CMA Early Years Investigation - FAQ
The Competition and Markets Authority (CMA) have published details of its investigation into the early years sector.
The results aren't really surprising. The CMA has essentially ruled that childcare provider contracts must be fair and reasonable.
• If a childcare provider can't provide services, through no fault of the parent, then it isn't reasonable to charge.
• If a parent pays in advance for childcare services due to commence in the future and a subsequent event happens that means the childcare provider can't provide the services, then the parent should be refunded.
• If a childcare provider contract states that parents should pay even if services can't be provided then such a clause is likely to deemed unfair and unenforceable even if the parent has signed the contract.
FAQ for Childcare Providers
Do I have to issue refunds to parents who have paid me for services I have not provided?
You do not have to issue automatic refunds but if you forced a parent to pay when you weren't able to provide services and they request a refund then you should probably give them a refund.
My parents made voluntary payments to me - I never forced them to pay
In that instance, you wouldn't be required to give a refund as long as you have evidence that the parent understood that they were making voluntary payments to you, even though there was no obligation for them to do so.
My contract says parents have to pay me x% if I can't work and they signed the contract
A contract has to be fair and reasonable and if elements are not then they may not be legally binding. In this instance, the CMA have ruled that such clauses could be unfair and the parent may be entitled to a refund.
I was open for key workers and some of my parents are key workers. Surely they should still pay?
Yes, perhaps. If you remained open to provide the full contracted services to key workers then it is likely you would not have to provide them with a refund as you were still able to fulfil the contract.
I don't care what the CMA say - I am not going to give a refund if a parent asks
The CMA have stated that they won't be undertaking any enforcement action right now against childcare providers but given the CMA ruling, the parent could issue legal proceedings against you and the court would be likely to rule in the parents' favour if your contract and charges were deemed to be unfair or unreasonable. The CMA also have powers to fine childcare providers for any future breaches of legislation.
I'm open but a parent is choosing not to send their child
If you are open and available to provide childcare as normal then you are likely to be able to continue to charge parents even if they choose not to send their child for any reason.
Can I charge parents when I am on holiday?
You can't generally charge if you are not open and are unable to provide childcare services but parents can make voluntary payments.
What about bank holidays?
The CMA has stated that if a childcare provider can't provide services, through no fault of the parent, then usually it isn't reasonable to charge. If you have a fixed weekly or monthly charging structure then parents might be agreeable to the same rate being charged even if the week or month contains one or more bank holidays when you are closed. However, if the parent refuses to pay for a bank holiday due to you being closed then it is unlikely you could force the parent to pay.
Are there any exceptions?
The CMA have said that they would be unlikely to object to a term which allows a childcare provider to request payment of a small contribution to its costs whilst the service is disrupted for a limited period. However, this contribution must be low, apply for a specified and modest time period and stop being charged if the parent decides to exit the contract to avoid further payment.
It isn't clear exactly what the CMA would deem to be a 'low contribution' or what they would regard to be a modest amount of time. Childcare.co.uk are currently seeking further clarification on this.
I'm very worried about this - I can't afford to give refunds
Try not to worry. Your relationship with the parents of the children that you care for is key. You both need each other. Unless the parent demands a refund then you are not obligated to provide one but you should ensure that your contracts and business practices are compliant in the the light of the CMA's findings. If a parent does request a refund, then you should explain your circumstances to them and try and find a mutually agreeable solution that you are both happy with. You should do everything you can to try and appease your parents and avoid them issuing legal proceedings. If the matter goes to court then you are likely to lose and have to pay additional costs and legal fees. The CMA also have powers to fine childcare providers who do not comply with consumer legislation.
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