Park in Hackney.[7]

Notes to editor:

  1. The New Economics Foundation is the UK’s only people-powered think tank. The Foundation works to build a new economy where people really take control – www.neweconomics.org
  2. Workers with GCSEs or less, qualification level 2, Childcare and Early Years Providers Survey 2016 (CEYPS), p.70.
  3. http://www.bbc.co.uk/news/uk-england-41098769
  4. CEYPS p. 92
  5. Assuming there is no flexibility in the salary of managers, being fixed at £11.20 per hour (note: many will actually be paid more) the hourly salary which would reduce this funding shortfall to zero is £7.33, below the national minimum wage of £7.50 per hour for over 25s. This is calculated as follows: An hourly wage of £7.33 results in an annual salary of 7.33 × 40 hours × 52 weeks = £15,300. The NI contributions on this are £978 and the 1% pension contributions are £93.80. This results in a cost to the employer of £16,300 which, over a 38 week period, is 16,300 / 52 × 38 = £11,900 per supervisor. The total cost to nurseries of their ten supervisors and one manager, plus the fixed costs calculated early is then 11,900 × 10 + 18,700 + 32,400 = £170,000. This is precisely the amount offered by the government for 38 weeks of childcare at 30 hours per week for 35 children.
  6. https://www.gov.uk/national-minimum-wage-rates
  7. For more information about NEF’s work on childcare, visit http://neweconomics.org/search/?_sf_s=childcare.
  8. All comments in response to the Government’s introduction of the 30 hours free childcare policy. More information here:https://childcare-support.tax.service.gov.uk/par/app/extendedentitlement
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