As speculation regarding the possibility of easing lock-down restrictions over the next few weeks grows, including the potential timetable for the reopening of schools and childcare settings, some of the support measures put in place by Government have begun to kick in.
Sadly, it has turned out that much of the support announced by the government is not available to the childcare sector or has been diluted following subsequent ‘clarification’ by HM Treasury, such as claiming furlough alongside receiving FE funding.
This is highlighted in a sobering report from the Early Years Alliance which featured on the BBC, ITV and other prominent news channels, suggesting that around a quarter of providers believe they will have to close permanently as a result of the Coronavirus emergency and inadequacy of financial aid from the government.
What support is available?
There is no denying that on the face of it these measures constitute a generous and unprecedented package of financial support, something the government is fond of repeating whenever there is criticism. They have stated that the support offered is intended to be ‘temporary, timely and targeted’ and that ‘no organisation should profit from the exceptional financial support available and should therefore only access the support required’. Both statements appear fair and reasonable. However, the devil is in the detail, and issues are found in the government’s complete lack of understanding of how the childcare sector operates and its unique challenges, coupled will the chronic underfunding the sector has endured for far too long.
The guidance states, ‘we expect that all relevant organisations should first consider any potential options to reduce their operating cost and secure commercial loans before seeking to access grant paying schemes like the Coronavirus Job Retention Scheme’. All very well but what if you are not eligible for these loans or do not have the means to repay?
Many settings do not qualify for either the business rates holiday due to being in properties where they are not paying rates anyway. Settings may not be eligible for rates relief due to their property’s rateable value. Settings may be wary of applying for the coronavirus business interruption loan and then finding themselves unable to repay and are concerned about the additional burden this will place on their already struggling business. Others cannot apply as they are unable to demonstrate to lenders that their business will be viable going forward. None of these schemes are available to self-employed Childminders.
There was better news yesterday, with the launch of the Bounce Back Loan Scheme which at first glance appears to be a more favourable option that the business interruption loan and is potentially open to Childminders too. This grant is 100% government guaranteed so less of a risk for lenders, and interest free for the first year. It IS still a loan, however, so will have to be paid back.
Universal credit is available to some self-employed Childminders, but the application process is unwieldy, mistakes in entitlement calculations made frequently, and no use if you have a partner who is earning as both incomes are taken into account.
The Self-employment Income Support Scheme (SEISS) is a bit of an unknown factor and comes far too late. On Monday (4 May) HMRC opened a portal for individuals to check their eligibility. Those successful were then given a date and time mid-May to log in to make their actual claim, with payments due by the beginning of June (possibly sooner). Those being told they are not eligible are given a link to a form to complete requesting that their claim is investigated. HMRC will also be sending out letters/emails inviting the SE to apply for this scheme.
The main issues with this scheme are:
I have saved the ‘best’ till last: the Coronavirus Job Retention Scheme and FE Funding. These have caused so many providers many sleepless nights.
The first hit came when HM Treasury confirmed fears that despite assurances by the DfE that the CJRS and funding could be claimed together there was a caveat and subsequently there would be conditions applied.
The second hit was in the form of new guidance and legislation allowing Local Authorities to redistribute the FE funding in ‘exceptional circumstances’ from closed providers, to open ones, in spite of settings having been advised that funding should be claimed and would be paid as usual even if children were not attending.
The Coronavirus Job Retention Scheme and furloughing staff
Firstly, what actually is furlough? Until coronavirus furlough did not exist is UK employment law. Historically it has been used to refer to periods of leave of absence granted to military personnel and it is a feature of US law as a period of unpaid laid. Its nearest equivalent in UK law is ‘lay-off’ which comes with its own set of rules and may be appropriate for staff who cannot be furloughed. The government have introduced the term furlough as a temporary leave of absence due to the coronavirus pandemic as part of the CJRS, in which employees are paid 80% of their usual salary, up to a maximum of £2500, which is repaid to the employer by the government. These employees are placed on leave, in blocks of 3 weeks at a time, rather than be laid off or made redundant.
I’m a bit late with this, given that furloughing has already taken place, but then, so were Government. They sent out the revised CJRS financial guidance regarding the impact of funding late on a Friday evening, immediately prior to the furlough claims portal due to open on the Monday morning (20 April), when staff had already been furloughed . This left owners and managers faced with a weekend of recalculating entitlements, and the dilemma of continuing with their furlough claim as planned or waiting for the promised childcare specific calculation tool (we are still waiting!). There was also the issue that the new calculations meant some of the staff already furloughed were no longer eligible.
Going back to why the new guidance was a problem… It states that ’where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs’. The reasoning behind this is sound in theory – businesses can’t expect to receive financial support that duplicates support they are already getting as they would then be profiting from the crisis. However, it doesn’t take into account the varied business models found in the childcare sector, or that FE is not just about paying staff salaries, it is about delivering high quality Early Years care and education and all the costs associated with this.
In spite of protestations by the major Childcare sector professional bodies, to both the DfE and HM Treasury, they are holding fast to their story: that the revised guidance was simply a clarification of what should have been obvious from their previous publications and that it was never intended for settings in receipt of funding to be able to take full advantage of the CJRS. The guidance does however allow for limited access to the CJRS, enabling settings to furlough staff who would typically be paid from their private income i.e. fees from parents:
‘Educational settings that are in receipt of some public funding should only furlough employees, and therefore seek support through the Coronavirus Job Retention Scheme, if they meet [all] the following conditions:
It’s pretty hard in a childcare setting to identify staff who never work with a funded child in some capacity, including with documentation relating to a funded child. Settings do not usually separate out their funded income and fee income to pay staff. Income is pooled and allocated to meet the overall needs of the business. The guidance does recognise this to a degree:
‘If it is difficult to distinguish whether staff are funded through free entitlement or private income for the purposes of meeting the first 3 conditions as listed above, then an early years provider can access the CJRS to cover up to the proportion of its pay bill which could be considered to have been paid for from that provider’s private income. Providers should initially use the month of February 2020 to represent their usual income in calculating the proportion of its pay bill eligible to be covered by the scheme’.
So, basically, if your typical income, based on February 2020, is split (for example) 40% funding and 60% fees, you can furlough staff up to the value of 60% of your total staff wages bill. So, if you have 5 staff, including a deputy and manager, whose wages add up to £7000 (3 x £1200, 1 x £1400 DM, 1 x £1550 M) in a typical month, you can furlough staff up to 60% of this; i.e. £4200. You could furlough your 3 staff on £12000 which comes to £3600 and claim back 80% of this from the government, but you could not also furlough the deputy or manager as this would take you over your £4200 maximum. Alternatively, you could furlough 2 staff plus the deputy or manager and still be within your maximum but in any of these combinations you would only ever be able to furlough a maximum of 3 people. How many you furlough will also be determined by how many children are still attending if you are open, in order to maintain ratios and other EYFS requirements. If your setting is closed it is a good idea to still keep some staff working, so there is someone available to maintain admin, reply to emails, keep in touch with families, check the premises etc.
This blog is already twice as long as it should be so I won’t go into all the other considerations and processes to undertake regarding furlough, lay-offs, short-time working and employment law, but I will end on a final point regarding furlough. If a member of staff has been furloughed they cannot do ANY work or volunteering for the setting or any organisation related to it, that either generates an income or provides a service so no, they can’t do a bit of cleaning, read stories on YouTube (unless uploaded beforehand), update learning journals or check in with their key children as ALL of these things are providing a service. This may be tough for the staff who may want to still help and support the setting but it is simply not allowed and if you are audited you could be made to repay the grant if staff are found to have broken the rules. It will be viewed as fraud by HMRC. (They can work or volunteer for other, non-related organisations, if this is permitted or not excluded by their contracts).
On that cautionary note I will end. Congratulations if you made it to this point. I’ve included relevant links to guidance below. I should add that I am not a legal or financial expert, but I have leaned heavily on my HR manager/CiPD qualified husband for confirmation and clarification, especially around furlough.
My name is Rebecca.