300,000 childcare jobs in Britain’s 24,000 nurseries are now in question following the Department for Education’s (DfE) u-turn on the availability of the Coronavirus Job Retention Scheme (CJRS) to the sector.
This move is likely to lead to business closures, threatens the long-term viability of the sector and has left many business owners in shock at the Government’s attempts to restrict childcare provider’s access to furlough.
The DfE issued guidance on 24 March 2020 to childcare providers assuring them that not only would they continue to receive free entitlement funding, but that, much like other businesses, they would also be able to take advantage of the CJRS, under which employers are bale to place staff on temporary leave (Furlough) and then subsequently claim a grant from HMRC covering 80% of their wages (up to a maximum of £2,500 p/month), in addition to employer national insurance contributions and pension auto-enrolment contributions. As recently as 16th April 2020 this advice was repeated by the DfE as part of their announcement on planner amendments on EYFS relaxation.
As such, childcare providers not only budgeted on this basis but also made significant business and staffing decisions. For instance, many nurseries furloughed a large proportion of their staff or closed temporarily on the basis that they could receive free entitlement and furlough payments.
However, the landscape dramatically changed on Friday 17 April 2020 when new guidance was issued by DfE severely limiting the wages of furloughed staff which childcare provider’s could recover under the CJRS.
Now, the timing of the release of this guidance raised more than a few eyebrows, not only because because it was not published online until 630pm on a Friday evening. but also because early years settings where due to start claiming through HMRC’s online CJRS portal the following Monday, both of which only add to the theme of unfairness.
In new guidance released last Friday, private providers are now being told they should only furlough employees if:
- the employee works in an area of business where services are temporarily not required and where their salary is not covered by public funding;
- the employee would otherwise be made redundant or laid off;
- the employee is not involved in delivering provision that has already been funded (free entitlement funding);
- (where appropriate) the employee is not required to deliver provision for a child of a critical worker and/or vulnerable child; and
- the grant from the Coronavirus Job Retention Scheme would not duplicate other public grants received, and would not lead to financial reserves being created.
As such, childcare providers will only be able to access the CJRS to cover the proportion of its pay bill which could be considered to have been paid from private income. Therefore. by way of example, if a nursery receives 75% of its income from Government funding and 25% from other income, the nursery can only claim CJRS support for up to 25% of their pay bill.
The change means that providers can only access the CJRS for the percentage of staff wages that is not usually covered by early education funding.
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 CJRS.
This means that many nurseries won’t be able to get full access to both schemes, as DfE’s original guidance suggested, throwing many settings into chaos. Reports have already been received that some nurseries will not be able to pay staff they had already put on furlough, based on the initial guidance issued a month ago and the repeated assurances from DfE that they would be able to claim under the CJRS.
We are already advising our provider clients on the best next steps to protect their business in the face of this worrying development and are on hand to assist wherever and however needed.
Lloyd Clarke is a Solicitor and Partner at Attwells Solicitors, heading up the firm’s Employment Law Department and has acted for a number of childcare providers in the past, assisting them with the particular issues they face in the sector. He has also advised many employers on the requirements of the CJRS in recent works, putting in place the procedures required.
Attwells offer transparent pricing, plain-English legal advice and excellent client care. If you or your business are affected in anyway by Covid-19 or any other employment law issue please contact Lloyd Clarke on 01206 239761 for a FREE consultation.