The 2024 expansion of nursery funding for eligible children aimed to assist a smoother return-to-work. It was celebrated by working parents, employers and campaigners alike.
But what about the impact on childcare providers? Here, Gill McAteer, director of employment law at Citation, and Jonathan Broadbery, NDNA’s director of policy, explore the issues…
The new 15 hours funded childcare allowance for eligible nine-month to two-year-olds in England and the 30 hours of childcare for three to four-year-olds in all eligible families has provided a lifeline for many families. However, for nurseries, it has exacerbated already deep-rooted issues.
“Staff recruitment and retention has long been an issue within the sector,” comments Jonathan Broadbery. “With rising costs, nurseries have been battling to stay afloat due to business rates, utilities and food costs.
“With the impact of the most recent Budget announcement on changes to National Insurance, the National Minimum and Living Wages, a single nursery with 18 staff will have to find an extra £47,000 per year. These are expenses that are increasing while funding rates are not keeping up.”
“Nurseries must ensure they are well informed about the details of new funding, including eligibility criteria, so they can communicate this information to parents,” stresses Gill McAteer.
“Recruitment is expensive, and attracting and retaining the right staff is key to running a successful nursery.”
The expansion of funded childcare places a new onus on nurseries to keep up with increased demand from families. The National Audit Office found that 85,000 new places are needed by September 2025. This has put huge financial strain on providers.
In a bid to help overcome this, the previous government pledged £100m of capital support to help providers expand their premises. The Childcare Expansion Capital Grant Scheme was to help deliver new places for children aged nine months to three years old. It was also to support wraparound provision for primary school-aged children.
Jonathan explains, “The fund was not even enough to deliver the expansions required. However, the situation has been made worse still as, with one year to go, most local authorities had not decided on their plans or distributed the financial support.”
An NDNA investigation showed that nine months after the Grant’s launch, 82.5% of local authorities hadn’t distributed additional funding. Nurseries aren’t getting the support they need, with less than 5% of the £100m distributed to date.
“Waiting lists are growing. Lots of nurseries told us that they would need to adapt or expand their settings to offer the places needed for funded babies and two-year-olds,” he continues.
“We even know of nurseries that have taken the financial risk to expand even before their council has decided how they want nurseries to bid for this support fund.
“The government has made a commitment to supporting parents and delivering on the expansion of funded hours. However, this needs to be backed up with the resources required to ensure settings are the best possible learning environments for our youngest children.”
The minimum wage hike is adding further fuel to the fire. Government funding for the existing childcare offer is not keeping pace with rising costs. Wage bills are up by 14.4% from April 2024 compared with a 4.6% rise in funding rates.
In early 2024, 83% of nurseries said their costs were higher than the funding for three- and four-year-old places. Their average shortfall was a staggering £2.36 per hour per child or £1,345 over the year for a 15-hour place.
As a result, nurseries continue to close at a time when society needs them most. The double whammy of increased NICs and above-inflation increases to wages will make this situation worse.
Nurseries are seeking to manage these challenges by streamlining recruitment, compliance and workforce management. The priority is to attract staff through targeted strategies. This enables providers to focus on delivering quality childcare while meeting funding obligations and maintaining staff wellbeing.
“In order to tackle record-long waiting lists and navigate the influx of children enrolling as seamlessly as possible, day nursery managers must implement robust recruitment and people management processes that help to attract the right type of staff through the door,” says Gill.
“They could consider some training for new recruits once they have started employment. This is rather than requiring certain qualifications on application, to widen the pool of potential candidates.
“This would then also ensure that their employees have undertaken the training that’s needed to do the job well. However, part of the recruitment process includes lengthy DBS checks, which in some cases can take weeks to process. This is time that the sector just doesn’t have to spare.
“It is also imperative to carry out Right to Work checks, as there are severe legal consequences if these aren’t done correctly. Enlisting the help of a third-party employment screening service such as uCheck.co.uk can help provide a stopgap in these instances. It saves precious time getting staff onboarded as quickly and efficiently as possible.
“The rapid online platform allows you to request checks in a matter of minutes and guarantees quicker results than government checks.”
In the current landscape, retaining skilled employees is vital for nurseries to meet regulatory requirements and maintain service quality.
Moreover, a stable workforce helps create a positive workplace culture that benefits both staff and the children they nurture.
“Recruitment is not the only measure that’s needed – retention of staff is equally as important,” Gill explains. “Nurseries should engage staff from the beginning. A good induction process is key to ensuring that staff feel engaged and understand their role and responsibilities. That’s both the good and more challenging aspects.
“They will then know what to expect and managers can be sure they’ve got someone that’s up to the job. It’s good to create a clear induction timetable. This ensures the employee meets the necessary people and gets a good understanding of the business from day one. You could set up a buddy system so the new starter feels welcomed and has an easy point of contact too.
“Nurseries should also consider measures to foster engagement generally with its employees. Wellbeing initiatives are important, some of which can be achieved without great expense.
“For example, fostering open-door relationships with managers so that employees can easily raise any health or personal issues, and team initiatives such as a charity challenge.
“Measures such as timetabling breaktimes so that employees can bond with colleagues could also be considered.”
Jonathan adds, “When thinking about retention, we know that staff wellbeing and progression are key priorities for them.” The newly established Institute of Early Years Education provides:
The expansion of funded childcare hours offers tremendous benefits to families and the economy, but it has placed nurseries under unprecedented strain.
By focusing on attracting and retaining skilled staff and leveraging tools to improve efficiency, nurseries can navigate this demanding period.
However, the government must also deliver on its promises of financial and operational support to ensure providers have the resources they need.
Gill McAteer is director of employment law at Citation, a leading health and safety and HR and employment law provider. Jonathan Broadbery is director of policy at NDNA, a national charity representing children’s nurseries across the UK.
