From April 2016, employers will be required by law to pay their workers aged 25 and above the National Living Wage of £7.20 per hour. According to the report by the specialist property adviser, Is the National Living Wage Creating National Living Rage? – The perspective from UK Businesses, the childcare sector’s primary concerns are that increased wage costs will be ‘reluctantly, but inevitably, passed on to parents through fee increases’.
The report reveals that discussions with prominent UK operators indicate that nursery fees are potentially set to increase by between four to six percent.
However the report cites evidence gained by the National Day Nurseries Association (NDNA) that suggests that fee increases may need to be closer to ten percent in order to meet the costs of the NLW.
Courteney Donaldson, head of Childcare at Christie + Co, said, ‘The cost of childcare generates recurrent debate, and while many operators are eager to better remunerate their staff, the shortfall in funding provided by local authorities is one of the major reasons why salaries paid in the nursery sector have remained broadly lower than for other care and teaching professions.
'Levels of salary expenditure across nursery businesses vary significantly, broadly ranging from 55 per cent to 70 per cent of revenues, dependent upon the location of the business, its operating capacity and occupancy, as well as the hourly funding rates awarded by each local authority – which in many cases are not sufficient.’
There has been much discussion about when operators intend to increase childcare fees. Some have already applied substantial increases in September, in keeping with their annual fee increase terms, while others are currently notifying parents of proposed increases in early 2016.
Ms Donaldson said, ‘While we are seeing some businesses proactively implementing cost-mitigation strategies, such as comprehensive spending reviews of their own businesses, other operators appear less prepared and thus potentially at risk of impacting profit margins.’