Childcare Centres Taking Bond Payments from Individuals/Families

elefc on 25/02/2020 - 10:44
Last edited 25/02/2020 - 17:00 by 2 other users

Hello to all

I really would like to get a gauge on this topic and see what people's opinion is on this. You dont need to be a parent, use some basic logic and common sense

A childcare centre that I have recently enrolled my son into has taken a bond payment from me. It's not as though i wanted to pay this, and I am very uncomfortable with it, however the childcare centre would not take an enrolment without this bond payment.

As a guide, the bond payment taken per day is $125 and you need to pay 2 weeks in advance. So, if you have your child in childcare for 4 days a week then it $125 x 4 ($500) and then double this as you need to pay weeks in advance, so a $1000 bond if you have your child in childcare for 4 days per week.

Lets assume the childcare centre capacity is 100 children, and they are all in 4 days per week. So now, the childcare centre is holding $100,000 of individuals and families money. It is not controlled, it is not policed, it is not governed in any way. Nothing.

I want to question this as I do not feel it is at all appropriate, or legal.

A childcare business is not in the business of managing funds, which is essentially what they are doing by taking bond payments from parents. They are in the business of childcare.

They are not an ADI (https://www.apra.gov.au/register-of-authorised-deposit-takin…), they do not hold an AFS licence (https://asic.gov.au/for-finance-professionals/afs-licensees/…) and they can not be allowed to take and hold money from individuals.

I do not want a childcare centre managing my money in any way, and that is exactly what is happening here. I could, and would, use this money to invest in cash or equities if it wasn't in the hands, or rather the bank accounts, of the childcare centre.

This bond payment held by the childcare centre is in no way guaranteed or secured, unlike a bond lodged with the RTBA for example (https://www.consumer.vic.gov.au/bondauthority).

What if this childcare centre goes into liquidation?

What are they doing with this money? Who would know?

These bond payments collected by the childcare centre, at the very least, I am sure, are earning interest on cash for which the owners of the childcare centre benefit, but the owners of the cash do not. It is obviously not right at all.

How can this be legal? This is my money, and someone else is benefiting from investing it under the guise of it being a "bond" payment.

If there must be a bond, which is extremely questionable to start with, then these bond payments must not be held by the childcare centres

There needs to be a system, exactly the same as the RTBA works for rental property

Poll Question: Is it right for childcare centres to take a bond?

Poll Options expired

  • 11
    Undecided/Indifferent
  • 90
    Yes
  • 176
    No
Financial Child Care

Comments

  • cheaplee on 25/02/2020 - 19:22
    +1

    I don't think it's right but if you don't like it you can go elsewhere. They are private businesses that have most of their income from government. Absolute scam, but that is how it government had set up the industry.

    Makes my blood boil every time I have to do laps of the carpark at peak times trying to find a park and I drive past the BMW SUV of the 'manager' parked at the front door. But it's a good childcare centre so I keep my kids there.

    • steelchain on 26/02/2020 - 09:03
      +2

      It's a complete scam… what gets me the most about it is if your child is scheduled to be there on a public holiday we still have to pay for that day. Doesn't matter if the center is open or not.. While I understand that the center still has expenses, I really don't see why parents should have to pay a full day for no service. In a normal company the wages for the staff on that day would just be built into the running costs. Not to mention every 20 mins it seems like they are asking us for donations or we have to pay a building fund. What the heck do they do with all the money is what I would love to know!

      • trapper on 26/02/2020 - 12:02

        what gets me the most about it is if your child is scheduled to be there on a public holiday we still have to pay for that day.

        This one grated me so bad I eventually changed to another centre. I see this as basically fraud of the CCS system as they are receiving tax-payer money for days they are not even open.

        My new centre doesn't do this and also has a 'Christmas shutdown' so you're not stuck paying then either.

        • serpserpserp on 27/02/2020 - 16:24

          This one grated me so bad I eventually changed to another centre.

          I have been through a lot of centres in my time and I have known of zero that don't make you pay for public holidays.

  • Vote for Pedro on 25/02/2020 - 20:09
    +2

    If it is Government subsidised (directly or indirectly) it should be Government regulated. I’m sick of the Privatise the Profits, Socialize the Losses ideology going on right now.

    • Herbse on 26/02/2020 - 08:54

      The point of "subsidising losses" is so that it improves overall areas on the outside of that business.

      The govt subsidises childcare for some parents (people forget this), so that childcare becomes affordable and encourages them to continue working, earning themselves money and proping up the economy. If every family, regardless of their income had to pay full price for childcare, it would make financial sense for one of them to stay home instead. Imaging half (exaggeration) the Workforce suddenly quitting because most of their pay was going to childcare.

      Same applies to everything else the government subsidises, if it creates a loss in that field but creates a net gain for the economy and society, then it's their responsibility to use our taxes for it.

      • Vote for Pedro on 26/02/2020 - 10:17
        +1

        I completely support the subsidy. It’s not what my reference was about.

  • Repi on 25/02/2020 - 20:33
    +1

    Wow, how good is privatisation, even better if you can collect from the parents and the government.

  • JetBombat on 25/02/2020 - 20:34
    +14

    Isn't it interesting that we as society accepted a norm to leave our kids with strangers for years, but yet to accept the very same thing about our money? We trust them our kids, but not our money.

    • nomoneynoproblems on 26/02/2020 - 09:01
      +3

      Over $1000 no less. Also lol'd at the investing comment.

    • trapper on 26/02/2020 - 17:53
      +1

      If they go bankrupt we still get our kids back though.

    • jjeanie on 26/02/2020 - 23:07

      Ive just always been requested to pay a bond… so just always paid.

      OP makes a good point that deposits for houses, rent or purchases are regulated.. the gov stepped in because people or companies do run off with it or go bust and it isn't their money..

      I think it's a good point that these deposits ought to be regulated as it is a significant amount of money all up.. how would you petition this?

      Wrt trusting them with our kids but not our money. I trust that they will do no harm to innocent children.

      They have wwc and police checks. There are rules in place about education, ratios, food, dietary requirements, sun smart… some are better than others.. But what rules do the organisations have about the bond money?

  • thaihoangaus on 25/02/2020 - 20:42
    +1

    My daughter has been to 3 childcare centre due to moving house and yes, bond is pretty normal everywhere. However, for me, $500 bond is absurd and unheard of. All 3 centres only charged us $100 for bond

  • Mrgreenz on 25/02/2020 - 20:44
    +4

    Maybe open your own childcare centre with a no bond policy and see how you go.

  • This Guy on 25/02/2020 - 21:10

    Go to one of the centre's parent days or nights. Most people who use childcare don't have the resources to continue paying if their life goes to poop and they are not the kind of people who care about appearances enough to load child care fees on a credit card.

    Bonds are a business strategy that provides the centre with early payments that can help cover any defaults but also provide capital to cover unexpected business costs, potentially reducing the costs of insurance ("self insurance"), reduce it's line of credit or even reducing interest on a loans by placing your bonds in a redraw facility.

    • cheaplee on 26/02/2020 - 09:36

      Which is all good and well except it's a private business and by all accounts they make a lot of money. Most private businesses don't take a bond. If those that do I wager none of them have at least half their income provide via the government

      • This Guy on 26/02/2020 - 12:20
        +1

        make a lot of money

        Daily cost is ~$100 for many centres without subsidy. I will look at the Nursery.

        One staff member can look after up to four babies so the most they can bring in $400 a day.

        Many day care centres are open for 12 hours. Assuming non casual, entry level staff, one 12 hour position costs atleast $240 a day ($20 * 12 hours)

        On top of this, the centre has support staff salaries, taxes, insurance, utilities, site costs and potentially advertising and franchise fees.

        Site costs has the potential to be huge, as day care centres are in large, dedicated buildings on large blocks of high demand land.

        I get where you are comming from, but if daycare centres were the many tree you claim, you would see far more dodgy daycare centres that don't just rely on ripping off the government.

        • trapper on 26/02/2020 - 17:24
          +2

          You have cherry-picked the nursery for that 1:4 ratio though.

          Profits are much healthier after 36 months age where the minimum ratio is 1:10 -> $1000 a day per carer.

          Also $100 per day is very low, $130 more typical. So now it's $1300 per carer!

          • This Guy on 26/02/2020 - 20:36
            +1

            @trapper: 100%, but I also used the lowest adult pay grade. I kept it simple.

            Centre's I have seen have 2 child care workers on open, 2 on close with 5 though the day (so 7 full time positions), a cook, a manager and an admin assistant. Assume a low average of $50k each for $500k pa for staffing, or $9,600 per week.

            Most centres I have seen provide ~20 places (there are bigger), so at $130 per child per day that is $13,000 a week.

            So that is $3,400 a week for rent or mortgage, utilities, insurance, consumables (nappies, wipes, food, formula).

            You really need very high occupancy, very low expenses per position and a significant investment in the building to make bank assuming you have unexpected issues (there are always unexpected issues).

            • jace88 on 26/02/2020 - 22:47
              +1

              @This Guy: I also reached similar conclusions to you on a back of the envelope calculation. Let's not forget the casual staff involved who float to ensure ratios don't breach when someone goes for a break or bathroom or gets sick, and I think it quickly adds up.

              As someone who is a new parent and just started sending my daughter to daycare - whilst I don't want to pay more than I have to (who does?), I also feel better knowing it's a sustainable business with happy employees. I'd rather the admin staff focus on ensuring my daughter is well looked after (incl. dietary requirements, etc) and I appreciate what they do.

            • cheaplee on 26/02/2020 - 23:19

              @This Guy: 5 FTE during the day and only 20 kids…

              Your calculations make it a borderline profitable business and yet I just discovered there are 21 centres within a 5 min drive of my house. Business can't be that tough…

              Sure every centre is different, but to manage 20 kids you need manager and admin assistant? And a cook slaving in the kitchen for 8hrs a day to feed 20 kids?

              Your number don't add up.

              I would suggest 20 kids in a centre with 10 FTE is not the norm

              • jace88 on 27/02/2020 - 00:36
                +1

                @cheaplee: I suggest you visit some daycare centres. Surprised me at first too but seeing all the bespoke culinary or allergy requirements make sense. Maybe the cook isn’t there the whole day and some people wear two hats but it actually looks pretty close to what I see.

        • macfudd on 27/02/2020 - 20:36

          From the centres nearby us, only a few would have under 20 kids and those were generally pretty grim looking. The majority hold 50-100 kids and are part of a chain. By far the majority of kids attending are 2+ years old.

          Most centres seem to play fast and loose with the 1-4 & 1-10 ratios. If you want to check out a daycare for your kid, make sure to see it at peak dropoff time. So often we'd see about 25 kids of all ages in the dropoff room 'supervised' by 2-3 carers with armloads of crying babies, one of whom would also be making toast (and therefore not count towards the ratio).

          They only need most of their staff from 9-3, by 5pm most kids are gone and a couple of minders who also clean at the same time seem to be enough.

          Goes without saying, don't put your kid in that type of centre. Pick one where there is an office manager, an admin assistant and hopefully someone actually cooking. A couple places we arrived at the same time as the Coles delivery truck. And the dudes wheeling in stacks of frozen hotdogs, fish fingers and microwave meals. We just turned around and left. It doesn't need to be fancy, but that's pretty grim.

          • This Guy on 05/03/2020 - 18:34

            @macfudd:

            The majority hold 50-100 kids and are part of a chain.

            That straight out sucks. Another way to find a decent centre is to ask around at work for centre's parents love.

  • DiscoJango on 25/02/2020 - 21:40
    +2

    My local kfc takes a $1 bond per chicken nugget 2 days in advance and is repaid henceforth upon consumption of 10 pieces or a whole bucket whichever comes first.

  • TheBilly on 25/02/2020 - 22:05
    +1

    You are probably an exception but alot of parents don't pay or pay on time to childcare centres, which causes alot of administrative issues - I believe the law was changed as a result where the centre is paid a portion direct from the government. Depending on the area and demographic this may be higher or lower percentage issue. I would have no issues with a bond as I have no intention to not fulfill my financial obligations to them.

  • od810 on 25/02/2020 - 23:57
    +2

    Isn't it just the same as Phone bills or Internet bills where you have to pay in advance?

    • jjeanie on 26/02/2020 - 23:16
      +1

      … But you don't pay a bond in addition to paying in advance

  • macfudd on 26/02/2020 - 00:01
    +1

    Seems a bit crap. We live in a poorer area and yet none of the centres around here - even the ones with waitlists - charge or even mentioned a bond. You do have to pay fortnightly upfront but not until your kid is literally about to start. Certainly not at the time of enrolment, that was just some paper/online/emailed forms (varied from place to place)- give over bank details, get told the day money gets debited, sorted. We visited and researched over a dozen places last year so pretty current info (VIC).

  • trev likes bargains on 26/02/2020 - 00:49
    +2

    My mrs runs a childcare centre. Many parents leave without paying the fees. There are parents who continuesly change childcare centres to get away from paying fees.

    An extreme case was when one parent who had left without paying brought the same child back and tried to enroll using another name.

    Pay the bond or go elsewhere.

    • trapper on 26/02/2020 - 11:56

      Why doesn't she just ensure fees are paid in advance? Seem pretty simple.

      You haven't paid for this week yet = no child care.

      • brendanm on 26/02/2020 - 15:02

        Then the place is lost, they can't just get another child that same day to fill in for the one who hasn't paid.

        • trapper on 26/02/2020 - 15:21

          How do parents get any free childcare doing this though?

          The concern was parents continuously changing childcare centres to get away from paying fees.

          • brendanm on 26/02/2020 - 16:20

            @trapper: The concern is that you are sent an invoice every week or two, and if they don't pay it, they are down that money, and then have to fill that place again. If people are serious, they will pay the bond money, and you have a much more stable centre. Weeds out the dropkicks I imagine.

            • trapper on 26/02/2020 - 17:02

              @brendanm: No I was responding to the concern that parents can get free childcare by continuously changing centres to get away from paying fees.

              • brendanm on 26/02/2020 - 17:04

                @trapper: Yes, as I said normally they are post paid, so they will get 1-2, maybe more, weeks for free.

                • trapper on 26/02/2020 - 17:27

                  @brendanm: lol and around we go, please start back at…

                  Why doesn't she just ensure fees are paid in advance? Seem pretty simple.

                  You haven't paid for this week yet = no child care.

                  • brendanm on 26/02/2020 - 17:30

                    @trapper: I already explained that, you then asked how they get free childcare, and I explained that. If someone doesn't pay your week in advance, you then have to find someone else to fill that spot, they may not want the same days, so you might have to get 2 people to split them etc. This may lose you a week, and you have a rotation of children, which is difficult for the child care workers, and for the kids.

                    There are no shortage of parents wanting childcare, this bond system simply leans the odds in favour of getting more good than bad.

                  • trev likes bargains on 27/02/2020 - 13:20

                    @trapper:

                    You haven't paid for this week yet = no child care

                    Not that simple. You have to pay for staff who are rostered two weeks ahead. Food has been ordered in based on the headcount.

                    You also have a duty of care towards the kids. Some parents will just lock them in the house and go about playing bingo or doing drugs.

                    There are a lot more people that don't conform to the social norm.

  • jimdotpud on 26/02/2020 - 01:08

    I dont see anything wrong with this. You do realise they are running a business. They have overheads, wages and running costs. That money isn't going to be sitting in an account long enough to earn that much interest. they are asking you to commit in advance to a placement and put up the money for it. they also have commitments to meet, like ensuring they have employees there 4 days a week to look after your kids.

    • cheaplee on 26/02/2020 - 09:38

      Sounds like every other normal business - the bakery, petrol station, florist, hairdresser. Maybe they should look at taking bonds too…

      • jjeanie on 26/02/2020 - 23:19

        Bonds… AND getting payments in advance o.o

  • KingJuf on 26/02/2020 - 01:16

    I recently had to enrol my son in child care, had to pay 2 weeks in advance plus an additional week before the subsidy was approved but they refunded the difference as soon as it was approved (2 weeks). Are you referring to an actual bond or paying the full payment in advance for 2weeks worth of child care until CCS is approved?

    At the end of the day the child care has to pay plentiful wages for staff to look after your children.

    One thing I think is ridiculous is that they charge for public holidays (when they are closed) and when you are on holidays (usually a discount though.)

    I guess their justification is that they still have to pay staff during those periods but other companies do as well and loose a days worth of trade.

    • trapper on 26/02/2020 - 11:50
      +2

      One thing I think is ridiculous is that they charge for public holidays (when they are closed)

      This one grated me so bad I eventually changed to another centre. I see this as basically fraud of the CCS system as they are receiving tax-payer money for days they are not even open.

  • DarkOz on 26/02/2020 - 07:26

    A bond is needed especially when it's a prepay system. You'd be surprised how many people end up in arrears. Some even try not to pay with petty excuses such as "it was a rip off in the first place" or "it wasn't good anyway."

    The answer is very simple. You need to respect how people run their business. If you don't like it or can't afford it then go somewhere else. If you believe that it is illegal I am sure there are government departments that you could report this to.

    • trapper on 26/02/2020 - 11:51

      A bond is needed especially when it's a prepay system.

      It's not 'needed' as plenty of other child care centres don't do it.

  • Will Mcdonald on 26/02/2020 - 10:26

    From a business perspective it prevents a customer from running away with their account in arrears. While this may not apply to the majority of parents out there, there is those few parents that ruin it for everyone. So this policy may not apply to you having the requirement to pay a bond in advance. But due to alot of abuse of the system,Childcare centres were forced to adopt these policies. Also avoid a 100 place childcare Centre, they r a horrible environment for your kid to be exposed to.

  • [Deactivated] on 26/02/2020 - 11:03

    If childcare goes broke, you lose all the money.

  • pogichinoy on 26/02/2020 - 11:07

    Yes, it's fair.

    The business needs to cover itself from the individuals who fail to pay them. It isn't fullproof but it'll mitigate any losses incurred.

    • Roman Sandstorm on 26/02/2020 - 17:16
      +1

      @pogichinoy

      The business needs to cover itself from the individuals who fail to pay them.

      How is this different to any other business?

      This is something that every business faces.

      Payment in advance, which appears universal in child care, must offer some protection. They can only lose out if they extend credit (ie, take in clients who have not paid in advance). Surely that is the child care centre's own fault?

      And if they do not fill the class…. too bad. So what? Surely their business plan is not so impossibly optimistic as to always expect 100% occupancy?

      So much of the argument in this thread seems to be justifying some kind of exceptionalism for child care centres compared to other businesses. Because…. ummmm… errrr….

      • pogichinoy on 10/03/2020 - 16:14

        No different to any other business. Dunno what you're upset about mate.

  • trapper on 26/02/2020 - 11:45

    I've never had to pay any kind of bond for child care.

    • Skramit on 26/02/2020 - 12:26

      But you do you pay in advance? Same thing….

      • trapper on 26/02/2020 - 12:37

        It's not the same thing at all.

        An advance payment is payment for a service that you do actually receive. - ie Pay for the whole week in advance and then by Friday its all used up and your balance is back at zero.

        A bond is more like a loan, it is never used to pay for any service. When you eventually leave then it gets refunded.

      • Roman Sandstorm on 26/02/2020 - 17:11

        @Skramit

        Skramit you just haven't learnt it! Trapper has tried and tried to explain the difference to you. You just wilfully ignore his point.

        Not. The. Same. Thing.

        • Skramit on 26/02/2020 - 18:18
          -1

          If the company goes bust and you have paid $1000 in advance fees vs a $1000 bond the situation you find yourself in is identical. It’s $1000 you will probably never get back. That’s all I’m saying. you can call it a bond or advance fees or a security or whatever you want the result is the same.

          You are pretty stubborn if you can’t see that.

          Bonds and fees paid in advance will be treated by that company the exact same way - used to boost their liquidity and keep cash flowing.

          • jjeanie on 26/02/2020 - 23:32

            @Skramit: With rent they are different with different rules surrounding a bond vs payment in advance. With rent, bonds are no longer able to be something a company can play with which I think is part of Ops concerns… all up it can be a significant amount of money that is not regulated and be lost

            https://www.absolutent.com.au/n/e2809cBut+I+paid+two+weeks+i…

            • Skramit on 27/02/2020 - 08:07
              -1

              @jjeanie:

              With rent they are different

              Agreed. But remember rent bonds, if not held by the government, would be abused by landlords if paid directly to them. So rend bondh laws are very necessary as its an individual paying a bond to another individual.

              With childcare centres, you're paying it to a company so IMO the same level of bond laws are not necessary. The corporations act most likely covers it i.e. consumer have rights etc.

              I was being tongue in cheek saying "same thing". I know the terminology is different, but paying "advance fees" or "a bond" net result is the same in terms of money paid to a childcare company, what they can then do with the cash they hold (i.e. anything), and what the risks are. Getting caught up in bond vs fees definitions is not the point.

  • Cyphar on 26/02/2020 - 13:53

    My friend owns a few child care centres in his area. The amount of parents that accumulate a large unpaid fee is staggeringly big, where they will then do a runner off to the next daycare to do the same thing. My friend and his wife were also victims to this. Since implementing the bond scheme, runners have dropped to near zero and fees are deducated from the bond where required.

    I can only speak to my friend but for him and his wife, bond payments are held in a trust account.

  • ihbh on 26/02/2020 - 14:35

    The money they get in advance is called the float. The return on it is factored into their pricing, etc. This is like what insurers do.

    Next thing you'll want is for insurers, gift card sellers to all put their float into a trust.

    Instead of such simplistic thinking, let market forces and the common sense of consumers drive decisions vs suggesting more regulation.

  • Cadic on 26/02/2020 - 16:14

    Because some parent prefer to move every 2 weeks and forgot to pay their childcare bills :)

  • MessyG on 26/02/2020 - 20:51
    +5

    Mate you're going to lose your mind when you find out about the aged care sector. Around $600,000 bond to put your loved one in a nursing home - they collect the interest and take the nursing home fees out of it.. The patients have to sell their family home to afford it because Centrelink counts it as an asset. The family gets it back when they leave the facility or they pass on - but what happens if the nursing home goes bust? Nothing. Money gone.

    The childcare thing is about protecting their income from unpaid fees. If you're going to go after someone, go after the aged care sector.

    • wtfnodeal on 04/03/2020 - 21:30

      Aged care bonds according to my understanding is held under trust account so even the centre goes bust the administrator isn’t allowed to use the money to pay any of the centre’s debts. If I remember correctly the trust account is subject to annual audit too.

  • Trying2SaveABuck on 27/02/2020 - 05:53
    +1

    Honestly it is there business if you don't like it go somewhere else

  • BertieBrown on 27/02/2020 - 10:59

    Child Care Centres, for owners, are a gold mine.

    It’s a win-win. Take the money from parents. Earn interest, or invest it. If the parents want their money back in a hurry, just claim that their child forfeited the bond. If anyone sues class it as a cost of doing business.

    I heard that child care is now more expensive than private tuition.

  • syousef on 27/02/2020 - 11:55

    Even the Blacktown Council run childcare centers took a bond as far back as 10 years ago. You might not like it. I know I don't. But that's how it is. There are a lot of great things about Australia. Childcare isn't one of them.

  • Nobby47 on 27/02/2020 - 12:55

    If you think this is bad, just wait until you get involved with the aged care minefield. The next investors gold mine…

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