It follows campaigning by nursery owners in Birmingham for fairer funding of early education places to make paying the living wage more affordable.
In the spring, Birmingham City Council told private, voluntary and independent (PVI) settings that from September 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, set at £7.56 per hour.
A number of providers have argued that at the current rate of funding, an average of £3.82 for three- and four-year-olds for PVI settings, paying employees the living wage would be unaffordable and put them out of business.
However, they clam that if their funding was increased to equal that of maintained settings - £9.94 for nursery schools and £5.75 for schools - they would be able to meet the living wage requirement.
In light of this, the council has commissioned KPMG to carry out a feasibility study to determine whether the rates of funding need to be addressed.
KPMG will first undertake a pilot of the cost analysis work with 15 early years settings, including childminders, ahead of the full review, of which findings are expected early next year.
Last week, members of the campaign group, ‘PVI Support’, met with KPMG to discuss their concerns.
Sarah Presswood, owner of George Perkins Day Nursery in Birmingham and a member of the campaign group, said, ‘The meeting went well, and everyone who attended appeared pleased with the way that KPMG were listening to their concerns.
‘I think they (KPMG) see this piece of work as something that other local authorities will want to replicate.’
However, Tricia Wellings, chief executive of the Bright Kids Group, which operates one of three nurseries in Birmingham, has questioned how purposeful the KPMG review will be following the publication of the Pre-School Learning Alliance’s figures into the real costs of funded places to nurseries.
She also took issue with the cost of the KPMG review, which is thought to be costing Birmingham City Council £273,000.
The local authority failed to confirm to Nursery World the actual cost of the review.
Ms Wellings said, ‘My current understanding is that the purpose of the KPMG study will be to review the funding provided for the PVI sector and to see what may be required for the implementation of the Living Wage. As the Pre-School Learning Alliance research shows, providers throughout the sector are massively underfunded to deliver the free places.
‘An increase of 21 per cent on our staffing costs, based on the living wage at £7.85, would be even more catastrophic unless a funding increase of over £2 per hour is proposed.’
A spokesperson for Birmingham City Council said, ‘The city council remains committed to working with the nursery sector in our shared ambition to find a solution, which not only maintains the high-quality nursery provision that children deserve, but one that provides a living wage for those who care for them.
‘It remains our intention that we do want this review to take place, and that we do not intend to implement the requirement for early years providers to sign contracts or to pay the living wage until the outcomes of the KPMG work are known and shared with the sector.’