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Catch 22 How To Pay Staff Pensions But Not Increase Fees?


SueJ
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This is a bit of a long winded one but for those of you who like myself have a term time only business where the majority of your income is early education funding have you given consideration to how you are going to find the funds to pay a 3% pension contribution for qualifying staff. As the wages bill is the busisness' single biggest outgoing a 3% increase in this bill is going to be potentially financially crippling.

 

Although my business' pensions staging date is not until 2015 (and in practice not necessarily all my staff will qualify or wish to enrol) I am wondering how I find this potential 3% shortfall in my income as in theory this could apply to all of my staff if they choose to take up a workplace pension.

 

Having looked at my options I feel that I am in a bit of a Catch 22 situation - if I don't offer a workplace pension and contribute then I break the Pension Reform law - if I try to find the income by charging a top up fee I break the Childcare Act 2006. I have come to the conclusion that I should write to both the Secretary of State for Work and Pensions and the Secretary of State for Education to ask them which law they feel I should break or better still come back to me with a sensible solution as to how I am meant to find these funds!!

 

I have drafted two extremely long letters to both and wondered if anyone here would like to comment on them before I make a complete fool of myself xD :lol: xD :lol:

 

The Right Honourable Iain Duncan Smith MP.doc

 

The Right Honourable Michael Gove MP.doc

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Hi Sue

 

I don't envy your position. I employed less than eight members of staff so this wouldn't have applied to me but if it had, I would have been in exactly the same situation.

 

One query about your letter to Iain Duncan Smith - would increasing your Nursery Education Funding by 3% actually cover the cost you'll incur in making the pension contributions?

 

The only other observation I'd make is that I'm not sure I would include the last paragraph about Plain English - it might appear to be a cheap shot as far as he is concerned. Mind you, if you were writing to Michael Gove it would be entirely justified! ;) I'll go and have a look at your letter to him next!

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I'd also argue that Michael Gove is probably able to ensure that funding increases, but that he isn't willing to do this. But I'm in a particularly tricky mood this afternoon! :ph34r:

 

Good luck with your letters - I hope you get a response. Have you thought about setting up an e-petition? I get lots of requests to sign them, and I think you'd get lots of support on this issue!

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Hi Maz

 

Thanks for the quick responses - yes the last bit is a cheap shot but then that way I will feel justified in responding if I get a reply in parlimentary gobblydegook!!!

 

Wouldn't have the first idea how to set up an e-petition - have usually done my sabre rattling face to face but I think that this is a bit of an issue in early years that needs flagging up on a wider scale and the forum is a good place to get some feedback and perhaps alert others to this particular conundrum - I have no doubt that Michael Gove or more likely one of his minions will respond telling me that money is tight but I will be interested to know where he would like me to find the money from if he doesn't dip into his pocket which is somewhat deeper than mine!

 

Let me know how to set up an e-petition and who knows it could be the pebble that starts a few ripples.

 

You're quite right 3% won't really cover costs but it would be a start ! xD :lol: xD

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I agree that this is a ticking time bomb for many small employers, which let's face it, covers many us users here. Infact I imagine that many many settings have absolutely no idea that this is coming. With regard to funding, I remember having a similar conversation with my LEA about the increase in holiday pay entitlement. When I asked was this going to be reflected in our FNEP funding, the reply was "I don't know anything about holiday entitlement". I suspect they will give me the same answer about compulsory pension contributions as well!!

 

I think that we as employers have a real problem being understood as "businesses" with our LEA's and with the government i general.

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Well done, I look forward to the reply. I did read this was 'just around the corner', not sure how groups are expect to find the extra money though.

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Couldnt have put it better myself :D

Might I add that copies to your own MP might speed up a response or even ensure one? Copies to David Cameron and Nick Clegg woudnt go a miss either!

If you work out how to set up a petition I'll sign it.

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Am fine tuning now - have done a letter to local MP with copies of letters to ministers of state - after all why should he escape xD

 

The ICT savvy daughter has promised to give me an e-petition tutorial and I am wondering whether to send copies to my LA Early Years Finance Officer as she is v. on the ball and often sympathetic to plight of settings living off EEF.

 

As Dorisdarling and EYFS1966 have suggested not many seem to know that this is coming and it's such an unsexy topic that its only had 137 hits on here !!!!!

 

Know a good spin doctor anyone?

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Happy to sign any petition too!

 

I have to confess this has completely passed me by, although we have an administrator so hopedfully she will know all about it! I've rad through everything I can find online, and can't find any reference to employees with less than 8 staff not having to join HappyMaz. We only employ 7 and only 1 of these is likely to be above the earnings threshold.

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As Dorisdarling and EYFS1966 have suggested not many seem to know that this is coming and it's such an unsexy topic that its only had 137 hits on here !!!

That might be due to the mix of membership here: I wonder how many people are leaders of their settings, or are responsible for budgets and so on. Also, as Devondaisy points out that my assertion that a small group wouldn't be affected is incorrect, maybe people feel this is an issue that doesn't affect them?

 

In which case, an e-petition is even more necessary!

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I thought it was less than three staff- however I now cannot find where I got this from. I must admit I am burying my head in the sand a little with this as if we have to contribute it without bumping up fees (and by fees I mean charging funding children as well) I'm not sure how we will do it.

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The new pension reforms mean that there will be no exemptions for small businesses and the reforms must be applied, even if you employ just one person. This is different from the old stakeholder pension scheme where you had to have a minimum number of employees.

 

You must enrol eligible jobholders into a pension and they are defined as follows:

 

"Eligible jobholders

 

Workers you will need to automatically enrol are known as ‘eligible jobholders’. These are workers who:

  • earn more than the minimum earnings threshold;
  • are aged between 22 and state pension age; and
  • work in the UK."

There is some useful information about pensions from DirectGov http://www.direct.go...page&pla=google

 

 

and Businesslink http://www.businessl...icId=1084109972

 

and the Pensions Regulator http://www.thepensio...ons-reform.aspx

 

The only benefit of being a small business is that your staging date will be after October 2012 as the big businesses have to go first.

Edited by SueJ
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Working on it - there are several hundred pensions e-petitions but none that I can see that cover this Catch 22 situation - am still fine tweaking the letters I am sending as the first salvo and then have to summarise to 1000 words the contents for the e-petition - when have done this will report back!

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There seems to always be some confusion about businesses v charities. In the past I have come up against this conundrum several times. I have been told "you can't do xyz because you are a charity, not a business" but I expect that in this case we'll be classed as a business.

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Lol re head-burying, Rafa!!

 

http://www.thepensionsregulator.gov.uk/employers/tools/staging-date.aspx

 

You need your employer PAYE reference number (found mine on P60) as you need to enter the last two digits. It's really quick then and apparently they write to us 12 months before as well so at least there's a little time to introduce fee increases I guess. And no doubt the LAs will increase the EYFE rates accordingly ROFL

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  • 3 weeks later...

Update!!

 

Well I have sent off my letters and (sorry Maz) kept in my slightly sarcastic suggestion that my letters would be pass to a parlimentary minion. This may well however of hit a nerve.

 

My local MP has written to me (I copied him in on the letters) and he has now written to both secretaries of state to "request sight of their replies". He seems to think that this should ensure that my letters are passed to a Minister. Here's hoping.

 

Will keep you updated!

 

My LA EYFS Improvement Manager has also forwarded my letters on to TACTYC - The Association for the Professional Development of Early Years Educators as she is a member and thinks that this issue needs to be addressed.

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  • 2 months later...

Update

 

Well the parlimentary cogs have been chugging thanks to the intervention of my local MP. I have had a letter from my MP written to him by Sarah Teather (not quite the head honcho but she will do).

 

The upshot is as follows:

 

"Although local authorities receive funding for free early education places from central government through the Dedicated Schools Grant, the actual rate paid to providers like XXXXX is decided by the local authority. All local authorities are required to use an Early Years Single Funding Formula (EYSFF) to determine the rates they will pay providers in their area. The EYSFF should be based on a detailed understanding of local providers' costs, inclduing employment costs like pension contributions, and local authorities are expected to design their EYSFF in close consultation with providers. The EYSFF was introduced to improve the fairness and transparency of the way funding is allocated by local authorities. The sustainability of providers should be a key consideration for local authorities when setting their rates.

 

"Ms XXX may like to look at the national EYSFF guidance which shows the factors local authorities take into account when designing their funding formulae (http://tinyurl.com/eysffguidance). XXXX Council will be able to provide more details about how rates are set locally. In addition, the Council has a legal duty to provide information, advice and training to childcare providers."

 

This response places the ball very firmly in my LA's court and my local MP says "In the circumstances I am sure you will wish to contact the Council, and I would be very interested to learn the outcome of your approach".

 

NEXT STEP

 

Well so far I am aware that the Government pays the Dedicated Schools Grant to Local Authorities and that this is "looked after" by the Schools Forum. There are 2 Early Years Reps on the forum - one representing Childminders and the other early years settings. I have already made tentitive enquires about how the LA has a "detailed understanding of providers' costs - I guess with this response I can ramp up the pressure particularly as the guidance document (clause 1.4) states that LAs have to have done a cost survey - I so want to look at that !! and that (clause 1.7) sustainability is a key consideration.

 

I will also be asking my LA if there is an appeals process for providers to challenge their LAs "detailed understanding of providers' costs".

 

Maybe we should all be asking our LAs the same questions - time to start rattling the cages xD :lol: xD

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With regard to the SFF and schools forums I was until recently the EY rep on our local schools forum. From this experience I can tell you that the LA will have done a cost survey and will have used this in determining the level of SFF. In our case I was very happy with the way the SFF was allocated and it was done very equitably across the different sectors. The government is right in saying the determination of the levels paid are down to the LA. However, what this does not address is the fact that the LA may well be playing with a pot of money which is not only too small to cover the true costs of both maintained and PVI EY providers (along with everything else that needs to be paid out of it!), but which is also decreasing year on year in real terms. Personally I wouldn't be happy with the reply as it is failing to address the real issues of the true costs of early years care and education, and how these are funded by the country as a whole.

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I hear what you are saying Holly35 but the next stage is to go back to the LA and ask to see the cost survey first and how that fits with the EYSFF allocation for my area. If it can then be shown that the LA have insufficient funds it's back to Sarah Teather to justify how LAs can meet provider costs from an insufficiently funded pot.

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I do agree Sue. That way you can face them with evidence that there is no more money! It just annoys me at the moment that in their haste to decentralise (most things it seems, but then that doesn't always ring true!) the current government keep throwing it back on LAs and almost seem to be setting PVIs and schools up to engage in a fight with the LA whilst stepping back and saying "see not our fault"! I know my LA has been part of the f40 group for many years trying to get a better financial settlement for the authority, and I see too many PVI providers in my area who seem to think the LA is sitting on a big pile of money somewhere!

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