With the introduction of a National Living Wage fast approaching, the Department for Education’s review of childcare delivery costs(1) suggests settings should increase staffing efficiency and flexibility to run their businesses more effectively. What does this mean in practice?
In its recent analysis of childcare delivery costs, the DfE said: ‘Our analysis shows that a “typical” provider in a private setting could save around 15 per cent of its unit delivery costs by staffing within the statutory requirements. Similarly, there are potential savings by changing the mix of staff used, within the limits of regulation. Potentially big savings are available using more variable staffing models to recognise peaks and troughs in occupancy.’
Put simply, the DfE review suggests childcare providers can deliver services at lower cost by adhering to statutory minimum ratios, changing the qualification mix of staff and using ‘variable staffing models’ which may include, for example, part-time and flexible employment contracts. In this article we focus on the latter of these propositions: the scope to reduce costs by utilising ‘variable staffing models’.
Ceeda forecasts suggest that average funding gaps of 10 per cent for funded three- and four-year- olds and 15 per cent for funded two-year-olds are likely to remain AFTER the introduction of new funding rates in April 2017(2).
Is it feasible and appropriate to increase flexibility in staffing models in order to bridge these gaps?
Research commissioned by the Pre-school Learning Alliance and delivered by Ceeda sheds light on existing employment models.
Almost one in 10 (nine per cent) of the 1,388 staff tracked in Ceeda’s original analysis of childcare delivery costs(3) was employed on a bank contract, called upon as and when required to meet peaks and troughs in childcare demand. Where this staffing model was in place, bank staff comprised anywhere between 5 per cent and 43 per cent of a setting’s workforce. A further three per cent of all staff were temporary agency workers, utilised to bridge internal staffing gaps.
Term-time and other part-year contacts are also a common means of managing peaks and troughs in demand; one quarter of all staff were employed on contracts of between 38 and 39 weeks. This flexible staffing model is not used exclusively by term-time settings; over one in 10 staff (15 per cent) in year round-settings worked for less than 50 weeks of the year.
Flexibility is also offered in the form of part-time working hours; more common in the early years sector than the general labour market. The Office for National Statistics reports that 68 per cent of all employee jobs in Great Britain were full time in 2014(4); in contrast only 42 per cent of early years staff worked 35 hours or more per week.
This analysis would therefore suggest that early years employers are already utilising a wide range of ‘variable staffing models’ to manage peaks and troughs in occupancy.
Flexible employment contracts have a place in the workforce mix and are a positive and active choice for some parts of the labour force. They have also, however, long been associated with lower rates of pay, reduced access to training opportunities, barriers to career progression and high labour turnover(5).
Strong relationships between practitioners, children and their families, stability and continuity of care, higher qualification levels, engagement in CPD and consistent pedagogical practices are all key characteristics of high-quality early education and childcare which are negatively impacted by over-casualisation of the workforce.
Funding levels which are based on an assumption that settings can further increase use of ‘variable staffing models’ to manage rising wage costs are at high risk of reducing the quality of early education and childcare and exacerbating entrenched staff recruitment and retention problems in the sector.
Adjusting the workforce mix in a theoretical delivery cost model simplifies the complexity of labour markets and operational issues on the ground in early years settings. Failure to fully evaluate this reality can lead to converse outcomes.
The recruitment and retention problems which go hand-in-hand with over-casualised labour markets bring about their own financial impacts in the form of rising recruitment and training costs and ‘fire-fighting’ staffing solutions. A common example is the use of agency staff to bridge gaps caused by hard to fill vacancies; this strategy increases staff costs due to agency profit margin, unrecoverable VAT input tax and the necessary investment in training which is then lost when an agency placement ends.
In December last year Ceeda raised a number of questions about the assumptions underpinning the DfE model of childcare delivery costs; these included queries about the extent to which the National Living Wage, employee on-costs and management and administration costs had been accurately reflected in the model. No response has been received from the Department at the time of writing.
The Pre-school Learning Alliance has commissioned further independent research to explore the everyday context of staffing decisions in early years settings and the wider structural issues impacting on these choices. In particular, the research will evaluate the scope identified by the DfE to lower costs by staffing within statutory minimum ratios - reducing the ‘slack’ which settings say they build into staffing models to respond to the individual needs of children and the operational requirements of their business.
Neil Leitch, Chief Executive at the Pre-school Learning Alliance says: ‘We are concerned that many of the ‘cost-saving’ measures proposed by the DfE in the ‘Review of childcare costs’ report are not feasible in practice.
‘The suggestion that providers can save money by relying increasingly on temporary and agency staff is yet another example of government’s prioritisation of cost-cutting over quality. Strong, trusting relationships between practitioners and both children and parents, established over time, are vital to the delivery of positive early learning experiences, both in the setting and at home.
‘As such, it’s deeply concerning that the government is encouraging providers to move away from such an approach in order to save money on a scheme that it chose to promise parents with no consultation with the sector.
‘As the ratios debate in 2013 demonstrated, despite the severe financial challenges facing providers, they continue to view quality of provision as an utmost priority. The government would do well to follow their example.
‘What’s more, many of the DfE’s proposals simply would not work in practice. The cost of childcare report fails to recognise that it is almost impossible to deliver childcare in neat ratio-sized components. In order to deliver exactly to statutory ratio, a setting would always have to have children in attendance in each age range in an exact multiple of the relevant ratio. This would require that as children would start each session in multiples of ratio and at the end of each session, an exact multiple of ratio would have to leave. As the children arrive and leave in exact multiples of ratio, so too the staff would also have to arrive and leave.
‘This is unrealistic - the only way such an approach would be possible is if a setting were to be totally inflexible in the way it delivers childcare.’
1. DfE (2015) Review of childcare costs: the analytical report. Reference DFE-00295-2015
2. Written evidence submitted by the Pre-school Learning Alliance (CB 08) http://www.publications.parliament.uk/pa/cm201516/cmpublic/childcare/memo/cb08.htm
3. Ceeda (2014) Counting the Cost: An analysis of delivery costs for funded early education and childcare
4. ONS Business Register and Employment Survey. Employee Jobs (2014)
5. Devins et al (2014) Improving progression in low-paid, low-skilled retail, catering and care jobs. Joseph Rowntree Foundation.