Money Matters

Issues around money bring out the best and worst in people.
Over the past few weeks, I have encountered numerous acts of altruism and generosity: people with very little, giving what little they have; people with £millions giving millions. I have also heard many stories of selfishness and pain: people lacking sympathy and consideration for others and putting themselves first at all cost. Most of us live somewhere in the middle of this though.
There is no doubt that the national emergency ensuing as a result of COVID-19 is causing enormous financial hardship to many and putting huge economic pressure on businesses both large and small. The various forums I belong to are strewn with stories of childminders, nurseries and preschools struggling to survive, with questions regarding how to deal with issues such as parents paying fees or retainers, furloughing staff and claiming benefits.
I am not an accountant, financial or legal expert. I’m not a business manager, although in a time years ago I was a retail manager with a team of staff. I am a childminder, as well as being a trainer, though and I am also in the position of supporting other childminders through my training and mentoring. I have taken time to consult with fellow trainers and to read the various government guidance documents. I’ve even attempted to decipher the relevant sections of the new Coronavirus Act 2020 which received royal assent and became law on 25th March.
I want to offer my own take on the money situation and hopefully provide a useful perspective. These responses are aimed specifically at registered Childminders, but the principles will apply to group settings as well.
If you have further questions that you would like me to attempt, do email me: [email protected]
 
What should I be charging parents whilst I am closed and cannot have their children?
This is the biggie! There is no clear answer I am afraid.
Your first port of call should be your contract with the parent. What does this say about charging during closure? Have you covered this scenario in it? I have seen it said that all contracts are null as a result of the pandemic, but I am not convinced this is true. This is something you would need to seek legal advice on if you are concerned.
However, in my opinion, you cannot insist a parent pays fees whilst you are closed and not offering a service, unless you have this provision already in your contract, remembering that you are not closed due to holiday and may not be due to illness, so it is unlikely you would have the relevant clause in there. You can give notice to terminate the existing contract (assuming you believe it to still be valid) and offer an amended version with this clause, but parents could just say no and go elsewhere.
There are a number of options for charging: including requesting full fees; partial fees; or no fees during closure. All present problems of different kinds. For me it is about balancing what is fair and reasonable against what is necessary and appropriate. You will need to examine your own situation and that of your families to decide.
Consider:

• Are you still open for critical workers and vulnerable children so receiving some income?
• Are you in receipt of free entitlement funding?
• Will you be eligible for the Self Employment Income Support Grant?
• Do you receive, or might now be eligible for any benefits?
• Do you have any other sources of household income, including from a partner/spouse?
• Can you manage financially to not charge families whilst you are closed to their children?
• Do the families receive any support towards their childcare that will continue whilst you are closed?
• Are the parents still working/being paid and if so, is this their full wage or partial? Have they been furloughed?
• Have you read the Government guidance?
  • ‘’Can childcare settings continue to charge parents during coronavirus-related closures?’’
    • ‘’We are working hard to mitigate the impacts of coronavirus (COVID-19) on all parts of our society, including individuals and businesses. We urge all childcare settings to be reasonable and balanced in their dealings with parents, given the great uncertainty they will also be facing’’

My (probably unpopular) advice would be:

• If you can afford to not charge, don’t charge. After all, you are not delivering the service they contracted you to provide
• Failing that, ask parents to consider making a voluntary contribution towards their fees, especially if they are still on full pay or receiving Government or employer benefits specifically to pay towards childcare. You may need to explain why you aren’t ‘rolling in it’ as a result of the Government self-employment ‘rescue package’!
• Some people are asking parents to pay a % of their normal fees, e.g. 20%, on the understanding that when their child returns to the setting, they will then receive an equivalent reduction in their fees for the same period. This is something to consider, but there are implications if you decide not to return to childminding or the parent gives notice.
• As a last resort you can try to impose payments for some, or all, of the fees due. You may (and may be right) feel that you are entitled to these, BUT you stand a very good chance of alienating these parents, and you will likely feel considerable resentment towards them, neither of which make for a positive working relationship going forward.
• Remember that goodwill goes a VERY long way and that asking nicely often works better than telling.

I understand that this is a difficult and scary time and that, for many, the possibility of having no money to pay bills or put food on the table is very real. However, we need to remember that the families may be facing hardship similar or worse than our own. We also can’t make assumptions about their financial circumstances – things may not be as they seem.
 
How can I survive financially if I’m not charging parents?
The Government have started to put support plans in place (see below) and there are other ways we can save money.

• Contact your mortgage company and request a deferral. Most are offering 3 months payment holidays or temporary interest free options. You’ll still end up paying in the long run, but not now, which is the important factor.
• Contact utility companies and your council tax department and ask what support arrangements they are offering. Some are deferring payments and some councils are offering 2 free months of council tax now instead of January
• Look at your direct debits. Which are for essentials and which are for luxuries? What can you cancel? If you do cancel DDs don’t forget to notify the companies concerned and comply with any cancellation policies. You don’t want to be faced with penalty fees for breach of contract.
• Could you do another job temporarily? For example: supermarkets are recruiting for pickers and delivery drivers and some for cashiers too; delivery companies are looking for drivers; care agencies need carers to provide support for patients coming out of hospital and other vulnerable groups; some nurseries may need bank staff to cover for illness and self-isolation; some areas are creating childcare hubs and need staff – contact your local Family Information service to see what’s happening in your area.
• Could you stay open to offer a childminding service for other critical worker children? This does not necessarily need to be in your home. You could apply to Ofsted to use the 50:50 rule and provide care on non-domestic premises.
• Chances are you will be spending less anyway as there is nowhere open. Avoid the temptation to buy takeaways instead of cooking and unsubscribe from all those online store emails so you aren’t tempted by all the discount offer emails flooding into your inbox.

 
What financial help can I get from the Government?
I have seen a lot of people complaining about the Government support package for the self-employed (see below for details of the offer). My first thought was, what an ungrateful lot we are – before this announcement we were being offered nothing and were entitled to very little beyond possibly Universal Credit. Surely, something is better than nothing? It is actually a very generous package considering, though I accept there ARE limitations and it is obviously disappointing for those in their first year of trading. I think that this had to be created in a very short space of time, hence the flaws and lack of full information.
I have tried to respond to some of the questions and comments I have seen:

• Why is it 80% of net profit rather than gross income?
  • Because your net profit IS effectively your living income. It’s what’s left over after expenses for you to live on day to day. It is the equivalent of net salary for an employed person. Government have given both employed & self employed 80% of their usual ‘wages’
• My average profits are low over the 3 years because I was just starting up/my expenses were high /my income was low due to illness or other factors etc
  • This is unfortunate. The government had to find a reasonably fair of working out the 80% and decided to use average income from the tax years 2016-2019 to calculate grants. If you earnt less than usual in this period, you will be disadvantaged. If you don’t have a full 3 years your average will be based on the number of years you DO have
• How can I live on just 80% of my net profit?
  • See suggestions above and remember that in theory this is only 20% less than you are currently living off. It won’t be easy and is not ideal but still better than nothing.
• I didn’t start trading until after April 2019 so I’m not eligible
  • Sadly that is correct but many organisations, not just in the EY sector are campaigning for additional support for those not eligible
• Why won’t we get anything until June?
  • It takes time to set up new systems and priority was given to the employed who make up 85% of the workforce. You should be contacted by HMRC well before this to submit your claim. Look at the suggestions above in the meantime, to save money. Remember that if you were due to pay tax on account in July this payment has been deferred until January so if you have been saving for this you could ‘borrow’ the money from your savings and pay it back from your grant in June
• Why will I have to pay tax & NI on this?
  • The grant is counted as taxable income so will be entered on your tax return as such. However, you may find that your overall income for the tax year is reduced as a result of the current emergency and so you will pay less tax/NI overall
• Will any income I receive during March–June be deducted from the grant?
  • This has been implied by a website that was widely shared on Facebook. The official Government guidance makes no reference to deductions being made, but it does state you must have lost income due to the COVID-19 situation to be eligible. We will no more when government release full application guidance. Any additional income will obviously need to be included on your tax return however, along with the grant, so will impact on the amount of tax/NI due

 
Government support
Below are the links to the official documents. Please read them carefully and sign up on the .Gov website for updates, which are frequent and usually hit inboxes late in the evening. This is a lot safer than asking questions on Facebook, where you are guaranteed to get multiple, conflicting responses. I have included the key points from these documents below the relevant link.

• There are still many unknowns surrounding the Job Retention Scheme (for employers) and Self-employment Income Support Scheme as the final details for how these will be managed are yet to be released. Speculation is rife, however. The main professional bodies for the EY sector, including PACEY and the Early years Alliance, are seeking clarification from the Government on a number of points, including receipt of FE/EFE whilst furloughing employees, how the FE/EFE will be administered by LAs for the summer term and if childminders can access the Business Interruption Loan. They are also lobbying for financial support for those not eligible for the self-employed scheme because they were not trading before 5 April 2019.
• The Job Retention Scheme portal is anticipated to open mid-April in time for April payrolls
• HMRC will contact all individuals potentially eligible for the Self-employed Income Support Scheme to make their claims. Payments are expected as a lump sum (March-June) in June.

https://www.gov.uk/government/publications/coronavirus-covid-19-early-years-and-childcare-closures/coronavirus-covid-19-early-years-and-childcare-closures
What additional business support is available to childcare settings during this period of disruption?

• The government has announced a package of support for workers and businesses which will benefit childcare settings.

• The Coronavirus Job Retention Scheme means that for employees who are not working but kept on payroll, the government will contribute 80% of each worker’s wages of up to £2,500, backdated to 1 March 2020. Settings can access this scheme while continuing to be paid the early entitlements funding via local authorities.
• The Self-employment Income Support Scheme for those who are self-employed or members of a partnership and have lost income due to coronavirus (COVID-19). The scheme allows individuals to claim a taxable grant worth 80% of trading profits up to a maximum of £2,500 per month for 3 months. HMRC will contact individuals who are eligible and invite them to apply online.
• For the self-employed (including childminders), the minimum income floor will also be temporarily relaxed, meaning Universal Credit* can be accessed at a rate to match statutory sick pay (SSP).
• Working tax credit has been increased by £1,000 a year.
• The government has also announced a £20 per week increase to the Universal Credit standard allowance and Working Tax Credit basic element and an increase in the Local Housing Allowance rates for Universal Credit and Housing Benefit claimants so that it covers the cheapest third of local rents.
• We will not be clawing back early years entitlements funding from local authorities during closures. This protects a significant proportion of early years settings’ income. The government has also introduced a range of measures, as outlined above, to support businesses and employees during this period. We will be keeping what further support businesses may require under close review.
• Settings may charge for consumables in line with national entitlements guidance. As per existing guidance, they should consider the impact of charges on disadvantaged families.
• On 17 March 2020, the Chancellor confirmed the government would continue to pay for free early years entitlement places for 2, 3 and 4 year olds even if settings were closed or children were not able to attend.
  • We expect local authorities should follow this position and continue early entitlements funding for all childminders, schools and nurseries.

*Universal Credit is open for applications now
https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

• You can apply if you’re a self-employed individual or a member of a partnership and you:
• have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
• traded in the tax year 2019-20
• are trading when you apply, or would be except for COVID-19
• intend to continue to trade in the tax year 2020-21
• have lost trading/partnership trading profits due to COVID-19
• Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment.

How much you’ll get

• You’ll get a taxable grant which will be 80% of the average profits from the tax years (where applicable):
  • 2016 to 2017
  • 2017 to 2018
  • 2018 to 2019
• To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount.
• It will be up to a maximum of £2,500 per month for 3 months.
• We’ll pay the grant directly into your bank account, in one instalment.

For Childminders who employ assistants:
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
Furlough = Placing employees on an extended leave rather than making them redundant

• Employers can claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
• Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:
  • full-time employees
  • part-time employees
  • employees on agency contracts
  • employees on flexible or zero-hour contracts
• While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
• If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
• Employers should discuss furlough with their staff and make any changes to the employment contract by agreement.
  • When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
• Employees that have been furloughed have the same rights as they did previously.
  • That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
• To be eligible, employers should write to their employee confirming that they have been furloughed and keep a record of this communication.
• When on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue.
• If your employee does volunteer work or training:
• A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.
• However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
• Employees on sick leave or self-isolating should get Statutory Sick Pay but can be furloughed after this.
• Employees who are shielding in line with public health guidance can be placed on furlough.
• If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
• You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.