Subsistence fees are a type of fee that may be charged to children who are accessing the Local Authority funding, and using 15-30 hours funding per week for children under the age of five.

The funding is paid by the provider’s Local Authority directly to them, and each LA sets the rate that they pay. There is a different rate set for each age bracket for:

The rates are higher for younger children, and tend to decrease with each age bracket.

It’s important to note that the funding amount paid by Local Authorities isn’t expected to cover all costs associated with running a childminding setting.

The EY Entitlement Operational Guidance states:

Government funding is intended to deliver 15 or 30 hours a week of free, high quality, flexible childcare. It is not intended to cover the costs of meals, other consumables, additional hours or additional activities. Parents can therefore expect to pay for any meals offered by the provider alongside their free entitlement. Parents can also expect to pay for other consumables or additional activities offered by the provider, such as nappies or trips.

Local Authority agreements also include this guidance:

All Funded Entitlement sessions must be ‘free’ to parents at the point of delivery and there should be no conditions attached to a funded place.

Any additional extras such as the below should be clearly presented to the guardian and agreed prior to the child starting at the setting. It should be agreed in your contract and stated clearly on your invoice:

What this means in practice is that while you can include additional charges, you cannot require a parent to pay any fees for additional hours, consumables, activities, or any other costs as a condition of them taking up the placement with you.

It’s very important to consider whether you can offer funded placements without charging any additional fees to parents. Consider if you can cover your business expenses and earn enough to meet your business goals, based on the rates that your Local Authority pays.

Factor in the costs you may incur to provide childcare, for consumables such as food, nappies, suncream, or costs for outings, among others. Also consider other costs you incur for running your business, such as your heating and electricity bills.

Having considered all your costs, you may conclude that the Local Authority rate won’t cover all of your costs for consumables, fuel, outings and equipment. In this case it may not be cost effective or viable for you as a business to offer funded placements.

Alternatively, you may wish to charge a subsistence fee to the parents to cover these costs, so that you can offer funded places without running a loss. There are three key rules about subsistence fees that we’ll go into in more detail. Subsistence fees must be:

Local Authorities occasionally run audits and they do check any fees you charge to the parent. If you are audited, it’s important to make sure you are following these guidelines on how you charge any subsistence fees.

In almost all cases, tiney suggests that you do charge a subsistence fee when offering funded places. This is to ensure that your business is sustainable and can continue to grow and thrive as more families request funded care.

You cannot obligate a parent to pay a subsistence fee as a condition of using a funded placement at your setting - this must be an optional fee that they agree to pay. At the contract meeting, you can say that you would like to charge a voluntary subsistence fee to contribute to the cost of consumables, outings, and to ensure you are able to provide a high quality of care.

Many providers use subsistence fees to cover the cost of providing meals or nappies. Some parents may want to provide their own meals, nappies, or other consumables, so you may want to reduce or waive any fees for these parents.

If you know that your costs won’t be covered by the Local Authority payments alone, it may not be cost effective or practical for you to offer a funded placement - it would be best to discuss this with the parents before entering into an agreement.

This must be agreed with the parents - it’s best to discuss these fees with them during the initial meeting, when discussing the other contract details. The fees will then be included in the contract, and charged on any sessions where funding is used.

We recommend itemising the costs for consumables and trips that you will incur for a funded child, and rounding these out to charge an hourly or daily subsistence fee to contribute to these fees. These hourly or daily fees will then be charged on sessions that have funded hours.

For example - if you spend on average £2 per day per child on food, and any excursions cost on average £10 per week including transport, you may consider charging £4 per day as a subsistence fee for a child who attends 5 days a week.

These are fees that you incur over your other business costs like rent or mortgage, fuel, wages for any assistants, etc.

The government operational guidance states that any fees charged to parents must not be a top up fee, meaning you cannot just charge the difference between the hourly rate paid by the Local Authority and your normal hourly rate. This is in line with the terms set out by each Local Authority that either tiney or you as an individual provider have agreed to by offering funded placements.

We recommend looking at your costs to calculate a reasonable subsistence rate.