Employer Options When Offering Childcare Benefits

February 19, 2020
Publication
Inside HR
Benefits
Read time: 4 mins

Only six percent of companies in the U.S. offer any childcare benefits according to a survey by Clutch. This is despite the fact that the average annual cost of daycare for one infant or toddler is $11,666 and can soar much higher depending on where the family lives.

Combined with the country's lack of paid parental leave, becoming a parent can be a huge financial hardship for employees. A lack of affordable childcare can cause employees to perform worse at their jobs, cut their hours, or even leave the workforce altogether—issues that disproportionately affect women. The survey found that while nearly 6 in 10 male employees (59 percent) believe everyone has a fair chance to advance at their company, only 43 percent of female employees felt the same way.

Several options. Employers may think that childcare benefits are too expensive to even consider. However, there are a number of helpful options that vary in cost. These include:

  • Childcare subsidies. Employers can offer childcare subsidies two ways. First, they can make direct payments to employees with children and allow them to spend the money however they see fit. The second option is to partially subsidize childcare with select care centers or certain childcare workers, while the employees and companies share the cost of childcare. Clutch estimates that employers who subsidize half the cost of childcare for a worker with two children under five years old will spend roughly $10,000 per employee each year.
  • On-site childcare. On-site childcare provides employees a company-sponsored childcare facility at or near their office. It is a highly effective but very expensive benefit for businesses. Despite tax benefits and improvements in employee retention, on-site childcare is a significant investment. Employers should expect to spend at least $500,000 per year for an on-site childcare program.
  • Flexible employee schedules. Determining their own work schedule is a top priority for employees, with more than four in ten employees (41 percent) saying that flexible scheduling is their most valued perk. Flexible employee schedules are also an effective and inexpensive childcare benefit. They provide working parents the opportunity to work without missing their children's activities and obligations. And with the rise of telecommuting, more employees can complete their work at home, so employers typically need to spend nothing on providing flexible schedules.
  • Predictable employee schedules. An unpredictable work schedule can make it hard for working parents to schedule for their childcare needs, while predictable employee schedules are an effective and inexpensive childcare perk. Where possible to implement, predictable schedules make child-rearing easier for employees and provide a stronger work-life balance.
  • Back-up childcare assistance. Back-up childcare assistance gives employees a safeguard for when spouses get sick, schools close, and other unexpected issues arise. It can also be a highly effective and moderately inexpensive benefit. Businesses partner with service providers to offer complimentary emergency childcare at an employee's home or at the provider's local location. Companies can structure back-up childcare assistance benefits as they do sick days: Employees are entitled to a certain number of days but after are required to pay a partial fee of $25 to $50 per day for the services.
  • Flexible childcare spending accounts. Flexible childcare spending accounts are a childcare benefit that provide employees choice and are highly effective and moderately inexpensive. Dependent care flexible spending accounts (DCFSAs) can fund the care of children under 13 years old. Parents can withhold money from their paychecks before it is taxed in order to pay for preschools, nannies, and transportation costs. Employers can provide matching funds. This way, businesses can contribute to employees' childcare without dictating how they spend their money.
  • Making the right choice. Employers can reduce employee turnover and improve worker performance by considering the costs and benefits of different childcare options and choosing to offer the programs that make the most sense for their employees' lives and their company's budget. Options such as on-site childcare or childcare subsidies can be moderately to very expensive to implement but can drastically reduce employee turnover while raising morale. Meanwhile, implementing predictable and flexible schedules can be an easier and cheaper way to begin helping parents.

Source: CCH/Wolters Kluwer