Pace of increase in childcare fees slowing due to government schemes, stiffer competition

Government schemes require operators to keep fees affordable in exchange for funding support or securing sites. But operators say keeping fees low while dealing with rising costs has hurt bottom lines, and hope for more help.
Government schemes require operators to keep fees affordable in exchange for funding support or securing sites. But operators say keeping fees low while dealing with rising costs has hurt bottom lines, and hope for more help.ST FILE PHOTO

Parents fretting about how it is getting more expensive to raise children may be somewhat relieved to hear this: Childcare fees rose last year, but at a much slower pace than the year before.

The median monthly fee for full-day childcare was $850 last year, $20 more than in 2013, according to figures released by the Early Childhood Development Agency (ECDA) last month.

In 2013, fees jumped by $80 from the year before - the highest in at least eight years.

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Industry observers said the slower fee increase last year could have been a result of government schemes that require operators to keep their fees affordable, in exchange for funding support or securing sites to set up centres.

There has also been stiffer competition, with more centres catering to the mass market, they said.

In 2013, new tender criteria were announced for sites for commercial centres in Housing Board premises and other state-owned properties. ECDA told The Straits Times that 31 sites have been tendered out under this.

Under the new tender process, fee affordability is taken into account for the first time, and it makes up 20 per cent of the score.

And operators that won tenders have charged fees lower than at their other centres secured in the previous tender process.

Modern Montessori International (MMI), for instance, charges $735 a month at its Sembawang centre, secured through the new scheme last year. This is about 30 per cent less than at its other centres in HDB void decks. The centre is under a new MMI-owned brand with a different curriculum.

In late 2013, ECDA started several schemes in which operators could get funding - but qualifying criteria included a fee cap of $850 a month over three years.

These schemes include a rental subsidy of up to 30 per cent for commercial centres set up at non-HDB sites in areas with high demand for childcare.

Just Kids Learning Place director Lurvin Lee has one centre receiving the rental subsidy, but is not sure if the scheme is a good fit for the business, noting: "With rising manpower costs and having to meet the fee cap, it is difficult to keep the business sustainable. We hope the authorities can raise the fee cap later on."

With more centres by anchor operators such as NTUC My First Skool, which get priority in securing HDB sites but must keep fees below $720 a month, there is also more pressure to keep prices low.

"If a new centre opens on my left or right, parents have more options, so we will need to keep our fees competitive," said Carpe Diem director Moses Ng.

But keeping fees low while dealing with rising costs has hurt the bottom line, said operators, adding that they hope the authorities will offer more help in dealing with manpower and rental costs.

Busy Bees Asia chief executive June Rusdon suggested that the tender evaluation process have a rental cap, while early childhood expert Khoo Kim Choo called for more government subsidies for staff costs.

Meanwhile, parents hope the fee increases will continue to slow. Sales manager Rachelle Khoo, 31, who has a daughter in childcare, said: "Any slower fee increase is definitely good news."

goyshiyi@sph.com.sg