Business - Occupancy and funding

By Gary Croxon
Tuesday, March 30, 2021

What do settings need to know about funding rates, and how can they boost occupancy? By Gary Croxon, service manager, East Anglia Service Hub, Early Years Alliance

Headcount: summer and autumn funding will now be based on termly counts
Headcount: summer and autumn funding will now be based on termly counts

One year on from the first lockdown, and multiple sets of guidelines, funding- and infection-related challenges later, and the early years sector is under colossal pressure. There has been a large decrease in the number of children attending settings as many families remain on furlough or reduced working hours. The number of children taking up a funded place in January 2021 was just 37 per cent of normal term-time rates and just 52 per cent of what the Government would normally expect at that time of year.

This also means a huge drop in government funding, as while autumn-term funding was based on January 2020 attendance, as of the spring term, government funding is based on the number of children on roll at a setting.

Current Department for Education (DfE) guidance states that during the spring term, the Government will ‘fund all local authorities on the basis of their January 2021 census for the spring term’. This means that providers should be funded for all children who are ‘reasonably expected to attend’ their provision where that provision is ‘made available to them by the provider’. This includes children who were not in attendance at their setting at the time of the census due to sickness, self-isolation or because their parents/carers did not feel it was safe.

Of course, with lockdown slowly easing and the reopening of schools, many settings are likely to see an increase in occupancy levels over the course of the spring term. In such cases, extra funding would be available – but only up to a point.

DfE guidance says that in local authority areas where a) attendance levels are below 85 per cent of their January 2020 census levels, and b) the council can provide evidence of increased attendance during the spring term, the Government will provide top-up funding for the additional places taken up after the January 2021 census count week. However, this will only apply up until the point where the take-up of places reaches 85 per cent of January 2020 levels. The Institute of Fiscal Studies has warned that where take-up rises above this level, ‘it could be up to local authorities to find funding for these places’. This is an approach it describes as ‘particularly ill-advised’ as it means that ‘funding over the coming months will be tightest exactly where there is most demand for childcare’.

The DfE has confirmed that summer and autumn funding will now be based on termly counts, i.e. including children who are temporarily absent that term due to sickness, rather than on the January census.


The Government has claimed that early years providers can recover funding losses through furlough support. However, a recent Ceeda survey found that even if a setting were able to claim maximum furlough support, this would still only equate to around 59 per cent of what they had lost for an unoccupied funded place.

This is because wage costs account for around three-quarters of nurseries’ and pre-schools’ overall costs, and the Job Retention Scheme only provides funding for 80 per cent of wage costs. Plus, the sector is seeing only a 1 per cent increase in funding rates this month, equating to just 6-8p per funded child per hour.

Is it any wonder, then, that the cost of childcare has increased during the pandemic? The latest Coram Family and Childcare survey shows that average childcare fees for children under two have risen by 4 per cent, while fees for children over two have risen 5 per cent since 2020. It also found that 39 per cent of local authorities have seen providers increase their fees, and 32 per cent have seen fewer providers offering funded places.

However, despite the challenges of the past year, we need to look towards a successful 2021 and beyond. It might be hard to do at times, but it is important to stop, reflect and see what steps your provision can take to put itself in the best possible financial position, given the wider pressures.

This is likely to mean doing all you can to boost occupancy levels, while cutting costs and reducing spending wherever possible.

Digital marketing

Word-of-mouth marketing, which was previously one of the best tools the sector had, is now less useful due to families being unable to attend their normal groups or meet-ups. We have all had to adapt to using virtual platforms more than ever – and you can use this to your advantage. Use your social media pages to highlight all the good work you are doing, and to inform families of how you will keep children and staff safe while they are with you and what extra measures you have in place.

Remind families that the early years is education, not just childcare, and vital to the development of their young child’s brain, and back this up with stories and photos of what is taking place at the setting. Explain to families the importance of their children’s learning, both at the setting and within the home learning environment. You can emphasise how you can support the latter and suggest activities that they can try at home which link to what they learn while in your care. Don’t forget to take into consideration GDPR, parents’ consent (to share images of their children) and safeguarding.


1. How can I challenge funding rates if my local authority is paying me on actual headcount?

A. During the spring term 2021, early years funding is essentially returning to the ‘normal’ approach of basing funding on the current year’s census count. The DfE has said the rules under which children should have been included in the January census – i.e. children absent due to illness, self-isolation or parental concerns over safety, alongside children physically attending the setting – is entirely consistent with previous census rules, which stated that children who are temporarily absent should still be included in the count. As such, if any local authority is insisting on funding providers based on actual headcount, this means they have either failed to carry out the January census in line with DfE guidance or failed to fund providers in line with the January count. Any provider in this situation can email

2. Can I challenge funding underspend, or large pots of unspent ‘contingency funding’ at my LA?

A. Unfortunately, there is no legislation preventing local authorities from retaining early years underspends or contingency funding. However, one route to challenge such a decision on a local level would be via the local schools forum. Schools forums are only required to have one early years PVI representative, which means that our sector is often underrepresented. However, meetings are open to the public, and so there is no reason that interested parties could not attend and submit questions beforehand.

3. Are we allowed to charge parents who choose not to take up their place?

A. DfE guidance states, ‘The general principle is that providers should not charge parents or carers for services that cannot be provided. If there is a barrier to accessing childcare, based on government guidance or the law, the provider should not charge the parents or carers for this period.’ This ‘barrier’ could include having to self-isolate. However, the Competition and Markets Authority has said, ‘The CMA is unlikely to object to the parties seeking to reach an arrangement that is mutually acceptable… provided that consumers are not left in a worse position where they have sought to find a resolution in this way.’

CASE STUDY: Pam Seear, owner/managerat The Tadpoles Nursery, Woodham Walter, Essex

‘The Tadpoles Nursery is a small rural pre-school nursery situated in a small village in Essex.

‘We have encountered many obstacles on our way through the Covid-19 maze, but in Essex we have received what I feel has been good support and guidance through this extraordinary time. We have been fortunate to still receive funding for all children whether they have chosen to attend or not.

‘However, the funding amount paid per child is definitely not in line with our income from fee-paying children, none of whom were still attending. As a small setting this then restricted our income; as the figure for funded children is capped, we were unable to charge anything on top.

‘Going into the pandemic, most of our children were funded, which made using the furlough scheme extremely challenging. Having guaranteed my staff at least 80 per cent of their salary, the bombshell then dropped that as we were in receipt of government funding, our furlough eligibility would then be calculated on the balance between income from funding and income from fee-paying children.

‘I value my staff very highly and felt that in order to help them through this time I needed to uphold my obligation. This of course was possible to a certain extent by the early entitlement funding we were still receiving. I furloughed just one part-time member of staff.

‘We still had no income from fee-paying children, as they were not attending, but I qualified for a small business grant, so with careful juggling I managed to stay afloat, stable and prepare for our reopening.

‘Covid-19 has also increased our spending, due to the extra cleaning routines and PPE. We waited in anticipation for a funding increase from our local authority, but it was delayed.

‘During the lockdown periods, our numbers were greatly reduced again with no fee-paying children attending. To help budget, I began doing all the paperwork at home and staff agreed to slightly reduce their hours. Once a week, one staff member would be off, which meant that staff were only down a few hours each per month.’

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