Paying living wage could bankrupt nurseries or hit parents with huge fee rises

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Nurseries and early years organisations have been responding to proposals by Ed Miliband that the 'the living wage' would be 'the norm' under a Labour Government.

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Unlike the minimum wage, the living wage is not legally binding, but is based on the cost of living.

The Living Wage Foundation, which sets the rate each year, last week raised it by 25p an hour to £7.45 outside London and £8.55 in the capital.

An analysis of staff salaries by Kids Allowed, which runs four nurseries in the Manchester area, reveals that 48 per cent of staff are paid more than £7.45 an hour and 'most considerably more'; 41 per cent are paid above the minimum wage, and 11 per cent of staff who are in training are on the minimum wage. Once trainees have completed their Level 2 training at the group's newly opening training academy they move up the pay scales and no qualified staff are on the minimum wage.

Chief executive Jennie Johnson said, 'Out of interest I ran the "numbers" putting everyone on at least the living wage rate and it broke! The business would go bankrupt overnight, or the fees would be so ridiculous that we wouldn't be able to find enough customers that could pay.'

She added, 'I don't think there is anyone that would say people in childcare are paid enough for the job they do and the responsibility they take. However, if we asked our parents if they would pay higher fees to support this, the answer would rightly be "no". Parents are already paying the equivalent of a mortgage (sometimes more) to send their children to nursery.'

The average wage for non-supervisory staff in early years settings is £6.60 an hour, just above the minimum wage of £6.19 an hour.

Claire Schofield, director of membership, policy and communications at the National Day Nurseries Association, which last week gave evidence to the Low Pay Commission, said, 'We'd like to be well beyond the debate on the minimum wage and the living wage and staff should be well-rewarded.'

Funding from sources such as childcare vouchers and tax credits should be streamlined with direct funding to providers, 'to make it simpler for parents' and make it possible for nurseries to pay all staff at least a living wage, she said.

She added that if a government were to introduce a living wage there would be less money available for tax credits, but that unless funding issues were resolved, nurseries would have to push fees up to pay salaries, which would mean that parents would still need extra financial support to pay for childcare.

Zoe Raven, managing director of Acorn Childcare, a group of nine nurseries, told Nursery World, 'I would love to adopt the living wage as a baseline salary for our staff, but the impact would be that our fees would become unaffordable for our parents. As a social enterprise, we try very hard to be ethical in all our practices and we don't want to be restricted to locating nurseries in affluent areas, but that means the level of fees that we can charge affects the salaries that we can afford to pay. The low levels of nursery education grant funding add to the problem.'

She added, 'It is frustrating that we have several part-time staff who are dependent on tax credits to the extent that they are worse off if they increase their working hours. If we were able to pay a better hourly rate, this would offer a solution - but we could only do that if we were to have our other overheads reduced and if we received a realistic hourly rate for the nursery education grant.'

Neil Leitch, chief executive of the Pre-school Learning Alliance, said, 'While it would make more sense to align the minimum wage with the living wage, we are keenly aware that this would put greater pressure on the sector as parents have to bear the brunt of any rise in the cost of childcare.'

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