Funded early learning and childcare in private, third sector and childminding settings: delivery costs
This report presents findings from a national data collection exercise commissioned by the Scottish Government to understand the costs of delivering funded Early Learning and Childcare (ELC) in private, third sector, and childminding settings.
Staffing and Pay
This chapter examines staffing-related costs, which emerged as the largest single expenditure for most providers. It presents data on hourly pay rates across different roles, employer pension contributions, and the proportion of total costs attributed to staffing. The chapter also includes provider feedback on recruitment and retention challenges, wage pressures, and the implications of current funding arrangements for workforce sustainability and quality.
Average hourly pay by role
The survey collected detailed information on hourly pay rates across a range of staff roles within day care of children settings, including managers, senior practitioners, practitioners, support workers, and staff working towards qualifications (such as modern apprentices).
Reported pay levels varied by role, with the highest rates associated with managerial positions. The median hourly pay for managers was £18.00, while the corresponding figures for senior practitioners was £14.63, and for practitioners it was £12.87. Staff working towards qualifications reported a median pay of £10.00, and support workers working towards registerable qualifications a median pay of £12.60 (see Figure 7). Mean pay levels were broadly consistent with the medians, suggesting a relatively normal distribution of pay across settings.
| Measures | Manager | Senior Practitioner | Practitioner | Staff working towards qualification | Support worker |
|---|---|---|---|---|---|
| Median | £18.00 | £14.63 | £12.87 | £10.00 | £12.60 |
| Mean | £17.90 | £13.49 | £12.85 | £10.65 | £12.50 |
However, provider feedback highlighted a growing sense of pressure around pay. Many respondents described a “squeeze” on wages, particularly for practitioner-level roles, and expressed concern about their ability to remain competitive with local authority settings. Several providers noted that they were losing staff to council-run nurseries, which typically offer higher salaries, better pension contributions, and more secure employment conditions. This was seen as a significant challenge to recruitment and retention, especially in areas where local authority provision is expanding.
Most practitioner-level roles appear to meet or exceed the real Living Wage rate at the time of the survey being undertaken (£12.60 per hour) The data suggests that entry-level and trainee roles may fall below this in some settings, however in line with the requirements for Living Wage accreditation, and as set out in Section 2 of the Funding Follows the Child Operating Guidance, apprentices do not have to receive the real Living Wage. Providers emphasised that without sufficient funding to support pay progression, they risk losing experienced staff and undermining the quality of provision.
Respondents were asked whether they currently pay at least the real Living Wage to staff in their service, in line with Living Wage accreditation requirements. The majority of day care of children services (88%) indicated that all staff receive the real Living Wage, while 8% reported that only staff delivering funded ELC are paid at least the real Living Wage. Meanwhile, 4% stated that they do not currently pay the real Living Wage to staff.
Childminders were asked to report whether they paid themselves at least the real Living Wage. Response to this question was limited but of those who responded 37% reported that they did pay themselves at least the real Living Wage while 63% reported that they did not.
Pension Contributions
Providers were also asked to report pension contributions for staff. Among those who responded, the mean employer pension contribution was 4.91%, while the median contribution was 3.00%. It should be noted that the legal minimum for an employer contribution is 3%.
There was limited variation in these figures across settings with most reporting that they were making contributions of around 3%, see Figure 8.
Where there was variation, this likely reflects differences in pension schemes across settings, including whether providers offer enhanced contributions or adhere to statutory minimums. There was not a significant difference across types of providers.
Staff Costs as a percentage of total costs
Staffing emerged as the single largest cost driver across settings. Based on provider estimates, staff costs accounted for approximately 77% of total operating costs in day care of children services on average.
This figure aligns with findings from previous cost collection exercises and reinforces the centrality of staffing in any discussion of sustainable funding. It also underscores the importance of ensuring that rates are sufficient not only to cover wages, but also to support pension contributions, training, career progression, and maintaining existing pay differentials across posts.
Many providers provided data where all staff costs were merged together making producing estimates across salaries, national insurance and taxes difficult to establish. However, among those who provided broken down data we can estimate that staff costs were distributed as follows:
- 79% towards salaries
- 7% towards National Insurance Contributions
- 9% towards taxes
- 4% towards pension contributions
Providers consistently emphasised that staffing costs are not just a financial consideration but a quality issue. Many noted that the ability to recruit and retain qualified staff is directly linked to the rates paid for funded ELC, and that underfunding in this area risks undermining the quality and stability of provision.
Several called for greater recognition of the full cost of staffing, including pay, pensions, and professional development, within future rate-setting guidance.
Based on the responses provided, it is evident that volunteers play a varied role across some settings, particularly in third sector settings. In these cases, volunteers, particularly parents, contribute significantly to the running of the setting through participation in committees, boards of trustees, and management groups. These volunteers often give up their time to support administrative functions, fundraising efforts, and maintenance tasks such as gardening, cleaning, and DIY.
Respondents were asked whether they currently claim the Employment Allowance to reduce employer National Insurance Contribution costs. Six in ten (58%) respondents reported that they do claim the allowance, while 42% said they did not. This indicates that although a majority are making use of the allowance, a substantial proportion of employers are not currently benefiting from this available support.
Contact
Email: elc@gov.scot