Case study

Greenwich Playcare Limited

Background

The London Borough of Greenwich in-house crèche service, set up in 1985 and co-ordinated by the London Borough of Greenwich Women's Unit, initially provided sessional crèche workers free of charge across all the Council departments. From 1989, a pricing policy was introduced whereby departments were charged a proportion (50%) of the worker time.

In November 1992, the Council Crèche scheme, came under a Central Services Review which set income targets for the service.

From April 1993, the charges were increased to cover the full rate of the workers, and the on-costs including a post in the Women's Unit, which had responsibility for the co-ordination of the crèche service (only a proportion of the workers time was spent on the crèche service, majority of time on other project work). This raised the charge to 13.50 (on-costs comprising 58% of this).

By the end of December 1993, the project provided only 35% of the hours required to break-even, and in January 1993, the Women's Committee concluded that the project was no longer viable.

The options

The existing members of the project expressed an interest in maintaining the jobs and services as part of an independent structure, with the Council continuing to be the main purchaser. On the advice of Greenwich Co-operative Development Agency, it was agreed that the group would adopt a Co-operative Company structure (ICOM Blue Rules), registering in 1994. Greenwich Playcare was able to commence trading in April 1994, with a seamless transition in service delivery.

The process

Continuing the project outside of the council was an employee-led decision. Crèche workers knew that there was existing demand at a reasonable rate of pay and they already had good contacts with many local organisations form previous work.

The lead in taking the concept forward was taken jointly by the crèche workers, Greenwich CDA, and the London Borough of Greenwich Women's' Unit worker.

The advisors facilitated negotiations between the crèche workers group and the council; advised and assisted in the development of a business plan; advised upon the legal structure for the co-operative; assisted with the registration process; provided marketing advice; provided management and marketing training.

All members of the co-operative subscribed as directors of the company, from which there was an elected Chair, Vice-Chair, Secretary and Treasurer, plus two others, forming the Management Committee, meeting quarterly. General meetings of the co-operative involving all members are also held on a quarterly basis. From the beginning, a member of the co-operative has acted as co-ordinator, being the point of contact for the public, allocation of work on a rota and availability basis, calculating and paying wages, maintaining books of account, providing financial reports to the management committee, and producing final accounts for the AGM. For this, the worker is paid a fixed monthly sum. By having one person responsible for co-ordination, it has enabled each member to devote their time to generating revenue.

The raising of the finance

A small grant was awarded from the Women's Committee to cover registration and other setting up costs. Used equipment was donated to the co-operative.

The co-operative had to take responsibility for calculating PAYE, and preparing year-end returns to the Inland Revenue. As all the members were part-time, there were initial problems with applying the correct tax codes.

The co-operative was liable for corporation tax on its first-year profit (accumulated reserve) which only came to light after the accounts for the first year had been prepared. Since then, Greenwich Playcare has been able to take steps to minimise its corporation tax liability.

After the conversion

Greenwich Playcare is now in its fourth year of trading. Although the turnover at the end of the third year is significantly down from the first year, the co-operative has undergone a period of consolidation. The number of workers has reduced, mainly due to members finding full-time employment (all members of Greenwich Playcare work part-time, having other part-time employment).

Greenwich Playcare have become effective in managing overhead costs, with 94% of turnover going towards paying wages, (compared with 84% and 72% in previous years).

In the current year, Greenwich Playcare are expecting turnover to increase again due to crèche bookings for training courses, further improving the standard of living of its members.

The employees found the process easier than they expected it to be, with much less paperwork than anticipated. The use of model rules was a great help, and the support from Greenwich CDA made the process easier. In hindsight, the co-operative would have liked more help towards planning for the end of the first year.

Any new project should be prepared to enter into tougher negotiations with the local authority, including political lobbying to ensure that there would be a minimum contracting commitment, and free promotion of the service in council publications.