Higher wages, capped fees: new preschool funding rules put provider budgets in focus

From January, community preschools in NSW will face mandatory new conditions for wages and fees, as the government seeks to expand access through existing services.

NSW community preschools receiving Universal Preschool Funding will have to meet new pay requirements and fee restrictions from January 2027. The conditions will affect how participating providers prepare their payroll, fees and operating budgets.

The 19 October announcement covers support for more than 700 community preschools. The government says more than 10,000 additional children could enrol by making better use of existing capacity, rather than building 10,000 new places.

“We’re committed to keeping costs down for working families and giving more children a confident start at school,” said Deputy Premier and Minister for Education and Early Learning Prue Car.

For providers, the immediate priority is understanding what the funding covers and the conditions attached to accepting it. The published guidelines set out obligations relating to payroll, fees, spending and service planning.

Higher pay becomes a condition of funding

From 1 January 2027, participating services must pay teachers and directors employed under the Educational Services (Teachers) Award at least five per cent above applicable award rates. Compliance is required to continue receiving funding.

Educators employed under the Children’s Services Award must receive the relevant June 2028 gender undervaluation rates from 1 January 2027. The guidelines describe these as up to 10.07 per cent above applicable modern award rates, depending on classification.

These requirements do not automatically mean an additional increase for everyone. Where staff already receive the required rate or more, services retain discretion over further increases. Providers should check individual classifications and existing arrangements against the minimum pay requirements in the guidelines.

Fee limits apply to funded preschool hours and days

For funded hours and days, services charging $20 or less daily will have a maximum out-of-pocket fee of $20. Services charging more must not exceed the fees set during the August 2026 preschool census period.

New participating services cannot charge more than $20 per day for funded provision. Compulsory charges, including enrolment fees and levies, count towards the cap, even if charged separately from the daily fee.

The department says the funding model reflects expected staffing and operating costs. Providers will need to assess their allocations against the mandatory pay requirements, fee limits and the costs of running their own service.

Enrolment ambitions now depend on implementation

Under the new funding model, three-year-olds will attract the same funding rate as four-year-olds. The government also announced funding for an additional day for eligible priority cohorts and up to $91 million in inclusion support for community and mobile preschools.

Providers can discuss the changes through the department’s online webinars covering the four 2027 funding programs.

• Inclusion Funding: Wednesday 28 October
• Mobile Preschool Funding: Monday 2 November
• Universal Preschool Funding: Tuesday 3 November
• Fee Relief for Long Day Care: Thursday 5 November

The changes come amid separate concerns raised by Goodstart, KU and Gowrie NSW about long day care preschool funding. With first-quarter Universal Preschool Funding payments expected by 19 December, participating providers will need to work through their allocations, wage obligations and fee limits before finalising 2027 budgets.