DfE releases more early years guidance on funding and claiming for furloughed staff

Catherine Gaunt
Wednesday, April 29, 2020

The Department for Education has published guidance on how it expects local authorities to re-distribute funding among early years providers to ensure there are enough places for children of key workers and vulnerable children during the coronavirus outbreak.

The new guidance sets out how local authorities are able to redistribute early years funding during the current crisis if they need to.

The guidance for local authorities and early years providers, states that local authorities should only redistribute early years DSG funding if absolutely necessary to fund provision for children who are eligible for free early education and care under one of the free early education entitlements. 

This is intended to ensure that those families are able to continue accessing their entitlement to free childcare during the coronavirus (Covid-19) outbreak.

The guidance sets out the priorities the Government wants local authorities to consider in using their DSG funding to provide free early education entitlement childcare places for eligible children during the coronavirus (Covid-19) outbreak.

The DfE is also temporarily extending eligibility criteria for the two-year-old entitlement to include children assessed as being vulnerable, who would not usually be eligible for a free place through the free early education entitlement.

The guidance includes:

  • information about the payment of early years DSG funding during the coronavirus (COVID-19) outbreak
  • details about the early years DSG funding flexibility available to local authorities to support them in securing sufficient childcare for children who need it
  • a description of the cohorts of children for whom local authorities can continue to fund places under the free early education entitlements
  • how the early years DSG funding flexibility works with the Coronavirus Job Retention Scheme
  • an update on powers under the Coronavirus Act 2020 to require early years settings to open or reopen

Using the Coronavirus Job Retention Scheme

The guidance also sets out more information for early years settings on how to calculate the proportion they can claim from the Government to pay for staff on furlough under the Coronavirus Job Retention Scheme.

It states that providers should initially use February 2020 to represent their usual income in calculating the proportion of their salary bill eligible to be covered by the scheme. 

The reason for using February is to provide the closest ‘usual’ month before any coronavirus (COVID-19)-related closures or absences.

Where local authority payments are termly, it will be appropriate for providers to calculate on the basis of the income which could reasonably be attributed to February from their full termly payment – local authorities will need to inform providers of an indicative termly budget share for this purpose if they have not already done so.

Where income and outgoings were artificially affected by half-term, providers should apply average income/costs across the three non-half-term weeks to the whole month.


Purnima Tanuku, chief executive of National Day Nurseries Association (NDNA), said, ‘Many providers who have stayed open during this crisis are facing significant costs in delivering childcare to critical workers and vulnerable children. We have heard of settings losing thousands of pounds a week to provide this emergency childcare. At the same time, those who aren’t open still face costs like rent, mortgages and utilities with Government funding as their only income.

It is vitally important that local authorities work with providers to ensure their sustainability – for the childcare needs now and the future of the sector which is a vital part of our national infrastructure.

This guidance does recognise the challenges nurseries face in meeting fixed costs, which is why we have called on ministers to recognise this in the Coronavirus Job Retention Scheme as well. Childcare providers need support meeting the costs they face over and above paying their staff.

Nurseries and other childcare providers need to know what might happen to their only source of income at this time so we welcome the need for local authorities to consult with providers and give notice of any changes. However, this remains a hugely confusing and complex area for providers to navigate with changes to this funding affecting their access to the furlough scheme.

The Government has also budgeted for spending on Tax Free-Childcare and childcare payments under Universal Credit and Tax Credits which will not be currently used at the pre-virus levels. We are calling on ministers to explore these options as well to support the early years sector both now and for the future. Childcare places won’t be available if nurseries and other providers aren’t sustainable.’

Extract from the guidance: 

When to use the funding flexibility

Where it is necessary to redistribute early years DSG in order to fund sufficient places for vulnerable children and children of critical workers, local authorities should redetermine the amounts allocated to early years settings that have closed, in order to redistribute necessary funding to settings which are open and providing places for these children.’

It adds, ’If a local authority has exhausted other options and deems it necessary to use this ability, they should make sure to engage their early years providers sensibly when doing so. We expect this to be a time-limited response, kept under regular review by the local authority, based on local sufficiency.

'Local authorities should only remove early years DSG funding from early years settings that are closed during the coronavirus (COVID-19) outbreak.

'Local authorities should consider very carefully the impact of removal on the longer-term sustainability of that setting and the local childcare market. They should consider whether any reduction in early years DSG would put at risk the ability of the setting to meet ongoing operational costs even whilst closed, for example, paying rent, and to consider what impact the amount of DSG being removed would have on the number of staff the setting might need to furlough under the Coronavirus Job Retention Scheme.’

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