Employers will have to pay the cash upfront and then claim it back under a new mandatory cash contributions system, with wages on top.
With 80 per cent of the nursery sector comprised of two settings or less, this system is likely to affect the majority of early years businesses across the country.
The package of reforms unveiled today also included confirmation that the apprenticeship levy, which is paid by larger groups, will go ahead from April as originally planned.
There had been speculation that it could be delayed or even scrapped after the CBI and other employer’s groups expressed voiced opposition to the scheme.
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