Ahead of the Budget, the Chancellor, Rachel Reeves, has announced that the Government has accepted the Low Pay Commission’s recommendation for the national minimum wage to rise by 6.7 per cent next year, boosting the pay of 3 million workers.
From April 2025, the National Living Wage will increase from £11.44 to £12.21 an hour.
According to the Government, the rise in minimum wage is worth £1,400 a year for an eligible full-time worker, while the rate for 18-20-year-olds will rise by £1.40 per hour from £8.60 to £10.00 – the largest increase on record.
The National Day Nurseries Association (NDNA) has however raised concern that the ‘substantial hike’ in minimum wages will vastly increase early years providers’ salary from April 2025. And, without funding rates keeping pace with wages, it has warned it will be ‘impossible’ for providers to deliver the expanded 30 hours offer.
Ministers previously committed to funding increases linked to inflation, statutory wage rises and average earnings, but funding rates are yet to be published.
Purnima Tanuku, chief executive of the NDNA, said, ‘The Low Pay Commission looks at living costs but not the full picture for employers. This substantial hike in minimum wages will mean that early years providers have a much bigger salary bill from April 2025. To deliver the expansion of early education and care places, the sector needs to recruit another 35,000 staff. However, if funding rates do not keep pace with rising wages, it will be impossible for providers to meet demand.
‘Since 30 hours of funded childcare was introduced in 2017, statutory pay has increased by at least 62 per cent and some categories have more than doubled. At the same time, funding rates for three and four-year-olds have only increased by 27 per cent making it harder for employers to make ends meet.
‘With the Government estimated to be buying 80 per cent of all childcare hours from nurseries next year, it’s critical that the sector’s biggest customer pays a fair rate. Ministers have committed to funding increases linked to inflation, statutory wage rises and average earnings, so they need to meet this commitment when funding rates are published later this year.’
A provider who has owned a nursery for the past 20 years also raised concerns about the minimum wage rise if funding rates don’t increase.
They told Nursery World, ‘Recruitment and funding are still an issue for our sector.
‘Will we get an increase in the funding rate when we have to increase all wages because of the increase in the minimum wage next year?
‘There isn't a lot of difference between a nursery nurse, room leaders, deputy and manager, so we have to put everyone's wages up accordingly.’
There is also speculation that the Chancellor will announce a rise to employer national insurance contributions, which the nursery owner she they are worried about meeting.
