Early years employers are gearing up to pay the latest increases in the National Minimum Wage (NMW), which goes up this month from 4.85 to 5.05 an hour for workers aged 22 and over, while the development rate, for workers aged 18-21 inclusive, rises from the current level of 4.10 to 4.25 an hour.
But leading figures in the sector are calling for urgent Government action to help childcare employers cope with further rises planned for next year.
'Obviously, like everybody else we welcome the increase in the NMW because we agree that it is unacceptable in the 21st century that we still have families in this country living in poverty,' says Rita Sutton, director of regional operations for the Pre-School Learning Alliance.
'But it is a double-edged sword for the early years sector. Pay and conditions in the sector need to be addressed as a matter of urgency. There is still a perception among the pubic at large that low pay equates to low status.
'In terms of how we deal with it, what we have come out and said loud and clear is that we now need nationally recognised pay scales for the early years profession, together with subsidies to providers to enable them to pay at the market rates without impacting on the fees that parents are going to be asked to pay.'
This latest award means that the basic rate for adult workers has risen by 1.45 an hour since the Government's flagship employment policy was first introduced at the rate of 3.60 an hour in April 1999.
The rates are based on the recommendations of the independent Low Pay Commission, which has already announced proposals for the next round of increases in October 2006. It is calling for the rate for adult workers to go up then to 5.35 an hour and for the development rate to rise to Pounds 4.45. The development rate can also apply to workers aged 22 and above during their first six months in a new job with a new employer and who are receiving accredited training.
High fees
'I am worried about next year's increase in the minimum wage,' says Tricia Tolley, proprietor of the Bright Kids nursery chain. 'I have put up my fees by 8 per cent to cover the latest increase in wages, but if I put them up any more I'll be pricing myself out of the market.
'I do know of nurseries that pay all their staff at the minimum wage rate regardless of their experience or qualifications, but I have a pay scale which gives staff something to work towards as they develop and become more professional in their role.'
In a sector where staff levels are regulated, parents complain about high fees, and occupancy rates are falling, employers have little scope to manoeuvre. 'We support the NMW and increased wages for nursery staff,' says Purnima Tanuku, chief executive of the National Day Nurseries Association.
'However, the conflict for nursery managers between paying childcare practitioners decent wages, meeting the increased costs of running a nursery and keeping fees affordable for parents remains unsolved.
'We would like to see more Government investment going direct to providers.
Unless this happens, the only way nurseries can support higher wages is to increase fees for parents.'
'The 125m transformation fund announced by the Chancellor in his pre-budget report in December 2004, with the launch of the Ten-Year Strategy, could meet these increases and pay childcare workers at the market rates,' says Ms Sutton. 'We are nearly one year on and we have heard nothing about how this transformation fund will be used.
'Implementing the increases will be difficult because there are pre-schools that are only just managing to survive and any increase in the NMW will impact on them, which is why we need to unlock the transformation fund.
'We hope the Government will do this quickly so early years workers can be paid the market rate. The danger is that we will lose experienced childcare workers from the sector. Once you lose people they do not come back.'
In balance
According to the regulatory impact assessment published by the Department of Trade and Industry earlier this year, the increases this month will cover around 1.3 million workers. The number of jobs that would potentially benefit from the proposed October 2006 increase is 1.4 million, made up of 0.1 million jobs held by 18-to 21-year-olds and 1.3 million jobs held by those aged over 21.
The assessment, presented by the junior trade minister Lord Sainsbury, says, 'The Government accepts the Low Pay Commission's analysis, that these proposals represent an acceptable balance between maintaining and enhancing the value of the NMW and preserving employment prospects for many of the most vulnerable workers.'
The projected 2006 increases are subject to confirmation by the Low Pay Commission in February next year to check that the economic conditions continue to make them appropriate. At the same time, the commission is set to review the operation of the 16-to 17-year-old rate of 3 an hour, which was introduced last year. This new rate is designed to help stop the exploitation of young workers without harming their employment prospects.
According to the latest estimates, about one per cent of all jobs in the UK labour market are paid below the NMW. New figures are due to be published by the Office for National Statistics at the end of this month, but the Annual Survey of Hours and Earnings found in 2004 that 272,000 people were paid below the minimum rates.
The survey does not indicate whether these workers fall into a category that is exempt from the legislation, such as apprentices or new trainees.
But it shows that those in part-time work were more than three times as likely as people in full-time work to be paid less than the minimum wage, with 2.3 per cent of part-time jobs and 0.7 per cent of full-time jobs falling below the minimum wage.
Jobs held by women were almost twice as likely to fall below the minimum wage as jobs held by men (1.4 per cent compared with 0.8 per cent). This was entirely due to the greater number of women in part-time jobs.
Wage arrears
Since the NMW was introduced the Government's compliance officers from HM Customs and Revenue, formerly the Inland Revenue, have identified around Pounds 17m in wage arrears for workers who were not getting what they were entitled to, according to paymaster general Dawn Primarolo.
In the annual report on the NMW published earlier this year, she says, 'This is a clear signal of the Government's determination to eradicate poverty wages and to make the policy work.
'Our compliance officers continue to produce good results and frequently receive telephone calls, letters and Christmas cards from workers who have been helped to obtain the minimum wage, together with arrears of pay.' NW 'In 2003-04 the 16 compliance teams completed more than 5,500 investigations. Although this is a decrease from the previous year, as time has gone on, it is recognised that the complexity of investigations is increasing.'
Further information
* For further information call the minimum wage helpline on 0845 6000 678 or visit the minimum wage website www.dti. gov.uk/er/nmw
