living wage

New living wage could increase nursery fees by 13%

A recent NDNA survey of English nurseries reveals that being required to pay the ‘living wage’ to all staff is likely to push nursery fees up by an average of 13%.

The national minimum wage is currently set at £6.50 per hour for people aged 21 and over. However the Chancellor George Osborne has said that there will be a ‘new compulsory living wage’ from April 2016 which must be paid to those aged 25 and over, which will initially be set at £7.20 per hour with plans for it to rise steadily to more than £9 per hour by 2020.[1]

According to the survey, only 12% of nurseries currently pay all of their staff the living wage and 75% pay it to some staff. For most nurseries, having to increase the pay of the lowest paid staff will have a knock-on effect on the pay of more senior staff, which will also have to be increased. Plus, with pension auto-enrolment coming into effect this year for many small businesses, nurseries’ staff costs are set to increase even without the new compulsory living wage. Since 77% of nursery income is spent on staff pay, the impact of these increases will be severe.

Nurseries are already facing serious funding shortfalls from local authorities, with funding for free nursery places below costs by an average of £700-800 per child per year. Despite rising costs to nurseries, funding remains the same causing an ever-increasing gap.

NDNA chief executive Purnima Tanuku said: “Nurseries want to reward their staff properly, but the combination of mandatory inflation-busting rises and chronically inadequate funding is a real threat to the sustainability and quality of provision of private, voluntary and independent nurseries.”[2]

With staffing costs for nurseries set to rise so drastically in the next 8 months, and with funding not set to increase in line with these, it will be parents who must absorb the difference. The implication of these rises in staffing costs will be a 13% rise in fees which many working parents simply cannot afford to pay. It is therefore essential that parents take the time to understand the financial support available to them before government changes take effect in 2017.

Find out whether you are likely to be better off with Childcare Vouchers or Tax-Free Childcare now >



[1] BBC News