Summer presents a financial challenge to many centres as enrolments often decline when families make alternative care arrangements in July and August. Centres with school-age programs are most susceptible to enrolment drops in the summer. In addition, many staff naturally prefer to take their holidays during the summer. This increases the need for casual staff to maintain child-to-staff ratios.
In the past many centres have covered summer losses with surpluses earned during the rest of the year. Given declining enrolments and the possible reduction of subsidized spaces, centres may not have surpluses to rely on for subsidizing summer programs. As a result reducing summer losses and maintaining a viable program all year long are critical.
April is the time to finalize summer plans. If your centre’s summer program isn’t planned by the middle of May parents may make alternative care arrangements. Following are some suggestions to help cover summer costs.
Do you expect a loss this summer?
First you need to determine whether your summer program is expected to cover costs or run at a loss. Prepare a simple budget for July and August.
- Estimate revenue on a room-by-room basis.
- Ensure that you treat salary grants consistently. Include salary grants in revenue and grants paid out in staff costs or exclude both grant revenue and expenses to be consistent.
- Keep other expense categories to a minimum. Exclude overhead costs (e.g. insurance) which you must be pay regardless of whether or not you operate in the summer.
- Here is an example:
You now have an idea of whether your summer program will incur a loss or not. Losses arise from one of two sources: too little revenue or too many expenses. Let’s look at how you might both increase revenue and decrease costs.
Controlling revenue losses
A drop in enrolment is the single biggest reason for losses in the summer. To keep enrolment numbers up and revenue high:
- determine how many children already at the centre will continue on in the summer. Survey the parents to get an idea of how committed they are to enrolling in the summer.
- ask parents for a modest deposit to help firm up their commitment.
- promote your fabulous summer program within your existing parent body. Current parents are the best and most convenient source of “customers”. Ask for their ideas and suggestions.
- having trouble filling your program? Find out why. Are you offering the type of summer program that your families want? Is your program too expensive? You must be prepared to offer a program that fits the needs of your community if you are to fill your centre for the summer.
- know your competition. If a relatively inexpensive Parks & Recreation program is operating next door then you may have to design your program differently than if you are the only “camp” in the area.
- advertise what is unique about your centre (french immersion, close to the park/beach, access to computers). Use these selling points to attract parents.
- obtain and advertise that you have staff with the skills to offer a full day summer program that both challenges and excites the children. Program creativity is often the essential ingredient needed to fill your centre in the summer.
Setting summer fees
If you expect your centre to be full then you are well on the way to maximizing your centre”s revenue. However, you may still have to increase fees to pay for extended school-age programming and possibly for increased July and August casual staff. To calculate how much you may need to increase fees you must first estimate expected extra costs. Lets assume you intend to offer a program for 6 to 12 year olds with an average enrolment of 13 throughout the summer (i.e. anticipating 2 vacancies). Extra costs can be calculated as follows:
If you are currently charging $12/day you will now need to charge $22/day for 6 to 12 year old children during the summer. Will school-age parents be willing to pay this? Survey the parents now to find out.
Cost cutting measures
What if you do not expect have a full program? This can be very expensive. For example, being short five preschool children for the two summer months could cost your centre in the order of $6,000. You need to determine how to reduce costs to cope with this. Here are some strategies you should consider:
Focus on reducing significant costs
As mentioned in our last issue (Volume 1 Issue 3, p. 9), any attempt to significantly reduce costs must focus on salaries and benefits as these expenses typically make-up 80% of total costs. Cutting less costly program items such as trips, food and supplies may not result in sufficient decreases and these components of a program are generally critical to quality of care and to attracting parents. If you remove trips from the budget to save $400 for a month you could end up with a program that neither parents nor children like very much.
Minimizing staff costs
In the summer centres often need higher than normal levels of casual staff to fill in when regular staff take vacations. Some techniques to minimize casual staff costs are:
- Match staff vacations with child vacations. Survey parents and determine when they expect to be on vacation. Allow staff vacations at times when parts of the program can be closed down as a result of child vacations. Advantages of prescribing staff vacations are reduced casual staff costs and reduced orientation time needed to train new staff. However, prescribed vacation dates may not be convenient for staff. Often there are not enough children on vacation at any point in time to permit a significant reduction in staff time. You will need to go through a fairly detailed staffing exercise to determine if this policy will work for you.
- Do not allow staff to take summer vacations. Insist that staff take vacations either before or after the summer period. While this policy may reduce casual staff costs it could have a negative effect on staff morale which in turn can affect the quality of care given.
If your centre experiences an enrolment drop in the summer then you may need to reduce core staff costs to avoid a loss. Ways to do this include:
Ask if any staff want to take an unpaid leave of absence for the summer. Staff are often keen to do this if given sufficient notice.
- Ask staff to work a reduced work week. Staff might enjoy an extra day off each week or a shortened work day. A shortened work week is often better than no job at all. Note that this option can have a negative impact on employment insurance (‘EI”) benefits if a staff member is subsequently laid-off on either a temporary or permanent basis as insurable earnings will be reduced. [Note that “unemployment insurance” is now referred to as “employment insurance”.]
- Consider laying off a staff member for the summer. Determine whether the staff member will be eligible for EI benefits if they are unable to find replacement work for July and August.
There are many ways to reduce staff costs during the summer period. You need to make sure that you adequately balance staff and childcare needs with financial necessity in the process.
Closing the centre for a week or two
Some centres choose to close for one or two weeks in the summer. You need to look very closely at the financial consequences before you choose this option. Generally costs saved are not significant. Staff are usually required to take their vacation during the (two week) closure. This may or may not be convenient for staff and their families and may result in morale problems at the centre.
Two possible advantages of a summer closure are:
- all staff are off simultaneously. Staff can all return to work refreshed and with renewed enthusiasm.
- the centre can be thoroughly cleaned during the closure.
Lets look at an example of a two week closure where parents are not charged. In this example, as is often the case, revenue losses exceed cost reductions. The closure costs the centre money.
In this situation staff receive their regular pay while they are on vacation. As a result there are no reductions in normal salary costs. The cost reductions come from being able to reduce casual staff throughout the summer as all regular staff are expected to work during the same seven weeks (they all have to take the same two weeks off as well). This casual staff savings generally does not offset the revenue reduction. You can also see that reduced program costs such as food and trips result in only relatively minor cost savings. Also note that Toronto Children’s Services will generally not pay for days the centre is closed if parents are not charged. Children transferred out to other centres for the period of closure may not transfer back.
Centres that close for a period without charging parents are usually worse off financially than if they stayed open throughout the period.
The second variation on this theme is closure for one or two weeks while continuing to charge parents for childcare. In our above example the centre would reduce costs by $3,700 while not reducing revenue in the short-term at all. This $3,700 saving would be at the expense of possibly annoying parents. Loss of one full-fee paying parent as a result of this policy would cost the centre dearly for each month the vacancy remains. Given that attracting full fee paying parents and maintaining enrolment is currently so difficult this course of action is not recommended.
September reservation fees
You could consider the possibility of charging parents who withdraw their children from the centre in the summer a fee to reserve spaces in the fall. We have found that this works well only if your centre has a substantial waiting list for the fall. If you do not have a waiting list then parents will often take a gamble that spaces will be available at the end of the summer and merely re-register in September. Also, the advantages of charging a holding deposit are probably outweighed by the negative impact of parents having to pay fees without receiving care.
Closure for the whole summer
There are situations which would make closure of the centre for the summer months the most advisable situation. These include:
- Your community does not need summer care.
- You are unable to match summer costs with revenues and your centre’s financial cushion is insufficient to tide it over the summer months.
- You are unable to find and hire sufficiently qualified staff to put on a high quality summer program.
In these situations your centre would offer a ten month program and close down for July and August. Offering a ten month program poses difficulties mainly for those centres with a significant number of spaces funded by Toronto Children’s Services. Children transferred out to alternate care arrangements in the summer months may choose not to return in September. Consequently, the option of closure for the summer months is generally taken only by centres with a high proportion of full-fee paying parents. If your centre is going to close for the summer first consider the following:
- Staff should receive temporary lay-off notices in writing. There is no requirement for the centre to make severance payments or give pay-in-lieu of notice for temporary closures not exceeding thirteen weeks. Staff should be informed well in advance of the decision to close so they can make summer plans themselves.
- A Record Of Employment should be prepared for each staff person on the date of the temporary lay-off so that staff can apply for EI benefits for the summer period. Staff are entitled to benefits based on their insurable earnings for the prior twenty weeks and, of course, subject to the EI waiting period in effect at the time the temporary lay-off takes effect.
- Ensure all parents are aware of your plans for closure well in advance of the summer. Finalize fall registration plans in May or earlier and consider firming up registration plans by requesting a small fee deposit from returning parents.
- Be sure that you inform MCSS of your plans to operate a ten month program. Your salary grant payments (DOG and WEG) will be reduced accordingly as both are affected by months of operation over the year.
- Inform Toronto Children’s Services of your decision to close for two months.
The decision to close the centre for the summer is a serious one and should only be made by your Board after discussions with all parties involved including parents, staff, MCSS and Toronto Children’s Services.