Funding follows the child and the national standard for early learning and childcare providers: guidance for local authorities

Section 3: The Real Living Wage Commitment

1. What is the real Living Wage?

The real Living Wage is a voluntary wage rate of pay, which is based on the cost of living. It applies to all workers aged 18 and over.

The rate is calculated by the Resolution Foundation and overseen by the Independent Living Wage Commission. These figures are calculated annually and are usually announced in November each year.

More information on the Living Wage can be found at: https://scottishlivingwage.org/what_is_the_living_wage.

For further information on the calculation of the Living Wage see: https://www.resolutionfoundation.org/app/uploads/2016/10/Living-wage-calculations.pdf.

2. What is the difference between the real Living Wage and the National Living Wage?

The National Living Wage is an enhanced legal minimum wage for workers that are aged 25 and over. This means that from 1 April 2018 all employers must pay all of their staff that are over 25 a minimum of £7.83 per hour. This will rise to £8.21 from 1^st April 2019.

The National Minimum Wage is the legal minimum wage for 21-24 year olds. Lower rates apply for those aged 18-20; 16-17; and for apprentices. The rates for each of these age groups for 2018-19 and 2019-20 are set out below.

Age group	Nationally defined legal minimum wages (from 1 April 2018)	Nationally defined legal minimum wages (from 1 April 2019)
25 and over	£7.83	£8.21
21 - 24	£7.38	£7.70
18 - 20	£5.90	£6.15
16 – 17	£4.20	£4.35
Apprentices	£3.70	£3.90

The National Minimum Wage rates are set by the UK Government. More information can be found at: https://www.gov.uk/national-minimum-wage-rates.

3. Do providers have to become Living Wage accredited to become a funded provider from 2020?

No. Whilst the Scottish Government encourages more providers to become Living Wage accredited, it is not required to meet the criteria.

To be a Living Wage accredited employer you must confirm that you pay all of your directly employed staff the real Living Wage that meets the cost of living, and have a plan in place for your contracted staff.

Further information on Living Wage accreditation can be found at: https://scottishlivingwage.org/userfiles/files/18%20Living%20Wage%20Employers%20Guide%202018.pdf.

4. Are any ELC providers Living Wage accredited?

There are already a number of Living Wage accredited private and third sector employers operating in the sector. More information on Living Wage accredited employers in the sector can be found at: https://scottishlivingwage.org/accredited.

There are also other private and voluntary sector providers in the sector who are paying at least the real Living Wage, but have not sought accreditation.

5. How do I become a Living Wage Accredited employer?

Information on how to become a Living Wage accredited employer can be found on the Living Wage Scotland site: https://scottishlivingwage.org/accreditation/how_do_you_become_accredited_as_a_living_wage_employer.

6. Who is covered by the ELC real Living Wage commitment?

The commitment covers all directly employed childcare workers in a setting who are providing direct care to children receiving the funded entitlement regardless of age or qualification and of the setting in which they are employed. This includes staff who are regularly employed by childminders to provide direct care to children.

7. Are Modern Apprentices included in the commitment?

In line with the requirements for Living Wage accreditation, apprentices do not have to receive the Living Wage - in recognition that particularly in the earlier stages apprentices may spend more time training than working. However, it is good practice to ensure pay rises over the course of the apprenticeship.

8. When will the commitment be rolled out?

The commitment will be introduced from August 2020 as part of the national statutory roll-out of 1140 hours and the introduction of the Funding Follows the Child approach.

9. Is there a timescale for providers to demonstrate that they are paying the real Living Wage to staff delivering the funded entitlement?

Providers who agree to deliver the funded entitlement will pay the real Living Wage to all childcare workers delivering the funded entitlement and commit to adopting and demonstrating Fair Work practices in their setting.

It is expected that providers will move to paying the real Living Wage to all childcare workers delivering the funded entitlement once they start to receive the sustainable funding rate from the statutory national roll-out of 1140 hours in 2020.

10. In the Fair Work criteria what is meant by "in accordance with the supporting guidance on Transition Options" with regards to payment of the real Living Wage to all childcare workers delivering the funded entitlement?

Scotland Excel are developing guidance on Transition Options, which will set out options for local authorities to consider when redeveloping their processes to assess ELC funded providers who are contracting with the authority.

This guidance will also set out potential options for implementing the real Living Wage commitment, including how to implement this criteria when tendering.

11. What funding will settings receive to enable delivery of the Living Wage commitment?

The Scottish Government has committed to providing the funding to allow local authorities to set sustainable hourly rates for funded providers in the private and third sectors from August 2020. This sustainable hourly rate will reflect the costs of paying the real Living Wage to ELC workers delivering the funded entitlement.

12. Why is the Scottish Government/local authorities not providing the funding for all workers – regardless of whether they are delivering the funded entitlement – to receive the real Living Wage?

It is the Scottish Government's ambition that all staff in ELC settings are paid at least the real Living Wage.

However, the funding provided by the Scottish Government/local authorities is for the delivery of a service on behalf of the public sector. A contract will be agreed by the provider and the local authority for the delivery of these funded hours. If funding were provided for non-funded hours then this could be interpreted as a subsidy and therefore could be in breach of State Aid Rules.

To put this in context the Financial Review of Early Learning and Childcare in Scotland, published in September 2016, highlighted that, on average, around 23% of income for funded providers in the private and third sector was from the funded hours. Whilst this is expected to increase with the delivery of the expanded entitlement from 2020, it is still expected that for many providers the fees that they charge to parents and carers for non-funded hours will be a significant (and in some cases still the largest) source of income.

It is also important to note that not all registered providers of daycare for children are delivering the funded entitlement. For example, Care Inspectorate data highlights that in December 2017 among private sector providers, 83 per cent of registered settings were delivering the funded entitlement.

It is at the discretion of providers as to how they operate the non-funded hours aspects of their business, reflecting their business model, cost structures and local market conditions.

It is not for local authorities or the Scottish Government to seek to comment on or intervene in the aspects of a funded providers business that are out-with of the funded entitlement.

13. Staff in my setting deliver a combination of funded and non-funded hours. Can I pay staff delivering non-funded hours less than the real Living Wage?

It is the Scottish Government's ambition that all staff in ELC settings are paid at least the real Living Wage.

The funding provided only covers the hours spent delivering the funded hours, and does not cover the hours that staff spend delivering non-funded ELC in these settings, either as 'wraparound care' or to children who are not eligible for the funded entitlement.

However, in line with the wider Fair Work criteria in the National Standard employers must demonstrate fair and equal pay policy within their settings.

The multi-year funding agreement provides the funding to enable providers to receive a sustainable funding rate for delivering the funded entitlement.

It is at the discretion of providers as to how they operate the non-funded hours aspects of their business, which will reflect their business model, cost structures and local market conditions.

It will therefore be a business decision for providers as to whether they provide the additional resource to uplift the salaries for all childcare workers, including those not engaged in delivery of the funded ELC provision, to the real Living Wage.

However, the purpose of this commitment is to recognise the contribution workers in ELC make to improving the quality of the experience for children. It is an opportunity to invest in ELC as a career of choice by helping to address one aspect of the recruitment and retention challenge in the sector.

14. What support will providers receive to support the implementation of Fair Work practices, including payment of the real Living Wage?

Whilst we understand that some aspects of the Fair Work criteria may initially appear challenging, we know that many providers are already delivering Fair Work practices in their day to day activity.

We will therefore, as part of our wider engagement events with the sector on the transition to 2020, work with the Scottish Government's Fair Work Directorate to run sessions with providers to identify what Fair Work practice looks like within an ELC setting and how they can demonstrate this. To support this, we will work with providers to develop case studies based on current ELC providers who are demonstrating fair work practices (and draw on lessons from other sectors). This will enable us to work through challenges with providers, and identify if any further supporting guidance is required.

We are also exploring, as part of the development of our Delivery Support Plan for Providers, the potential for some targeted advice and support to providers on implementing Fair Work practices, in particular, payment of the real Living Wage.