Upcoming reforms to support working families | Moorepay
May 2, 2023

Upcoming reforms to support working families

Chancellor Jeremy Hunt announced in his 2023 budget that he will be introducing reforms to help people back to work, including the expansion of free childcare hours.

Parents in the UK can face high childcare costs, with net costs representing nearly 30% of the average wage for a couple with two children. There are around 435,000 parents in England with children under 3 who are not in work due to caring responsibilities. This group is made up disproportionately of women. Mr Hunt is quoted stating ‘’for many women, a career break becomes a career end’’. However, he claims that by reducing this barrier it could potentially tap into more than one million additional working women.

Our HR Director Michelle rounds up the Reform!

What’s currently in place?

Currently all 3-4-year-olds in England can get 570 free childcare hours per year (this is usually taken as 15 hours a week 38 weeks of the year i.e., term time only). You may be eligible for an additional 15 hours a week 38 weeks of the year, for your children aged 3-4 if you are working (or self-employed) and you meet certain earning requirements. However, it is not as simple as this, the funded hours do not start until the next academic term following the child’s 3rd birthday and ends when the child started reception, so how much funding a parent receives can vary depending on the birthday of their child.

The problem with the current entitlement is that there seems to be a large gap between the end of statutory parental leaves, when the child is 1 year old (or younger) until the first academic year after the child turns 3, which could discourage/prevent parents from returning to work.

What’s changing?

Mr Hunt has announced that the 30 hours free childcare for working parents will apply to all children over 9-months old. The entitlement will be introduced in phases, starting with parents of 2-year-olds will start receiving 15 hours free childcare from April 2024, from September 2024 this will be extended to include children aged 9-months and over and finally, all parents of children aged 9-months to 4-years will be entitled to 30 hours free childcare by September 2025. He has also confirmed that the adult:child ratio will increase from 1:4 to 1:5 to allow childcare settings to give providers more flexibility. Furthermore, increasing hourly rate paid to childcare providers by the government to help them deliver their existing 30 hours entitlement, with the increase coming into effect from September 2023.

The budget has also announced support for families with children of school ages by giving local authorities and schools more funding for ‘wraparound care’ to all these parents to access childcare in their local areas from 8am to 6pm. With the expectation that by September 2026, most primary schools will be able to provide their own before and after school care. Although this pledge is commendable, it merited no more than four sentences in the budget, so there is no information on what this would look like in reality.

There’s no such thing as a free lunch

Childcare settings have already suffered with the implementation of funded places, given the low hourly rate the government provide, resulting in many settings having to close, with approximately 5000 setting closing last year. The funding rate is purely for the child to be present at the setting and it was never intended to cover the cost of consumables, but with some local authorities paying as little as £2.50 per hour it would barely cover staffing, utilities, and overheard costs. As a result, many childcare providers have had to put measures in place such as additional charges for parents, increasing the fees for children who fall outside the scope of funding, restricting the hours the funding can be used for, or limit the number of funded places they offer.

It is no secret that the system now effectively relies on fees paid by parents of younger children to offset the ‘’free’’ hours, but the expansion of these free hours will now drastically limit this ability for setting to offset. Although the Government have promised to increase the funding hourly rate, given the increasing costs of, for example, utilities and higher demand for wages it is unlikely this increase will have a significant impact. Therefore, parents should expect to have these additional costs passed on to them. Finally, there is no mention whether the increase in free childcare hours will continue to be for only 38 weeks per year but it is reasonable to assume it will, leaving most working parents with the question of how to afford care for the remaining 14 weeks, this will be especially difficult for families on lower incomes. While the Chancellor has planes to provide increased support for parents, it needs to echo this support in that given to childcare providers.

What can you do as an employer

Studies have shown that Companies that have introduced family-friendly measures report significant reductions in staff turnover, absenteeism, increased return of parents after statutory leave, reduce in workplace stress and generally enhanced worker satisfaction and productivity.

One thing an employer to look at is creating a more supportive culture, being more sensitive to challenges, this could be in the form of offering more flexibility or something as simple as creating a working parents group to support staff in claiming childcare vouchers, applying for tax-free childcare, sourcing local child and assistance with any other issues parents are facing. Review your family friendly policies and benefits packages to ensure they are fit for purpose, could they be more flexible or more sensitive to for example single parents. Finally, parents and caregivers can experience a lot of mental health issues ranging from postpartum depression to anxiety caused by guilt of leaving their child to work, which may need support to overcome through Mental Health First Aiders, service such as Employee Assistance Programs or signposting to specialist charities.

For childcare providers, due to the lack of detail provided in the budget, planning may be difficult. Adding to this is current childcare workforce recruitment and retention crisis. Now is the time to start planning for these changes and how they could potentially impact the business for example reviewing the recruitment and retention policies such as offering an attractive benefits package. If you are struggling to retain more qualified staff there are opportunities to explore with regards to upskilling you existing workforce. Reviewing your current rates now in anticipation of the impact of increase funded places may also be an option as well as exploring other revenue streams such as working with local business to provide care for their employees’ families, offering ad hoc day care if there is capacity. Unfortunately, the devil will be in the detail for childcare settings, which has not yet been provided but measures taken now could greatly reduce the further impact.

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jeanette branagan
About the author

Jeanette Branagan

An HR/Employment Law Advisor, Jeanette has been involved in HR for over 10 years. She started out as a standalone HR and Payroll Officer for a manufacturing company. After 6 years, she chose to move to the HR advisory service to offer a personal service and support to small and medium business across all sectors. With this in mind, Jeanette provides a wealth of knowledge and pragmatic advice in a clear and simple way to assist clients achieve their aim whilst minimising risk and disruption. The client and their business needs are always at the heart of Jeanette’s advice.