Living wage would add thousands to weekly costs, report finds
Thursday, June 25, 2015
Settings in Birmingham would have to increase budgets by nearly a fifth to pay staff the living wage, a landmark report has found.
Nurseries would face bills of nearly £2,000 more per 30-hour working week if they gave all staff the same percentage wage rise. This equates to a jump of 17 per cent or 61p per hour, the report by auditors KPMG said.
Even if only those staff paid below the living wage were given increases, which was not a likely scenario, this would mean an 11 per cent rise in staff costs.
The £273,000 study, which analysed responses from 64 day nurseries and 15 childminders, none of whom paid all of their staff the living wage, was commissioned by the council following a dispute with nursery owners over wages.
It followed the council issuing an ultimatum last year: that to receive funding for the free places, PVI settings would have to follow the Birmingham Business Charter for Social Responsibility, which stipulates that employees must be paid the living wage of £7.56 per hour.
The report found, ‘should the council require providers to adopt the living wage requirements of the social charter, there will be a significant impact on costs for most providers.’
It also highlighted underfunding in the area. Before any allowance for the living wage was made, the the total cost of provision per hour for two-year-olds in day nurseries was £5.24, 35p less than the funding received. For three- and four-year-olds it was £3.86, 17p less. When allowing for a six per cent profit to be added the deficit rose to 66p and 40p respectively.
For childminders, hourly pay ranged from £3.16 to £12. The report found ‘childminders pay themselves a rate considerably lower than the comparative role in a day nursery.’ The average was just £5.88 – below the minimum wage for over 20-year-olds.
Sarah Presswood, owner of George Perkins Day Nursery in Birmingham and a member of the campaign group set up to call for fairer funding, said, ‘The findings are exactly as we expected. We are relieved that the report has backed up everything that we have been saying for a long time now. Obviously we are hoping that the report will now encourage Birmingham City Council to look at the funding they are paying PVI providers to ensure they are funded properly.’
Claire Schofield, of the National Day Nursery Association, added, ‘KPMG’s open book accounting review of PVI sector nurseries in Birmingham has national as well as local significance.
‘It clearly shows hourly funding levels passed by the local authority to PVI nurseries fall short of current delivery costs - this is before even considering the impact of the Living Wage, pensions auto-enrolment or most critically extension of free places to 30 hours a week.’
Ms Presswood added, ‘Birmingham will be using this as their response to the national consultation on funding. If we are underfunded on 15 hours we are going to be underfunded for 30 hours. We are hoping the government will sit up and take notice.’
A Birmingham City Council spokesman said, ‘Current funding arrangements for nursery provision are inconsistent, with rates varying depending on the sector providing care. We therefore commissioned an independent review by KMPG to allow us to make informed, evidence-based decisions as to how we move forward. The review has intentionally not made any recommendations or come to specific conclusions, and we will now use the report to feed into the city council’s wider early years review.’
The spokesman added that more reports were likely to be produced before the council made a final decision.
