NOTE: This blog post was updated on 27 July 2020 to include new information on early entitlement funding. Update is included at the bottom of the post.
- Covid-19: Financial support for education, early years and social care
- Use of free early education entitlements funding during coronavirus (COVID-19) (Updated 20 July 2020)
What is the Coronavirus Job Retention Scheme?
The Job Retention Scheme is a government scheme where employers can apply for a government grant to cover 80% of the monthly wages for furloughed employees. Furloughed employees are staff who are still employed, but not currently working.
More general information about the scheme is available here.
Who can access the Job Retention scheme?
The scheme only applies to settings who employ staff. This includes nurseries, pre-schools and childminders who employ assistants.
If you are a childminder with no staff, you will receive support from the government via the Self-employment Income Support Scheme, not the Job Retention Scheme. More information on that scheme is available here.
I receive government funding. Does the new guidance mean that I can’t furlough staff?
No, it doesn’t mean you cannot furlough staff. If a setting receives any private (non-government) funding, then it is impossible to say that any staff member is solely funded through ‘free entitlement’ funding. In the vast majority of cases, staff wages will be funded through a mix of funding and private income. In such circumstances, staff can still be furloughed, but the level of financial support the government is willing to provide will now vary.
Ultimately, the more income a provider gets through government funding, the less support they will be able to get for staff wages through the Job Retention Scheme.
New guidance on the scheme was published on Friday 17 April. What has changed?
Previous Department for Education guidance for the early years stated that providers could receive early entitlement funding for children not attending their setting during the coronavirus period, and also claim 80% of wages for furlough staff through the Job Retention Scheme. This guidance made no reference to any additional conditions or limits.
However, on Friday 17 April, new guidance was published which detailed a number of limitations on how much providers who receive early entitlement funding can claim back for the Job Retention Scheme.
The Department for Education has said that this new guidance is simply a clarification, not a change. However, many providers have made business plans based on their understanding of the original guidance.
The Alliance is challenging the government’s decision to change its guidance at the latest minute. Thousands of parents and providers have written to their local MPs on this issue already – if you haven’t yet done so, you can fill out our simple form here.
However, in the interim, we feel it is vital that providers understand what the new guidance means, which is why we have produced this Q&A.
What does the new guidance mean? Can I furlough staff?
If your setting only receives government funding, and has no private income, you will be unable to furlough staff members. This is because your staff wages are already being fully funded by the government via the early entitlement scheme.
If your setting only receives private income, and receives no government funding, you will be able to furlough any staff members you choose to and receive 80% of their monthly wages via the Coronavirus Job Retention Scheme.
If you receive a mix of government funding and private income, which most providers do, then the amount of government support you can claim through the Coronavirus Job Retention Scheme will vary depending on what proportions of your ‘usual’ income come from government early entitlement funding and from private income.
The government has said that providers should use their income in February 2020 to represent their ‘usual income’.
What can I do if I am unable to furlough employee/s?
If you, the employer, cannot access the Job Retention Scheme Grant, due to receiving no private income in February, then there may be the possibility of reducing staff wages from your own funds.
Alliance members have been given more detail on this process by legal service Law-Call as part of their membership. The information is available in the Members' Area.
My setting receives both private income and early entitlement funding. How do I calculate how much support I can get for furloughed staff wages?
The proportion of your wage bill that you can claim wage support against is the same as the proportion of your usual (February) income that comes from private sources (i.e. not government funding).
For example, let’s say a setting received £10,000 in income in February. £4000 (40%) of the total monthly income came from government funding and £6000 (60%) came from private income.
This means that, under the new guidance, the setting could only apply for wage support on up to 60% of its wage bill.
Let’s also say that this setting has total monthly staff wage costs of £7,000. The setting should then calculate 60% of £7,000, i.e. £4,200. This is the maximum value of wage costs that Job Retention Scheme support can be applied against.
It’s important to note that this doesn’t mean that the setting would receive 60% of £7,000 via the Job Retention Scheme. It means that only 60% of £7,000 (i.e. £4,200) would be eligible for government support via the scheme.
This means that the government could pay 80% of £4,200 via the Job Retention Scheme – that is, £3,360.
To claim this, the setting would need to identify staff whose monthly wages add up to £4,200, and then apply for Job Retention Scheme support for these wages.
I have calculated how much of my wage bill is eligible for Job Retention Scheme support, but no combination of staff wages comes to exactly the same amount. What happens to the ‘leftover’ wage?
Let’s say the setting in our example, which has a total monthly paybill of £7000, employed seven employees, each earning £1,000 per month.
We have already established that this setting can only furlough employees whose combined salary comes to no more than £4,200 (60% of the total paybill).
This would mean that the setting could only furlough four members of staff, with a combined salary total of £4,000.
This is because furloughing a fifth member of staff would take the combined salary total of £5,000, more than the limit of £4,200.
The setting would not be able to claim 80% of the leftover £200 as this does not equate to the full wage of any member of staff.
As such, when calculating how much support your setting is able to receive via the Job Retention Scheme, it is important that you base this on actual staff wages to get an accurate picture of the level of support you will receive.
What happens if the amount of government funding we receive changes?
The government guidance states that if a provider receives additional early entitlement funding as a result of, for example, providing additional hours of childcare, the provider would need to:
- recalculate what percentage of its ‘usual’ (February) income this new level of funding would represent
- work out what percentage of its usual income is therefore now accounted for by private income
- reapply the steps outlined above.
For example, if the setting in our example saw its early entitlement funding increase to 55% of ‘usual’ income, then this would mean that private income now accounts for 45% of usual income.
This means that the setting would now only be able to claim Job Retention Scheme support against 45% of its total monthly wage bill.
As the setting’s wage bill is £7,000, this would mean that the setting could claim support against 45% of £7,000, which is £3,150.
Again, this doesn’t mean that the setting would receive £3,150 from government via the Job Retention Scheme. It means that £3,150 worth of staff costs would be eligible for government support via the scheme.
This means that the government could theoretically pay 80% of £3,150 via the Job Retention Scheme – that is, £2,520.
However, as each staff member at this setting earns £1,000 a month, in reality, it would mean that the setting could furlough three members of staff, and receive 80% of their combined wages (80% of £3,000 i.e. £2,400) via the Job Retention Scheme.
If, however, the setting's 'free entitlement' funding went down to 30% of their 'usual' income, then the setting would now be able to claim Job Retention Scheme support against 70% of its total monthly wage bill.
As the setting’s wage bill is £7,000, this would mean that the setting could claim support against 70% of £7,000, which is £4,900.
Again, this doesn’t mean that the setting would receive £4,900 from government via the Job Retention Scheme. It means that £4,900 worth of staff costs would be eligible for government support via the scheme.
This means that the government could theoretically pay 80% of £4,900 via the Job Retention Scheme – that is, £3,920.
However, as each staff member at this setting earns £1,000 a month, in reality, it would mean that the setting could furlough four members of staff, and receive 80% of their combined wages (80% of £4,000 i.e. £3,200) via the Job Retention Scheme as furloughing a fifth member of staff would take the combined wage bill to £5,000, which is more than the limit of £4,900.
What will be the impact of using February income to represent our ‘usual’ income given that this is a short month and also includes a half-term?
In additional guidance published on 28 April, the DfE confirms that providers should initially use February 2020 to represent their 'usual' income when calculating the proportion of their salary bill that can be covered by the scheme - this is "to provide the closest 'usual' month before any coronavirus-related closures or absences".
The guidance adds that where local authority payments are termly, providers should "calculate on the basis of the income which could reasonably be attributed to February from their full termly payment" adding that "local authorities will need to inform providers of an indicative termly budget share for this purpose if they have not already done so".
It also states that "where income and outgoings were artificially affected by half-term, providers should apply average income/costs across the 3 non-half-term weeks to the whole month".
Update July 2020 - Plans for Autumn 2020 and beyond
The Department for Education has shared its plans for early entitlement funding for the autumn term 2020 and beyond.
The guidance states that local authority funding for the 2020 autumn term will be based on the January 2020 census data. The DfE says that this is in recognition of the fact the number of children attending settings may not have returned to normal levels by January 2021.
From the autumn term local authorities will be expected to continue funding providers who are open "at the levels they would have expected to see in the 2020 autumn term had there been no coronavirus outbreak". They should also continue to fund providers which have been advised to close, or "left with no option but to close, due to public health reasons". Local authorities are not expected to fund providers which are closed "without public health reason".
The DfE intends to fund settings "as if autumn term 2020 were happening normally". To do this, local authorities should use the numbers of children in places in the previous autumn term to inform funding levels this autumn.
In "exceptional circumstances" local authorities will be able to "redirect early years dedicated schools grant from providers that are closed" to ensure that there is childcare available for key worker families and vulnerable children.
The DfE guidance also encourages local authorities to consider increasing the frequency of payments to providers from termly to monthly to allow for adjustments as providers reopen.
The government expects to return to the normal process for early years funding in January 2021.
The full guidance can be found here
When applying for the Job Retention Scheme you need either a UTR or CRN or Corporation Tax Unique Taxpayer reference. As a charity pre-school we do not have those references. What should I do?
Where an organisation has a CT UTR, SA UTR or CRN, they must enter it when making a claim. For those entities such as charities that don’t have one or more of those references, they should enter “no” into each of those fields and they will be asked for their employer name, which they must then enter. The HMRC guidance says:
You also need to provide either:
- your name (or the employer’s name if you’re an agent)
- your Corporation Tax unique taxpayer reference
- your Self Assessment unique taxpayer reference
- your company registration number
Read the full guidance - Use of free early education entitlements funding during coronavirus (COVID-19)
We know that there are many other questions on how this scheme will work in practice. For example queries on what exactly can be counted as ‘private income’.
These, and the many other questions we have received, have put to the Department for Education, who are currently in the process of putting together answers to each of them. In the meantime, please continue to send questions you have to firstname.lastname@example.org so we can push for answers to these too.
Challenge the government's U-turn on the Job Retention Scheme and 'free' entitlement funding
The Alliance has an MP email campaign to support you to write to your MP on this issue. You just need to fill in a short online form with your details, including postcode, and your concerns, and your email will be sent directly to your local MP on your behalf.
Webinar: Furloughing for the early years