Business advice - common questions

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We know the early years sector is understandably extremely worried about the impact of Covid-19 on their families and future sustainability.

We know there are many more questions about how childminders, nurseries and pre-schools will be supported through this outbreak and second lockdown and we're continuing to raise these to government. 

These meetings will continue on a regular basis so we will have the opportunity to raise the questions we receive from our members and the wider sector to try and get clarity on the key issues facing you over the next few months.

The Coronavirus Job Retention Scheme (JRS), or Furlough Scheme, has now been extended to the end of September 2021.

Read a summary of the March 2021 Budget.

Or view the full collection of March 2021 Budget documents.

What business support is available for childcare providers during this period?

Business rates relief

Business rates: The business rates holiday for early years providers was extended until 30 June 2021, alongside other eligible retail, hospitality and leisure properties. There is now a 66% rate relief until 31 March 2022, with a cap of £105,000 per business for those businesses that were not required to close as of 5 January 2021.

Read: Budget 2021- what you need to know

The Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme means that for employees who are not working but kept on payroll (furloughed), the government will contribute the majority of each worker’s wages of up to £2,500, backdated to 1 March 2020. The scheme was due to end on 31 October but has been extended to the end of September 2021.

In August and September, employers are expected to pay for 20% of workers’ wages.

Self-employment Income Support Scheme

The Self-employment Income Support Scheme (SEISS) is for those who are self-employed or members of a partnership and have lost income due to Covid-19.

The scheme allows individuals to claim a taxable grant worth 80% of trading profits up to a maximum of £2,500 per month for 3 months.

A fifth SEISS grant is available to self-employed individuals who think that their business profit will be impacted by Covid-19 between 1 May 2021 and 30 September 2021. 

Claims must be made before 30 September 2021.

Read: Claim a grant through the Self-Employment Income Support Scheme


Other support
  • Tax rates: Corporation tax will rise to 25% from 19% from April 2023 on profits over £250,000. However, this will not apply to businesses with profits less than £50,000 and there will be additional relief for businesses with profits under £250,000. From 2022, the personal income tax allowance of £12,570 will be frozen until 2026, rather than rising in line with inflation.  

  • Apprenticeships and training: Employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive a direct payment of £3,000 per new hire, compared with £1,500 per new apprentice hire (or £2,000 for those aged 24 and under) under the previous scheme. This is in addition to the existing £1,000 payment the government provides for all new 16-18 year-old apprentices and those aged under 25 with an Education, Health and Care Plan, where that applies. Portable apprenticeships will also be extended. 

  • Sick pay and isolation: The Statutory Sick Pay (SSP) Rebate Scheme will continue so employers with fewer than 250 employees will still be able to reclaim up to two weeks of eligible SSP costs per employee. £500 Test and Trace support payments will continue in England until the summer. 
  • VAT payments due with VAT returns between now and the end June 2020 will be deferred. UK VAT registered businesses will not need make those payments until March 2021.
  • A £20 per week increase to the Universal Credit standard allowance and Working Tax Credit basic element and an increase in the Local Housing Allowance rates for Universal Credit and Housing Benefit claimants so that it covers the cheapest third of local rents.

Coronavirus Job Retention Scheme, Furlough Leave and Related Employment Matters

What is the Coronavirus Job Retention Scheme?

The Coronavirus Job Retention Scheme is a scheme where employers can apply for a grant to cover a proportion of usual monthly salary costs of furloughed employees. Furloughed employees are employees who are still employed but are not currently working.

The grant, which does not need to be repaid, will be a maximum of £2,500 a month per employee, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that salary. Fees, commissions and bonuses are not included.

Why has the scheme been introduced?

The scheme is designed to minimise the need for redundancies (because of provision closures or a downturn in business) during the coronavirus outbreak. It introduces a new concept of employees being furloughed and kept on the payroll. 

If a staff member’s wage varies from month to month, how will the scheme work?

If an employee has worked at a setting for at least 12 months before a claim is made, but their pay varies, employers can claim for a grant based on whichever is the higher of: the same month's earning from the previous year (e.g. earnings from March 2019); or average monthly earnings in the 2019-20 tax year.

If the employee has been employed for less than a year, the employer can claim for an average of their monthly earnings since they started work.

How long will the scheme run?

Chancellor Rishi Sunak has confirmed the Coronavirus Job Retention Scheme will run until the end of September 2021.

During this time, the government will pay 80% of up to a cap of £2,500. Employers will pay employer National Insurance Contributions (NICs) and pension contributions only for the hours the employee does not work

Which employers is the scheme open to?

The scheme is open to all UK employers (small or large, charitable or private) that had created and started a PAYE payroll scheme on 28 February 2020.

What’s the minimum period that a staff member can be placed on furlough leave?

Employers can bring furloughed employees back to work for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked.

Which employees are eligible?

You can claim for employees who were employed on 2 March 2021, as long as you have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021, notifying a payment of earnings for that employee. You do not need to have previously claimed for an employee before the 2 March 2021 to claim for periods from starting on or after 1 May 2021.

The employee can be on any type of contract, including: full-time employees part-time employees employees on agency contracts employees on flexible or zero-hour contracts.

To be eligible for the subsidy, an employee cannot undertake work for or on behalf of their setting while on furlough leave. This includes providing services or generating revenue. 

More updated guidance on who is eligible here.

Can early years staff on reduced hours benefit from the scheme?

Employers can bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim the grant for the hours not worked. 

What if members of staff are self-isolating or are sick?

Government guidance states that the Coronavirus Job Retention Scheme is not intended for short-term absences from work due to sickness, and that if an employee is on sick leave or self-isolating as a result of coronavirus, they may be able to get Statutory Sick Pay.

However, the guidance also states that if an employer wants to furlough an employee for business reasons and they are currently off sick, they are eligible to do so, as with other employees. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee. Employers can furlough employees who are on long-term sick leave.

Employers can claim back from both the Coronavirus Job Retention Scheme and the SSP rebate scheme for the same employee but not for the same period of time.

What about staff shielding in line with public health guidance?

Employees who are shielding in line with public health guidance can be placed on furlough. Shielding is required for people, including children, who are at very high risk of severe illness from coronavirus (COVID-19) accessing the provision. It’s also for their family, friends and carers.

Can staff who have no childcare of their own be furloughed?

Yes. Government guidance state that employees can be furloughed where they are unable to work because they "have caring responsibilities resulting from coronavirus, including employees that need to look after children".

What about a change in ownership and employees who have transferred under TUPE?

If you’re claiming for a period beginning on or after 1 May 2021 and you employ someone who was transferred from another business, you can claim under the normal rules if they were included on a PAYE Real Time Information (RTI) submission to HMRC on or before 2 March 2021.

Otherwise, you may still be eligible to claim in respect of the employees if the TUPE or PAYE business succession rules apply to the change in ownership.

The new employer can claim for employees transferred on or after 1 January 2021. The transferred employees must have been:

  • employed by the old employer on or before 2 March 2021
  • transferred from their old employer to their new employer on or after 1 January 2021
  • included on a PAYE Real Time Information (RTI) submission to HMRC, by their old employer, between 20 March 2020 and 2 March 2021

Read more guidance on TUPE rules.

Read more guidance on business succession.

Will employees continue to accrue service and annual leave?

Employees will remain on the payroll and therefore continue to accrue continuous service and their annual leave. Settings are obligated to ensure that staff are entitled to the statutory annual leave entitlement of 5.6 weeks. Where enhanced annual leave is provided any variation will normally need to be agreed. Settings should review their contracts and Alliance members can obtain legal advice from the free member legal advice service Law-Call. 

What if an employee has more than one job? 

Both employers will be able to make a claim under the scheme. 

Can an employee work while on furlough leave?

A staff member of furlough leave can take part in volunteer work as long as it is for another employer or organisation.

Furloughed employees can take part in training for their childcare setting, as long as it does not provide services to or generate revenue for, or on behalf of, the setting. However, if employees are required to, for example, complete online training courses whilst they are on furlough leave, then they must be paid at least the National Living Wage or National Minimum Wage for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

If staff have already been put on short-term hours working, can this now be converted this to furlough leave?

If staff have already been put on short-term hours working, can this now be converted this to furlough leave?

If employees have already put staff on short-time working on reduced pay, then employers should be able to vary this arrangement so that staff can benefit from the grant payment.

A short term contract must be for a fixed duration and will come to an end once the end date is reached or, if the contract is for a specific task, when the task is complete. Specific advice should be sought from a legal advisor or helpline. Alliance members can contact Law-Call, the 24-hour legal helpline. 

What information will settings need to make a claim?

To claim, employers will need:

their ePAYE reference number

the number of employees being furloughed

the claim period (start and end date)

amount claimed (per the minimum length of furloughing of three weeks)

their bank account number and sort code

their contact name

their phone number.

HMRC has stated that it will retain the right to retrospectively audit all aspects of the claim.

Can a setting make more than one claim?

Employers can only submit one claim every three weeks. 


Early entitlement funding in 2021

The Department for Education has confirmed that during the summer and autumn terms, funding will be based on termly attendance counts.

The full guidance can be found here.

The Coronavirus Job Retention Scheme and ‘free entitlement funding’

Government guidance - Coronavirus (COVID-19): financial support for education, early years and children’s social care - states that private early years providers should only furlough employees through the Coronavirus Job Retention Scheme if the following conditions are met:

  • the employee works in an area of business where services are temporarily not required and whose salary is not covered by public funding
  • the employee would otherwise be made redundant or laid off
  • the employee is not involved in delivering provision that has already been funded
  • the employee is not required to deliver provision for an attending child
  • the grant from CJRS would not duplicate other public grants received and would not lead to financial reserves being created

Government guidance additionally states that employees can be furloughed where they are unable to work because they:

  • are shielding in line with public health guidance (or need to stay at home with someone who is shielding)
  • have caring responsibilities resulting from coronavirus, including employees that need to look after children

If it is difficult to distinguish whether staff are funded through continuing public funding, for the purposes of meeting the first 3 conditions listed above, then the total proportion of staff (based on gross payroll) that are retained (for example, not furloughed) should, as a minimum, be equivalent to the continuing DSG funding, as a proportion of all income that the provider usually receives. For example, if the current DSG funding is equivalent to 25% of normal total income, then this should be the proportion of staff (based on gross payroll) that could not be furloughed.

Read the full guidance.

More information is available in the Alliance’s FAQs specifically on the Job Retention Scheme and Early Entitlement Funding.

Implementing furlough leave

How should I select which staff to place on Furlough Leave and which staff to continue working?

You must be careful not to discriminate when deciding who you will offer Furlough Leave to. The Equality Act and the duty to consider the health and safety of individuals will still apply. You should consider the following key points when taking the decision:

the business needs of the organisation (i.e. which roles are critical)

if staff roles are identical you could ask for volunteers

rotate Furlough Leave amongst employees complying with the minimum three week period (subject to clarification)

health or other relevant circumstances of individuals (place those at risk on Furlough Leave first)

ensure that sufficient staff are in place to carry on operating.


This is not an exhaustive list. 

You should record the reason for your decision and clearly communicate this to staff in an open and transparent manner. 

What process do I need to go through to furlough staff on 80% of their salaries?

You should make sure any process followed is fair and involves consultation with each employee affected. Furlough Leave should not be unilaterally imposed without written consent. In seeking to agree a temporary variation to the contract to place an employee on Furlough Leave, consideration must be given to the following practical steps: 

  • check the employment contracts for staff (including short term layoff clauses, consultation requirements and notice periods for changes)
  • discuss the business case for the change with the employee
  • where there is no provision in the contract to reduce pay, you are required to obtain written consent; (you may be able to impose a reduction in pay in line with the relevant clause within the contract of employment – however, you will still need to deal with the matter appropriately, proportionately and sensitively
  • you must ensure that the employee's consent was not obtained by duress and that your communications are propionate and reasonable
  • where a trade union is recognised for collective bargaining purposes, the trade union should be consulted
  • place staff on Furlough Leave from an agreed date if you do not have enough work for them or are closing the setting
  • confirm and obtain agreement in writing with affected staff 
  • inform staff that you will keep them updated.

Employment law requirements including consultation obligations and timescales will apply. However, this will be a challenge given the pandemic. Consequently, you should take legal guidance. Alliance members can obtain support from the free legal helpline Law-Call in our member area. 

In these extreme circumstances, employees (and any trade unions) may agree to a period of Furlough Leave because the alternative is likely to be redundancies. Where there is no provision in the contract to reduce pay, and the setting is unable to obtain agreement from the employees, then you should obtain legal guidance. 

Do we have to top up the pay of a worker on Furlough Leave to 100%?

The guidance makes it clear that this is the employer’s choice and is not compulsory. The decision may depend on the financial circumstances of the setting or organisation as a whole. However, there will need to be a clause in the contract to allow for a reduction of pay in these circumstances. Otherwise written agreement will be required from the employees. Specific legal advice should be sought, if settings intend to apply this top up to only certain groups of staff as this could lead to direct or indirect discrimination.

We cannot afford to top up our staff pay to 100% during Furlough Leave. What other support is available?  

Employees, whose income has fallen, may be eligible for other government support such as universal credit, or housing benefit. They may also be eligible for a three-month mortgage holiday.

What process do I need to go through to furlough staff on 100% of their salaries?

It is unlikely to be a breach of contract to place an employee on Furlough Leave (without their agreement) provided you pay them their full pay, and deal with the matter appropriately, proportionately and sensitively.

This will include:

  • discussing the business case with your employees
  • placing staff on Furlough Leave from an agreed date if you do not have enough work for them or are closing the setting
  • confirming in writing
  • informing staff that you will keep them updated.
Will an employee be entitled to their contractual benefits and to accrue annual leave during Furlough Leave?

Employees will be entitled to continue to receive all of the non-discretionary benefits of their contract, including the right to accrue annual leave, unless they expressly agree to waive these. Statutory holiday, 5.6 weeks per annum and minimum auto enrolment pension contributions cannot be waived and must therefore continue. Where you are seeking to agree to vary any terms and conditions during Furlough Leave you should obtain legal advice.

What decisions will the setting need to make if there is an ongoing financial impact of the pandemic?

Settings will need to decide whether to continue operating or to close. This will be a decision for settings based on their individual business and financial circumstances. Whatever course of action is chosen, employment law requirements must be followed. 

 I issued staff with notice of redundancy last week, can I re-employ then and place them on Furlough Leave?

Anybody who was on the payroll on 28 February 2020 and has since been made redundant can be rehired and put on the scheme with their agreement. Members should take legal advice from the free legal advice service, Law-Call, to ensure that they follow an appropriate process that will enable them to claim from the scheme.  

Does Furlough Leave apply to Casual Workers?

Technically no. However, you will need to consider the work pattern of individuals to understand whether they are truly casual workers. Further clarification should be sought from your legal advice service.  

Can staff be furloughed multiple times?

Employers can place staff on furlough more than once – and one period can follow straight after an existing one. The minimum length of a furlough period is three weeks. 

Employers will be able to bring employees back to work for any number of times and for any shift pattern ('Flexible furlough'). For example, an employee could be brought back for two days a week, with the furlough scheme covering the other three.

Employers can bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim the Coronavirus Job Retention Scheme grant for the hours not worked.

Can I ask furloughed staff to complete tasks remotely?

You cannot ask staff to do work for your setting once they have been furloughed. Staff can volunteer to do some tasks for your setting – but they cannot do anything that creates revenue or provides a service.

This means that staff may be able to volunteer to complete essential training courses remotely or stay in touch with families by posting information on Facebook, for example.

However, they cannot be asked to complete tasks such as providing lesson plans to parents or remotely offering services such as story time via Skype.

The intention is that staff will no longer be doing their job while on furlough.

If they are required to do any training courses or other services, they will need to be paid the National Living or National Minimum Wage for any time spent on this – even if this means that they are paid a higher rate than they would be through the Coronavirus Job Retention Scheme.


Other questions

How do I deal with staff who cannot or choose not to attend work during the national lockdown? 

The government has stated that nurseries and other early years settings will remain open to all families. As such, there is no change to the expectation that staff attend work on their normal scheduled shifts and observe all the protocols settings have in place regarding social distancing between staff and between staff and parents, sanitisation of equipment, surfaces and rooms, hand hygiene etc. which are all in place to minimise the risk of contracting or transmitting Covid-19.

However, there may be situations where staff must not attend the workplace, cannot attend the workplace or are choosing not to attend the workplace and how those absences are treated will depend upon the reasons behind them.

Further guidance on how to deal with these staff absences can be found here. Alliance members can also receive free legal advice from the Law-Call helpline; details of which can be found within the members’ area.

If parents' income changes due to the impact of Covid-19, are they still eligible for the 30 hours entitlement?

Parents who are normally eligible for the government’s childcare offers will continue receiving the entitlements during the summer term if their income levels fall due to the impact of coronavirus.

The Government has announced that any working parent usually eligible for 30 hours free childcare or Tax-Free Childcare will remain eligible if they fall below the minimum income requirement due to COVID-19. Subject to Parliamentary approval, parents who are critical workers will also remain eligible for these entitlements if their income has increased over the maximum threshold during the COVID-19 pandemic.

Read the guidance here

Can I delay paying my fees to the Information Commissioner's Office (ICO)?

If your renewal date is coming up and you are unable to pay your fees please get in touch with their registration department as soon as possible, so that they can make a note against their registration and see if they are able to stop the payment being taken, if you pay by direct debit. Once the current situation is over, the ICO will contact you to seek payment and it will be back-paid to your original renewal date.

What should I be communicating with Ofsted?

You can keep up to date with any updates from Ofsted here.


Our FAQs are not an exhaustive list of points for consideration. This is a new and fast-changing situation for providers and the wider sector.  For this reason, you should seek legal advice (Alliance members can access free legal advice as part of their membership, contact details are available in the members’ area).

We are also seeking further clarification from the DfE on a number of areas to ensure we are completely clear about implications for employers and employees. We will continually update these FAQs on our website as new information or further guidance is made available. 

While many employers will be pragmatic, we know that they will work hard to protect the interests of their employees. 

Any employer should be aware that if they fail to follow employment law requirements, their actions could potentially result in employment claims.

We have another FAQs for general operations of your early years business here.

Guidance for Alliance members

Alliance members have free access to Furlough Leave template letters in the Members’ Area.

Government financial support 

 The Coronavirus Job Retention Scheme

Coronavirus (COVID-19): financial support for education, early years and children’s social care

Use of free early education entitlements funding during coronavirus (COVID-19)

Self-employment Income Support Scheme

(Self-employed Income Scheme: How HMRC works out your total income and trading profits)

Small Business Grant 

Business rates: Nursery discount

Covid 19: Support for businesses


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