Management round table: Understanding Universal Credit

 Manager’s dilemma:

‘With a lot of publicity around the first trial of Universal Credit I am wondering how this will affect the families who use my service – and how it will affect my business. What are the key things I need to know’?

The round table responds:

David Wright – Paint Pots Nursery

‘One of the key issues around the introduction of Universal Credits is the change in the payment period from weekly to monthly. Families who find budgeting challenging are going to need support and guidance in managing their money across a longer period. As childcare providers, I believe we need to be proactive in identifying the potential for getting into arrears. We need to acknowledge the issue and provide practical assistance by offering flexible payment plans, before the changes come into effect.

We need to be clear about our fees and terms of payment at the time we first engage with families so they are fully aware of the costs and when they will need to pay.

Our preferred methods of payment are standing orders, online or voucher payments but we also recognise that cash is easier for some families to manage and we are thus willing to accept this.  

We also need to identify and signpost agencies who are able to provide specialist support and guidance on benefits entitlement and on managing personal finances. We are reviewing our parents’ display boards and folders to ensure the information reflects the latest updates as they become available.

Our principles are to work with parents; to anticipate potential difficulties; to provide support and advice and to be flexible but firm in our approach. We have found that building in achievable boundaries around invoicing actually helps those families who might be in danger of slipping behind, stick to planned payments.

Sarah Steel - Old Station Nursery group

‘My understanding is that the Universal Credit should be much better for families working part time, who currently have the artificial limit of 16 hours imposed on them, and they lose their credits if they work more than this.

We have a lot of staff who won’t work more than 16 hours per week as it adversely affects their credits. I understand that this will be more flexible with the Uuniversal Credit. As far as advice goes about paying their childcare bills, families should continue to liaise closely with their nursery manager, and explain if there are likely to be any delays or problems with payment. However, in the past providers have had their fingers burned, allowing families to run up large debts as they were waiting for credit payments, which they then spent on something else. Therefore parents should try and keep on top of their fees, reducing session if they know that they are struggling to pay their bills, rather than letting the debt increase. Some nursery offer weekly payment options, or payment plans, where the cost is averaged out over the year, so it is always worth asking.

John Trow-Smith – LEYF 

‘The way the new system will work is not easy to explain to parents as every family’s circumstances will be different, and these individual circumstances will affect the benefits they receive under the new system.  

The removal of the 16 hour threshold is likely to see more people take up some part-time work under Universal Credits.  Families who rely on housing benefit to live in metropolitan areas like London will have extra pressure on them to do more than 16 hours work, so that they can meet the eligibility criteria for Working Tax Credit (this is one way to get exemption from the upcoming household benefit cap).  If nurseries want to support families to make these changes, they may have to be more flexible in the part-time hours they offer - especially the free entitlement hours because school-style five short mornings or five short afternoons are unlikely to match part-time work.  If these families don’t find work and affordable childcare, they may be forced out to areas with cheaper accommodation and the demand for part-time places would move with them.

The introduction of Universal Credits will mean families will be receiving payments on a monthly rather than a weekly basis. The last proposals I saw required families to report their actual billed childcare costs every month alongside their monthly income.  If your nursery is billing weekly and allocates nursery entitlement funding term-time only, there will be expensive months during school holidays when there are no funded hours and/or when the weekly billing cycle sees more weeks billed in some months than others.  The upshot of this is that, for those expensive months, families may be faced with a substantial amount of unsubsidised fees over and above the childcare cost monthly threshold (£760 of childcare costs considered for one child or £1,300 for two or more).  Nurseries may be able to help by stretching the funding and doing calendar monthly billing for children’s paid for hours, so that families get billed for the same amount each month.  This also makes confirming the amount to HMRC simpler.

One really good proposal is that, under the Universal Credit, families would be able to access childcare tax credits to help with their deposit plus other advance charges by the nursery, such as registration fees.  Nurseries could help families by billing for these in advance; the family could then claim for assistance without it counting towards the childcare cost threshold for the first month they are paying fees.  Obviously, in this scenario the deposit will need to be used against the family’s final childcare bill rather than given back as cash.’

David Wright is owner of Paint Pots Pre-School and Nursery in Southampton; Sarah Steel is managing director of the Old Station Nursery and John Trow-Smith is information and systems manager for LEYF, London