To furlough, or not to furlough – that is the question (and that?s not the only question)
A timeline to provide some clarity in light of the ambiguous guidance released to the Early Years sector on April 17th 2020.
On the 17th March Early Years settings were told that funding received through the government?s early years entitlements will continue during any period of closure via a News Story ?Free childcare offers to continue during coronavirus closures. This was gratefully received and provided ?reassurance for early years settings? in light of the coronavirus pandemic. There was an expectation that Local Authorities would pass on this entitlement in full, (some sadly haven?t), to provide stability. Ofsted inspections were temporarily suspended to reduce the burden on staff providing vital services at this time.
Providers began to plan their Coronavirus Response alongside Guidance for schools, childcare providers, colleges and local authorities in England on maintaining educational provision that came out on the 19th March. ?For many it was clear that they would have no children and were being forced to close. Some had small numbers of children and therefore would remain open with a core team or they networked with other local providers to ensure children of key workers and vulnerable children had access to childcare at this time. Significant numbers of providers remain open and should be applauded in doing so, despite a drastically reduced income and the fragility of staffing and continuing to provide an environment based on social distancing. In all cases the ?on furlough? scheme was a better option that reducing hours and redundancies.
came out on the 19th March too. This acknowledged that the large majority of providers didn?t have insurance that covered them for loss of income due to Covid-19 closures, told parents that the funding is continuing and that the funding protected ?a significant proportion of early years providers? income?, (whilst this may be the case for some, for the majority of providers the funding is a lesser proportion and does not cover the costs associated with providing high quality care and education). This guidance also detailed other help providers could access and referred to the ?significant support for workers?, which was to form a part of ensuring viability long term. Providers were then considering their options and began to be ?reasonable and balanced? in communicating with parents. Their responses were heavily reliant on individual circumstances and the ?moral compass? in asking for a percentage of fees, a contribution or no charge at this very difficult time. Staff and parents were kept fully informed as the gravity of the situation unfolded.
Vicky Ford MP Parliamentary Under-Secretary of State for Children and Families sent Early Years and Childcare providers a letter on the 24th March Vicky Ford letter to the EY Sector. This highlighted the ?package of support? for the sector including access to the Coronavirus Job Retention Scheme (CJRS), reiterating the fact that they can access the scheme whilst still receiving the funding, acknowledging that staffing is the largest expense and detailing the ?significant contribution? that the CJRS will make to manage outgoings.
The 24th March also brought the Guidance Coronavirus (COVID-19): early years and childcare closures for all childcare providers registered with Ofsted. It recognised the vital role of the sector in supporting children and families who qualify to attend, yet also recognised it was not possible for all settings to remain open. Again, reference to the CJRS for employees who are not working but kept on the payroll. ?The government will contribute 80% of each worker?s wages of up to ?2,500, backdated to 1 March 2020?. More definitive confirmation ?settings can access this scheme while continuing to be paid the early entitlements funding via local authorities?. This document continued to be updated (last on 15th April) yet the reference to claiming CJRS together with receiving funding remained.
Notifications in writing (a requirement of the ?on furlough? process) at this point have been sent to staff, promises of 80% of their pay or 100% if the provider chose to ?top up?, emails sent to parents clarifying fees (whilst continuing to remain reasonable and balanced), have been sent out, decisions made on reducing outgoings and applications made for other grants and loans to potentially benefit from (everything crossed).
The viability of many settings hung in the air at this point, we know that early years are vital to the economic recovery but what this will look like for the sector no one knows. With assurance in guidance that the CJRS and funding could be claimed for together, providers could at least have some figures to base projections onto.
On 26th March the guidance? Check if you can claim for your employees’ wages through the Coronavirus Job Retention Scheme came out, it seemed that for a period of time (now extended to end of June) that employers can claim a grant covering 80% of their employees usual wages. The uncertainty appeared at this point with reference to the use of public money, the guidance referring to public funding that it is used for ?staff costs?. Now we know that staff are the biggest outgoing for most providers and the funding makes up a proportion of income, therefore allocating funding entirely for staffing simply doesn?t add up. The funding has always been a contentious issue, with many providers sadly leaving the sector over the last few years due to this policy. The hourly rate doesn?t cover staffing, there are many other costs of providing high quality care and education. Parents have been confused and been sold a ?free entitlement?, local authorities have placed undue pressure on providers to deliver a policy that doesn?t allow flexibility and providers have been required to take public money that doesn?t cover increasing ?and ongoing costs. The funding provides all children who are 3 years of age and above with a space for 15 hours and for some, 30 hours a week term time only or stretched over the year if a provider is open all year round. This policy has been welcomed by parents who are faced with increased childcare costs and enables less advantaged parents to take up a place in an early years setting prior to school. We all recognise that these places are crucial, but this policy has left providers striving to make ends meet, frustrated and for many, no longer sustainable.
Providers are unique, just like children, with incomes and outgoings that are hugely variable. So, having just got their heads around this, liaised with payroll, HR and accountants (if they were lucky enough to have them), worked through all of the guidance with no help and support and were all set for the portal to open at HMRC on the 20th April, then, during the evening of 17th April (out of business hours and on a Friday night) the realisation that all previous promises of claiming CJRS whilst receiving the early years funding came crashing down. The guidance Coronavirus (COVID-19): financial support for education, early years and children?s social care Published 17 April 2020 is not only contradictory of all other guidance and reassurances, it is confusing, complicated and unclear. The Department of Education recognising the confusion over when CJRS applies themselves have already turned to Twitter to clarify and interpret their own guidance.
It seems it is all down to the proportions of income now and with only the weekend to prepare for submitting information onto the HMRC portal and the online tool to help with the guidance not yet available, no wonder providers feel upset and betrayed. If the funding covers the staffing costs entirely then it is clear you don?t need to furlough your staff, but the fact that guidance, up until now has suggested that you could, will mean that providers will have to recalculate and step into reserves that? they don?t have. These providers are the ones who are more likely to rely on fundraising to supplement their income and for now, that simply won?t be there. For staff and settings in this situation sadly the options are ?limited, closure and / or redundancies.
Providers now have to calculate what proportion of their paybill comes from private income in order to claim for the CJRS grant and base this on February 2020 figures initially (remember this month contains a half term where income could be far less). No formula has been? supplied or ?consideration for the wide range of variables the sector has. Certainly no guidance can be gleaned for the figures suggested, ?if 40% comes from funding and 60% from other income then you can claim 60% of your paybill. ?This would be done by furloughing staff whose usual salary / combined salaries come to no greater than 60% of the provider?s total paybill?. So then how much is the grant for? What if the percentages are less? Does the provider have to pay the furloughed staff member 80% even if they don?t qualify for it? Then to add insult to injury when the funding goes up, as it does in the summer term, your income from parents is still the February figure and then you can claim even less? How can this be fair? Oh, then there?s a link to the guidance updated last on the 15th of April for ?further guidance? and this says you can claim CJRS and the funding! You couldn?t make it up and neither would you want to.
Providers should only furlough employees if they meet certain conditions and would be subject to ?appropriate measures to monitor the use of these schemes in order to detect any duplication of funding, and will be considering potential options to recover misused public funding as required?, those very schemes they have been told they can benefit from in guidance that has not been withdrawn and? is still ?live?, now a threat of investigation! The ?significant package of support? ripped from under providers feet, the reassurances made in current guidance removed and pledged support for staff and parents no longer an option.
The Early Years Alliance and others are working on the sectors response and we hope to receive further guidance and support soon. One thing for sure is that it is not as simple as calculating 80% of a persons wage anymore and waiting for the portal to crash. ?Until we have further guidance and a tool to calculate the amounts, it would be wise to wait for further clarification before submitting claims to the HMRC portal.
Early Years Consultant