Employers are required by the Family and Medical Leave Act to provide up to 12 weeks of job-protected leave to employees to care for a newly born or adopted child. Once the employee has returned to work, however, no federal or state laws obligate employers to give child care assistance. However, national studies show that employers that offer child care benefits reap valuable rewards: increased worker productivity; improved job satisfaction, employee morale and recruitment success; and reduced absenteeism and turnover.
New Tax Credit Available
If you’re looking for a way to assist your employees with child care, a new 25% federal tax credit under the Bush administration’s RELIEF (Restoring Earnings to Lift Individuals and Empower Families) Act of 2001 is available for employer-related child care expenses. These include subsidizing the operating costs of a child care center, training child care workers and acquiring, expanding or repairing on-site or near-site child care facilities. Businesses that join forces to create a child care center also can qualify for the tax credit.
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Child Care Assistance Options
Employers interested in providing child care assistance can consider a variety of options:
- Full service on-site care. In a recent survey, 20% of large health care providers and 17% of colleges and other schools reported providing in-house care. For hospitals and other round-the-clock employers, on-site care may solve staffing problems by addressing the often daunting challenge night workers have of finding child care at a time when most day care centers are closed.
- Employer-funded off-site care and consortium care. You may wish to consider funding off-site day care, either alone or in cooperation with other area employers. Typically, employers receive a number of day care slots in return for their financial assistance. This may be an attractive option for companies located near an existing day care center or employers in large office buildings and industrial parks who can pool their resources in a single center. Funding, rather than self-operating, a day care center may also eliminate potential liability concerns.
- Summer camps. Employer-supported summer camps can offer extended hours to cover the full workday rather than the 9 a.m. to 3 p.m. day that is standard at many summer camps. Employer subsidies may make these camps a less expensive option for employees.
- Drop-in care. Some employers are experimenting with providing limited direct child care services that employees can use on an occasional basis to fill unexpected gaps in care. Having a drop-in center where parents can bring a child when a caregiver calls in sick, when the child is ill or when schools close unexpectedly can dramatically reduce absenteeism. Some of these centers have a sick child area staffed by a registered nurse or other medically trained staff to allow them to accept children who cannot attend school or day care because of a minor illness.
- Financial assistance to employees. Perhaps the most popular option with employers—financial child care assistance to employees—usually takes the form of a “flexible-spending account” for child care expenses. These programs allow the employee to set aside a specific amount they designate from their pretax pay to reimburse themselves for child care expenses. IRS regulations allow employees to set aside up to $5,000 per year, tax free, for eligible child care expenses. Flexible-spending plans are well-liked because they involve minimal start-up costs and provide tax advantages to both the employer and the employee.
- Referral services. Referral services can provide a valuable service at a minimal cost. Employers can provide a bulletin board or a site on the company’s in-house intranet or e-mail server to allow area child care providers to post openings and employees to exchange information about day care sharing arrangements.
For More Information
More information, including data on child care providers, is available from the National Child Care Information Center, www.nccic.org, Child Care Aware, www.childcareaware.org, and the National Association of Child Care Resource and Referral Agencies, www.naccrra.net.