UPDATED 5/4/2020 Do I have to pay my childcare provider if they are closed due to COVID-19?

With the announcement yesterday evening (19th March 2020) that schools and early years childcare providers must close their doors to all but essential key workers’ children on Friday, many parents, facing the prospect of no childcare and possibly no income themselves, are now wondering where this leaves them with regards to having to pay childcare fees.

As time has gone on and support from government has been announced, some of the issues have become clearer while other questions have been raised. In light of this I updated some sections of this article on the 5/4/2020 to reflect the ongoing situation.

I’m not a contract specialist or a lawyer so please don’t take anything written here as ‘formal’ advice. However, from experience, I can point to a few areas to consider.

When your child started at the childcare provider you probably signed some kind of contract specifying what happens if the setting is closed due to emergencies, holiday periods or other situations. How detailed it is and whether fees are still due, will vary from setting to setting. So, my first bit of advice would be to check the terms and conditions that you signed up to.

I know some parents have been told by their childcare provider that fees will still be due and are now considering removing their child from the setting. Two things to bear in mind:

  • The terms and conditions probably specify a notice period if you no longer want your childcare place. During this notice period fees are probably payable, and you may well have to pay these fees even if the setting has closed. Although, with the government giving no end-date for compulsory closures, the notice period could possibly be shorter than any compulsory shut down.

  • When the childcare setting (hopefully) reopens, your child won’t be guaranteed their childcare place and may have to join a waiting list.

But what about the ethical viewpoint?

This will depend on individual family circumstances. Some people will be in the fortunate position of still having work they can juggle from home and thus will still be getting an income (although working and trying to home educate or care for children is really tough). Others have already been asked to take unpaid leave and so will already be struggling with their own finances. Some may have been furloughed and will be on a reduced income. And others, sadly, will already have lost their income. What you can do and decide to do will be a matter of personal choice. For example, I have already committed to paying my own childminder but, as a freelance worker myself, I will need to monitor how long I can keep that up.

Most childcare providers are run by a person just like you. They may have spent years building up their business and now face the very real prospect of losing their business and their own income. Nursery owners have to consider the knock-on impact for their staff (more on this below). For many nurseries, if you don’t pay your fees (or at least some of them) they can’t pay their staff. If they have to make staff redundant this not only affects the wider economy but also means that, when settings are able to re-open, there won’t be staff employed to be able to care for your children. It will take time to get people re-employed and will impact how quickly childcare settings are able to start caring for your children again.

But surely the setting has insurance to cover situations like this?

Some settings may well be able to claim on Business Interruption Insurance and it is certainly worth asking the question, particularly if your setting is part of one of the larger chains. But the reality is that many settings are unlikely to have insurance to cover something as unprecedented as the COVID-19 pandemic.

But hang on, didn’t the government announce support for businesses during this time?

Yes, a range of measures have been announced, such as government backed loans and a business rate holiday and confirmation that providers would still receive payments for children on two-three-or four-year-old funding. However, less than 50% of children who make use of early years settings are in receipt of early education funding and furthermore it is well known that the hourly rates paid to providers do not cover the full cost of providing care.

The sector has been lobbying government for a number of years for a business rate exemption to help keep the sector viable in normal times. While this latest announcement is welcome for many providers it still won’t go far enough in this difficult time.

As time has progressed and more details have been announced about the government backed loans, it has become clear that many small and medium sized businesses are struggling to access them. The banks simply aren’t lending to them or the time lag to access a loan means that cash flow might dry up before the setting can get its hands on the cash. Furthermore, for some settings, the prospect of taking on more debt in these uncertain times is just not something they feel they can do.

While the measures will help some nurseries, others will simply not find them enough. The Early Years sector was already struggling before the Covid-19 outbreak and, for many, taking a loan that will have to be paid back, will not be an option.

It is a sad fact that the government’s announcement to close childcare settings will mean that some providers will no longer be around when life returns to normal. Furthermore, a childminder who is self-employed, will have no access to most of these packages of support (more below).

But can’t settings furlough their staff, that must have made a difference?

Yes. That announcement has been a big help to the sector and has helped alleviate at least some of the pressure on nurseries and afterschool clubs. However, there are a few points still to consider.

  • The government is only covering up to 80% of staff salaries so owners have to decide if they can/or want to top up this amount, so staff still receive their full pay.

  • Staff can’t do ANY work once furloughed. So, a setting that is remaining open just for a few key workers’ children will still have some staff they need to pay, and the number of children attending may not be covering overheads. Buildings still need heating, the cook still needs paying whether making lunch for 5 children or 50. Furthermore, to meet minimum Ofsted requirements, settings still need to have appropriate numbers of trained first aid staff, a trained safeguarding lead, and a special education coordinator. They also need a manager and a deputy who can take over in the event that the manager is unwell, and staff lunch breaks will still need covering. So while settings can run on a ‘skeleton staff’ it might need quite a large skeleton to ensure all those roles are covered, and the numbers of children attending may simply not be covering the costs.

  • Finally, the owner is unlikely to be able to furlough themselves. As previously stated, someone who is furloughed is not able to do any work. The owner is unlikely to be able to do simply nothing even if their setting is closed. There will be queries to answer from parents, banks to be dealt with, employees to keep in touch with, government announcements to understand, and all the paperwork that will go with furloughing staff or applying for grants or loans.

What about my childminder?

The initial wave of support announced won’t have covered most childminders, who tend to be self-employed, rather than small businesses. The later announcements around support for the self-employed on the 26th of March 2020 will have offered some relief for childminders. But, as with most things around Covid-19 the support offered is not without its limitations:

  • Firstly, childminders have to wait and see if they will be eligible for support under the scheme. The government has said they will write to those who will qualify once the scheme is up and running but hasn’t indicated when this will be.

  • Secondly, the support will be backdated to cover the 3 months to May but won’t be paid until June. In the meantime, the self-employed can apply for universal credit if they are eligible, but there is a five-week waiting period built into the system, and the childminder will still have bills to pay and food to buy.

  • Thirdly, if your childminder only started operating in the last 12 months, they won’t qualify for this support as they won’t meet the requirement to have completed at least one self-assessment tax return.

  • Finally, it now appears that only those who gained the majority of their income from their self-employed work who can claim. If your childminder has an employed job alongside their childminding, they might not get anything at all from the scheme, even if their childminding work makes up 49% of their income.

So, what should I do?

Whether you chose to pay your childcare provider during this difficult time is something only you can decide. If your setting is asking you to pay 100% of your normal fees, given the support this is now in place, I think you could ask them to justify their demand - beyond just pointing to their terms and conditions. It is likely that some of their costs will reduce (for example, utility and food bills and business rates) and the option to furlough staff will have helped. But expenses like rent will still be payable and many owners will still need their own income. And, in the short term, cash flow could be a very real issue; without some cash coming in some settings may well go bankrupt and it will be much harder to open a setting again once this has happened.

I have heard of a range of measures being agreed between settings and families. Some settings are asking for 50% of their fees to help with cash flow, with most (or some of it) to be applied as a credit on the account once the setting is open again. Other families are agreeing to pay 20% to guarantee their place. In some cases, settings are not asking for any fees to be paid.

The available options may well evolve as the shutdown continues. Whatever you decide, make sure you have written proof of any agreement, rather than just your recollection of a conversation.

But please tread carefully when talking to your childcare provider! Nursery owners are facing the very real prospect of losing a well-loved business. Nursery managers will simply be passing on messages from above. Childminders will be fearful of losing their income.

You may find that your setting is unable to provide you with a clear picture. Everyone is trying to understand the implications of this unprecedented situation. It will take time for settings to adapt but they will do their best to keep you updated.

If you have any further thoughts or questions, please feel free to share them.

Further support for parents can be found on the dedicated parents’ pages of Cambridge Early Years or you can follow us on our newly created Facebook page.

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