Fees and funding Why do we need to increase fees? As we head into the Autumn term, whilst wondering what happened to the summer, we’re faced with the annual task of reviewing our fee rates, and we know for certain that they will need to rise, probably more than usual. Around 80% of our expenditure last year was on salaries, and the recruitment crisis across the childcare sector led to us carrying out a mid-year salary review, and an increase in several of the bands of our pay scale. Early years practitioners don’t enter the profession because of the monetary rewards, but of those that leave each year, many are drawn to other sectors, and work which is less stressful and better paid. The current shortage of suitable candidates for positions is worse than I have seen in over 30 years, particularly for qualified practitioners. It is widely acknowledged that salaries need to improve in the sector, so in many ways I am perversely delighted that there are clear signs of salary increases across the sector, which means that we too, need to further increase ours, in order to attract and retain the very best. I’m sure we’re not the only group of nurseries that also aspire to be a Living Wage employer, and even if there wasn’t an external pressure on salaries, I would still hope that we can work towards paying better salaries for our highly skilled and professional teams of practitioners. The only we can do this at the moment is by increasing our fees. Affordability and the problem with funding But where does that leave parents and carers whose salaries have not increased, and who are also facing price rises in food and other outgoings? UK parents already pay disproportionately more of their income in childcare fees compared to European countries, and government funding only kicks in for most children after their third birthday. Research has also clearly shown that the current funding rates are insufficient to cover the cost of delivery of those places, which means that providers have to charge higher fees for the non-funded hours, in order to subsidise the funded places. The option of charging optional extras goes against all the principles of inclusion, potentially leading to two-tier levels of quality within a nursery, so that is not an avenue we’d ever want to explore. We are very fortunate at Acorn that we don’t have any shareholders or investors, so we don’t have to factor in any dividends to be paid out, but we do have to be financially sustainable, and we therefore always have a difficult balancing act between our desire to increase salaries and keeping our fees affordable. The Acorn cross-subsidy model One way in which we balance the costs of high quality provision with affordable fees, is our cross-subsidy model. Each of our nurseries needs to be able to cover the costs of their staff team, and their direct overheads, but the allocation of our centralised costs (for our central support office, IT infrastructure, website etc) is weighted towards sites and services most able to afford it, and this enables us to sustain nurseries in areas of deprivation, or when nurseries are potentially too small to be economically viable on their own. Our fees therefore vary significantly according to the location of each nursery, but with those charging less not having any reduction in salary budgets or investment in resources. Within each nursery there is also an element of cross-subsidy between sessions. Hourly rates in the afternoons are usually lower than the more popular mornings, and there are discounts for full days compared to separate morning and afternoon sessions. Those children attending only the funded sessions enjoy a full nursery experience, which may include meals, snacks, forest school sessions and the like, and we do our best to offer session times which suit the needs of individual families, although we obviously have to be efficient with our staffing, and also ensure that we do not have any overlaps between part-time sessions if that would compromise staff ratios. Transparency As a charitable social enterprise, we are also proudly transparent in our fees and finances. Our salary bands are published on our website, and the fee rates for each nursery are available in each nursery’s brochure on the website. We do NOT charge for bank holidays, or any of our training days, or our Christmas closure, and we give families the choice of whether to pay an annualised fee to keep monthly payments the same, or to pay according to their booking pattern for each month, which can suit anyone concerned that some of their days fall disproportionately on closure days – although that’s also why we spread our training days throughout the week. We don’t charge a registration fee, just a deposit which is deducted from the first month’s invoice. Like all other nurseries, we do charge for absences due to children’s holidays or illnesses (with a few exceptions for serious illnesses or difficult circumstances) and we do insist on payment in advance. But we also work with families to ensure that they are accessing the most cost-effective way to pay for their childcare fees – the take-up of tax-free childcare is still not as high as it could be, and there is additional help for low-income families through universal credit, tax credits and funded hours for two-year olds. For those who are wondering how we’ll manage the additional bank holiday next year, this will add an extra day to our non-chargeable days, which means that our usual annualising calculation of charging for 49 weeks over 12 months (to exclude the 8 bank holidays, 4 training days and 3 additional days at Christmas = 15 days = 3 weeks) means that we’ll instead have to charge for 48.8 weeks over 12 months! We hope to publish our new fee rates by the end of October, and at the moment are working out how much our costs will increase, how much we need to increase salaries, and then what the impact of different fee increases would be for each nursery. We always do our best to ensure that our fee rates are competitive, by monitoring the fee rates at other nurseries, but we also have to factor in our uncharged days, the absence of any chargeable extras, and our investment in the workforce and the quality of the nursery environments. Hopefully our parents will agree that we do our best to offer value for money in very difficult times; 95% of parents in our recent survey were either ‘Happy’ or ‘Very Happy’ with our fees, and we will continue to do our best to justify their confidence in us.