Decide structure of childcare
Extract from Coram Family and Childcare Trust report
The process for deciding how to structure your childcare setting is likely to start at the very earliest stages of set up and continue even after the nursery is open. At the early stages these decisions will be quite high level, such as describing the purpose of your organisation as part of the registration process, and then they will get more detailed further down the line, such as deciding timings of the childcare sessions and staffing structures to match this.
What decisions need to be made, and when?
There are a large number of decisions that you will need to make about the structure of your childcare, including both the number of children that will be looked after, the ages of the children, timings of childcare sessions and staffing structures. This is why it can be helpful to make these decisions over time. To help with these decisions, you can use financial modelling, which allows you to model different options and look at what this will mean for the prices that will need to be charged in order to break even. The finances for childcare are complex, and so this exercise is important to do.
What factors are fixed and where are you flexible?
When starting to think about these decisions, we found it useful to start with how many children the nursery would look after. Ofsted space requirements will set a maximum for the number of children, but you may decide to look after fewer children than this maximum number – this was the decision made at Friendly Families Nursery as the parents felt that a smaller group of children better met their own and other local parents’ preferences. Because our building was a one room setting we knew we could only provide care for children aged between 2 and 5 years old (children under two need access to a separate room). It can be useful to start this decision making process by discussing what the most important factors are for the parents involved. This is likely to help you with prioritising which decisions are most important and should be looked at first, compared to the ones where there is more room for compromise and that could be decided later.
How will you budget for funded hours’ funding?
All three and four years olds in England are entitled to 15 hours funded childcare during term time (38 weeks of the year) and some three and four year olds in England with working parents are entitled to 30 hours per week (for 38 weeks of the year). Some two year olds are entitled to 15 hours free childcare per week (for 38 weeks of the year) if they are from a low income household, have Special Educational Needs and Disabilities (often referred to as SEND) or are looked after by the local authority or have left care under an adoption order, special guardianship order or child arrangement order. This childcare is funded by the local authority at a set rate that varies by local area. It is common for the hourly rate provided for these funded hours to be less than the actual costs of providing this care, particularly if there is a commitment to pay all staff the Living Wage or above. It is likely that your setting will offer a mixture of these Government-funded places alongside childcare that parents pay for and there will need to be decisions on the balance between these two different income streams. More information on funded hours rates can be found here .
Will you offer funded hours places and if so how will families use their hours?
You will need to decide if and how you want to offer this funded childcare. Offering these hours is important for making childcare more affordable for working parents. The free hours can be a way of attracting parents who are not working to join the setting and they can help to make the setting socially and economically diverse. Working families will often pay for hours in addition to the funded hours childcare so that they have enough childcare to support their work. Non-working families or couples where only one parent works will often only use the funded hours.
There are a number of different options for how to offer these government funded hours:
- 3 hours per day during term time only (or 6 hours per day for the 30 hours offer). This ensures that many families are reached but often creates a division between the funded hours only children, who do morning or afternoon slots and the full day children whose parents are paying for a full days care. It can also mean the children don’t all get to have lunch together.
- Hours spread over a smaller number of days, for example two 7.5 hour days, term time only. This can be popular for parents who are working or looking to move into work as it allows them longer periods of time when their child is being looked after.
- ‘Stretch’ the hours over a full year rather than only during term time, so that families can use around 11 or 22 hours per week throughout the year rather than have no childcare or face higher costs during the holidays.
How will you involve families in the conversation about hours and fees?
All of these options will have implications for which families you attract to your nursery and so it is really important that a broad range of parents are brought into decision making about hours and fees at an early stage. Some childcare providers will offer the funded hours differently for families who are buying additional hours to those who are not. This can make financial sense and help to attract more paying families, but it can create difficulties to treat paying and non-paying families differently. The decisions you make may also depend on the funding rate on offer locally and how this compares to the fees that you are likely to charge parents. Offering sessional childcare will also have implications for your staffing structures as it will mean that more staff are needed for these sessions than at the beginning and end of the day when there are fewer children attending. It is also possible to set up a nursery so that it only opens for typical school day hours (9 am to 3 pm) and is only open during term time. In this case most income will come from funded hours rather than parent fees.
Do your fees enable you to pay staff fair wages?
Your financial modelling needs you to enter information on the number of staff and their pay. To decide this, you can look at average wages for other local childcare providers. Pay for professionals in the childcare workforce tends to be lower than other sectors requiring similar levels of qualifications and this can contribute to poor morale and high turnover. For this reason, it is worth considering paying higher than the local average. At Friendly Families Nursery, we committed to becoming a London Living Wage employer.
When deciding the number of staff that are needed, you will need to think about how you will structure working times. Childcare is often open 8am to 6pm, longer than your typical working day, and it is unlikely that you will want to have the same staff working this shift Monday to Friday. Instead you could either consider a staffing structure with staff working long days but for fewer days per week, or having shifts with some staff starting and finishing early and others starting and finishing late. This shift approach can work well if you are offering some sessional childcare and have more children attending in the middle of the day. You will need to ensure your staffing patterns also allow staff some time away from the children, completing child focussed planning, tracking and updates for parents.
How will you explain your fees to parents?
You will need to include information on how much you plan to charge in parent fees. It is helpful to look at what other local childcare providers are charging and you can also look at Coram Family and Childcare’s Annual Survey to find regional averages. Local authorities should have conducted a local childcare sufficiency assessment which will include information on local prices. Often a first priority for parents is that childcare is affordable but if this is your only priority you are likely to drive down staff wages. We have found it important to be explicit to families that paying staff fair wages is important for the quality of our provision.
Will you offer parents discounts for supporting the nursery?
You will need to think about whether you want parents to volunteer in your setting and, if so, the structure of the volunteering. Parents can play a role in directly looking after children, reducing the requirements for paid staff as they can still count towards the adult: child ratio (as long as they are working with qualified staff). This carries with it some risk around guaranteeing a reliable and stable team of volunteers to make sure there are enough staff available each day, but can also bring benefits to families and children and reduce the fees charged to parents. At Friendly Families Nursery, we have five regular parent volunteers. Each parent commits to a regular day of the week, Monday to Friday, and volunteers between 9am and 3pm. The parents are counted in the ratio. There is always at least one member of staff with the parent but mostly two (Ofsted requires no more than 50% of people at the setting to be unqualified). This felt like a good balance between helping to make sure there would be enough staff available everyday but meaning that most of the time the nursery would have a greater number of adults working with the children than is required in the ratios, which was favoured by parents. Those parents who are volunteering on a regular basis in the classroom receive a 15% discount on their fees. They also receive free childcare on the day that they volunteer as this is necessary in order for them to be able to volunteer. This approach was taken because there was a strong desire from parents to have this level of involvement in their child’s early years. It is also a useful way to make childcare more affordable for families.
Summary
It is unlikely that you will be able to make final decisions on all aspects of fees at an early stage but it is something that parents are likely to ask about from the beginning. When first developing you financial model, it is useful to have ideas about which are priorities and possible ranges for different areas where the parent group feel they are willing and able to be more flexible. You can then run your predicitions with several different options which will start to give an idea of the impact of changing these different options and inform decision making. Once the nursery opened, we needed to continue to address and adapt our financial modelling as various true operational costs became clearer. This allowed us to continually assess the financial sustainability of the setting.
What decisions need to be made, and when?
There are a large number of decisions that you will need to make about the structure of your childcare, including both the number of children that will be looked after, the ages of the children, timings of childcare sessions and staffing structures. This is why it can be helpful to make these decisions over time. To help with these decisions, you can use financial modelling, which allows you to model different options and look at what this will mean for the prices that will need to be charged in order to break even. The finances for childcare are complex, and so this exercise is important to do.
What factors are fixed and where are you flexible?
When starting to think about these decisions, we found it useful to start with how many children the nursery would look after. Ofsted space requirements will set a maximum for the number of children, but you may decide to look after fewer children than this maximum number – this was the decision made at Friendly Families Nursery as the parents felt that a smaller group of children better met their own and other local parents’ preferences. Because our building was a one room setting we knew we could only provide care for children aged between 2 and 5 years old (children under two need access to a separate room). It can be useful to start this decision making process by discussing what the most important factors are for the parents involved. This is likely to help you with prioritising which decisions are most important and should be looked at first, compared to the ones where there is more room for compromise and that could be decided later.
How will you budget for funded hours’ funding?
All three and four years olds in England are entitled to 15 hours funded childcare during term time (38 weeks of the year) and some three and four year olds in England with working parents are entitled to 30 hours per week (for 38 weeks of the year). Some two year olds are entitled to 15 hours free childcare per week (for 38 weeks of the year) if they are from a low income household, have Special Educational Needs and Disabilities (often referred to as SEND) or are looked after by the local authority or have left care under an adoption order, special guardianship order or child arrangement order. This childcare is funded by the local authority at a set rate that varies by local area. It is common for the hourly rate provided for these funded hours to be less than the actual costs of providing this care, particularly if there is a commitment to pay all staff the Living Wage or above. It is likely that your setting will offer a mixture of these Government-funded places alongside childcare that parents pay for and there will need to be decisions on the balance between these two different income streams. More information on funded hours rates can be found here .
Will you offer funded hours places and if so how will families use their hours?
You will need to decide if and how you want to offer this funded childcare. Offering these hours is important for making childcare more affordable for working parents. The free hours can be a way of attracting parents who are not working to join the setting and they can help to make the setting socially and economically diverse. Working families will often pay for hours in addition to the funded hours childcare so that they have enough childcare to support their work. Non-working families or couples where only one parent works will often only use the funded hours.
There are a number of different options for how to offer these government funded hours:
- 3 hours per day during term time only (or 6 hours per day for the 30 hours offer). This ensures that many families are reached but often creates a division between the funded hours only children, who do morning or afternoon slots and the full day children whose parents are paying for a full days care. It can also mean the children don’t all get to have lunch together.
- Hours spread over a smaller number of days, for example two 7.5 hour days, term time only. This can be popular for parents who are working or looking to move into work as it allows them longer periods of time when their child is being looked after.
- ‘Stretch’ the hours over a full year rather than only during term time, so that families can use around 11 or 22 hours per week throughout the year rather than have no childcare or face higher costs during the holidays.
How will you involve families in the conversation about hours and fees?
All of these options will have implications for which families you attract to your nursery and so it is really important that a broad range of parents are brought into decision making about hours and fees at an early stage. Some childcare providers will offer the funded hours differently for families who are buying additional hours to those who are not. This can make financial sense and help to attract more paying families, but it can create difficulties to treat paying and non-paying families differently. The decisions you make may also depend on the funding rate on offer locally and how this compares to the fees that you are likely to charge parents. Offering sessional childcare will also have implications for your staffing structures as it will mean that more staff are needed for these sessions than at the beginning and end of the day when there are fewer children attending. It is also possible to set up a nursery so that it only opens for typical school day hours (9 am to 3 pm) and is only open during term time. In this case most income will come from funded hours rather than parent fees.
Do your fees enable you to pay staff fair wages?
Your financial modelling needs you to enter information on the number of staff and their pay. To decide this, you can look at average wages for other local childcare providers. Pay for professionals in the childcare workforce tends to be lower than other sectors requiring similar levels of qualifications and this can contribute to poor morale and high turnover. For this reason, it is worth considering paying higher than the local average. At Friendly Families Nursery, we committed to becoming a London Living Wage employer.
When deciding the number of staff that are needed, you will need to think about how you will structure working times. Childcare is often open 8am to 6pm, longer than your typical working day, and it is unlikely that you will want to have the same staff working this shift Monday to Friday. Instead you could either consider a staffing structure with staff working long days but for fewer days per week, or having shifts with some staff starting and finishing early and others starting and finishing late. This shift approach can work well if you are offering some sessional childcare and have more children attending in the middle of the day. You will need to ensure your staffing patterns also allow staff some time away from the children, completing child focussed planning, tracking and updates for parents.
How will you explain your fees to parents?
You will need to include information on how much you plan to charge in parent fees. It is helpful to look at what other local childcare providers are charging and you can also look at Coram Family and Childcare’s Annual Survey to find regional averages. Local authorities should have conducted a local childcare sufficiency assessment which will include information on local prices. Often a first priority for parents is that childcare is affordable but if this is your only priority you are likely to drive down staff wages. We have found it important to be explicit to families that paying staff fair wages is important for the quality of our provision.
Will you offer parents discounts for supporting the nursery?
You will need to think about whether you want parents to volunteer in your setting and, if so, the structure of the volunteering. Parents can play a role in directly looking after children, reducing the requirements for paid staff as they can still count towards the adult: child ratio (as long as they are working with qualified staff). This carries with it some risk around guaranteeing a reliable and stable team of volunteers to make sure there are enough staff available each day, but can also bring benefits to families and children and reduce the fees charged to parents. At Friendly Families Nursery, we have five regular parent volunteers. Each parent commits to a regular day of the week, Monday to Friday, and volunteers between 9am and 3pm. The parents are counted in the ratio. There is always at least one member of staff with the parent but mostly two (Ofsted requires no more than 50% of people at the setting to be unqualified). This felt like a good balance between helping to make sure there would be enough staff available everyday but meaning that most of the time the nursery would have a greater number of adults working with the children than is required in the ratios, which was favoured by parents. Those parents who are volunteering on a regular basis in the classroom receive a 15% discount on their fees. They also receive free childcare on the day that they volunteer as this is necessary in order for them to be able to volunteer. This approach was taken because there was a strong desire from parents to have this level of involvement in their child’s early years. It is also a useful way to make childcare more affordable for families.
Summary
It is unlikely that you will be able to make final decisions on all aspects of fees at an early stage but it is something that parents are likely to ask about from the beginning. When first developing you financial model, it is useful to have ideas about which are priorities and possible ranges for different areas where the parent group feel they are willing and able to be more flexible. You can then run your predicitions with several different options which will start to give an idea of the impact of changing these different options and inform decision making. Once the nursery opened, we needed to continue to address and adapt our financial modelling as various true operational costs became clearer. This allowed us to continually assess the financial sustainability of the setting.
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