All about deposits

There appears to be some confusion among childminders regarding what to do with deposits. You take a deposit to secure a child’s place, but when do you give it back to the parents?

The most popular school of thought and the one I was told at my last finance briefing by the Tax Office is that the deposit should be returned to parents as part of their first month’s bill; however, it has been commented to me that it should instead be kept until the end of the contract, in case parents do a bunk without paying their bill.

Never one to avoid a challenge, I have been looking to best practice for guidance and finding out more on the subject.

Here are some thoughts about deposits that might help you decide what to do for the best...

 

Spending the deposit

Of course, it depends to a certain extent on you and how you do your banking and trust yourself with other people’s money. If you put the deposit in a separate account and do not spend it unless parents forfeit the money, then of course all will be well.

However, if you spend the deposit in a time of need and your then circumstances change and the child drops hours or leaves suddenly and you need to find it to refund and it’s not there, you will obviously be in trouble.

 

Paperwork for deposits

You need clear paperwork drawn up between you and the parent to make absolutely clear when the deposit will be repaid. It must also state when you are liable to repay the full amount of the deposit. This should clearly say whether it is to be repaid either in lieu of the first month’s bill or at the end of the contract. Remember that if you say it will be repaid at the end of the contract and you do not have the money, then parents need reassurance that they will be repaid, so think this one through first in case they ask the question.

 

Who says what about deposits?  I have been researching different viewpoints...

On the NCMA website, on their ‘working with your childminder’ page, it states –

‘A deposit is a one-off payment from parents to show their intention to take up a childminding place. It is usually refunded to parents by being deducted from the fees once the childminding arrangement begins.’

The Enfield childminding advice pages offer the following advice –

‘If a childminder does not have a vacancy straight away, but one is expected to become available in the near future, you may be able to pay a deposit to reserve a place.  Often the deposit is taken off the first bill but if you decide not to take up the place, the childminder is entitled to keep it.’

Tunja and Tamsin Stone in their book ‘Secrets of childminding success’ state –

‘The deposit is usually a one off fee paid to show parents intend to take up a place. It is then deducted from the first week / months fees’

Howto.co.uk states -  

Deposits are usually refunded when the child starts by deducting the amount from the agreed childminding fees.’

Allison Lee in her book ‘Childminder’s Handbook’ says –

‘A deposit is a one-off payment securing a place. It should be returned as part of the first month’s billing. If parents do not take up the place, it may be retained.’

 

So, the advice from childminding experts seems to suggest that the deposit is returned at the end of the first month. However, some childminders still argue that this is folly and it should be held onto through the contract in case of problems...

Well you can see that there is no clear legal guidance to follow. Other childcare experts use vague words like ‘usually’ and ‘should be returned’ and ‘often’... 

I would therefore say that it appears it is up to you and the parents to reach an agreement with which both sides are happy!

I hope this clarifies the situation :)

 

Information added 14.3.09