Childcare businesses are worried they may struggle to maintain employment levels when government-backed free childcare ends in July alongside a wind-back in JobKeeper payments across the industry.
While childcare centres and all other businesses were initially told to expect JobKeeper payments to last until September, federal Education Minister Dan Tehan announced on Monday that Child Care Subsidy (CCS) recipients and sole traders running childcare services will lose access to the $1,500 fortnightly payments on July 20.
In the first variation to the $70 billion JobKeeper package since payments began flowing in May, the changes will coincide with the expiration of $1.6 billion in temporary emergency support measures for the industry, which included the provision of free childcare services for parents amid the COVID-19 pandemic.
Instead, the paused CCS will be reintroduced and bolstered with a $708 million “transition payment” designed to replace the wage subsidy scheme in the interim. This transition arrangement will last until September 27.
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Valued at 25% of an individual centre’s revenue between February 17 and March 1 —the period before COVID-19 saw industry revenue start to fall— Tehan said the payment is likely to be a “tiny bit less” than JobKeeper subsidies, but would spread further across the industry.
But Andrea Christie-David, director of Leor In Home Early Learning, is concerned the rollback of free childcare and JobKeeper payments together could spell trouble for businesses. Christie-David’s business operates in all Australian states and territories, except for South Australia, providing early childhood education and care for families in their own homes.
She is concerned about the new arrangements in part because the government’s transition payment is conditional on firms maintaining employment levels and not increasing fees beyond pre-coronavirus levels.
The requirement for businesses to maintain fee levels could also scupper a typical July 1 price increase, tied to inflation, which could put further cost pressure on childcare businesses.
“Once you introduce fees again, we don’t know how many enrolments we’re going to have, because we don’t know how much money parents actually have,” Christie-David tells SmartCompany.
“The issue is they’re saying you have to maintain staffing levels, but how can we do that if we don’t have access to JobKeeper and parents might actually withdraw their enrolments when fees come back into play?”
While variations to the $70 billion JobKeeper program have been flagged for weeks, Prime Minister Scott Morrison has previously said businesses should expect wage subsidies to last the legislated six months.
There have been suggestions JobKeeper could be better targeted and Treasurer Josh Frydenberg is due to hand down a review into the program in late July that will canvass options for reforming the program.
That review is likely to cover tweaks to the quantum of the wage subsidy payments, but Monday’s announcement indicates the government is already actively looking for ways to adjust the scope of the scheme.
Childcare attendance has risen to 74% of pre-coronavirus levels in recent weeks and the government has seized on growing momentum in the industry to push ahead with transition arrangements.
However, Christie-David says those figures are based on the provision of free services.
“A lot of businesses would have done their budgets for the next six months based on receiving JobKeeper — the fact they would just pull that out with six weeks’ notice, where the rest of the businesses in the country are relying on it, does seem quite strange,” Christie-David says.
The Australian Childcare Alliance (ACA) welcomed the transition measures in a statement on Monday, but said it was concerned about cost pressures on operators and uncertainty about enrolment numbers once free services end.
“We will monitor the pressure of operator costs to ensure the new policy settings regarding fees being maintained at February levels do not cause undue harm to families, educators or the providers,” ACA chief executive Paul Mondo said.
“It is obviously very difficult to predict the attendance outcomes of the weeks ahead, let alone months ahead at this point in time with so many possible variables in this current climate.”
The government has loosened activity tests for families until October 4 to support enrolments across the industry, offering families up to 100 hours of subsidies child care over the next four months.
“Nearly 80 per cent of providers in the childcare sector operate a single childcare service, and our childcare transition package is designed to support businesses to remain viable while they provide care to children as we ease restrictions further and get more people back to work,” Tehan said.