Nurseries forced to pay employees the 'Living Wage' to retain funding

Private, voluntary and independent (PVI) settings in Birmingham were told during a series of meetings held by Birmingham City Council last week that from April 2015 if they receive funding to deliver the free places, they will have to follow the Birmingham Business Charter for Social Responsibility, which stipulates that employees must be paid the Living Wage.

Early years settings that fail to pay the Living Wage, set at £7.56 per hour in Birmingham, could risk having their funding stripped away.

According to the council, from April 2015 nurseries that receive funding for two-, three- and four-year-olds will be counted as Birmingham City Council contracted suppliers and therefore required to follow the council’s charter.

The charter states that it is mandatory for employers to ‘ensure that employees are given a fair reward for their labours and help foster a loyal and motivated workforce by paying the Birmingham Living Wage’.

A number of nursery owners have contacted Nursery World appalled at the council’s move, which they say is unaffordable, particularly given the rate of funding for the early education places, and will put a lot of settings out of business.

Early years providers in Birmingham receive £3.54 to deliver the early education places for three and four-year-olds.

One nursery owner with two settings in Birmingham who pays his employees more than the minimum wage, told Nursery World that if he were to pay the Living Wage to all his staff it would cost him an additional £40,000 a year.

Another owner with three nurseries, who is fighting the council’s decision, said it would cost her £160,000 more per year.

However, the council has defended the move, which it says will raise standards across businesses in the city.

A Birmingham City Council spokesperson said,  ‘The proposed changes will put our relationship with PVI providers on a sounder footing as we will be introducing formal contracts between the council and the providers - something that has not been the case in the past.

‘Any organisation entering into a contractual arrangement with the city council will be subject to the Birmingham Business Charter for Social Responsibility, which is designed to raise standards across all aspects of business operations in the city.

‘One requirement of the charter is the payment of the Living Wage to employees, to ensure they receive a fair day's pay for a fair day's work. We recognise that in the broader social care agenda this is an issue, so we will later this year be carrying out consultation on how this will be achieved.’

Neil Leitch, chief executive of the Pre-School Learning Alliance, said,  'This case clearly highlights the impact that chronic underfunding is having on the sector. We of course agree that all early years practitioners should receive a fair level of pay and have long lobbied on this point. However, forcing providers to pay the Living Wage as a condition of free entitlement funding, without any increase in funding levels is naïve, unrealistic and unsustainable.
 
'Such an approach would also appear to directly contradict the Department for Education’s assertion that local authorities cannot withhold funding from good or outstanding providers for any reasons other than safety concerns. We understand that they are looking into this particular case and so await with interest the outcome of their investigation.’