Benefits of Employer Sponsor Childcare

Purpose

In this paper, I will explore whether employer-sponsored childcare has any effect on attracting and retaining employees in order to make recommendations to organizations that provide employer- sponsored childcare benefits.

Significance

One of the primary goals of companies is to attract, hire, and retain the most competent employees. Employers are constantly researching for benefits that will attract employees, and produce a return on their investments. With the ever changing demographics of the workforce, employers are faced with the challenge of providing benefits that are attractive to their target demographics. Over the years, there has been an increase in single parent households, dual income households, and the number of women entering the workforce. Thirty years ago, just 34 percent of married couples with children younger than six were dual income households; today the figure is almost 60 percent (McIntyre, 2000). With the increase of women, and dual income households, there are more families in need of childcare. There has also been an increase in childcare expenses over the year, and employees are constantly searching for affordable childcare. Employers recognized the need for inexpensive childcare, and have found creative ways to provide opportunities for childcare that are affordable, accessible and available to employees (Oekerman, 1997). One of the benefits that employers are providing in response to this need is on-site childcare. By providing employer-sponsored childcare such as worksite daycare, employers are setting themselves apart from their competitors. An on-site childcare is one that is funded by the employer and the company usually pays for the start-up cost, initial operation losses and portions of the ongoing cost (Oekerman 1997, Miller 1984)..

It is estimated that businesses lose nearly 3 billion dollars due to childcare- related absences (Harper, Densmore & Motwani, 2001). Those who support on-site childcare claim that it increased the ability to attract employees, lowered absenteeism, improved employee attitudes, generated favorable publicity about the employer, and improved community relations (Miller, 1984). Miller (1984) also states that critics of on-site childcare argue that there is not enough documentation of savings available for the cost associated with starting and operating an on-site childcare center. Nevertheless, with an increase in single parent households, there is definitely a certain way to attract women and a diverse workforce. Yet, there are not many employers that have taken the initiative to include this as one of their benefits.

As small business owner in the home healthcare field, I am interested in learning about the benefits of employer sponsored childcare. Some of the challenges home healthcare business are faced with are high turnover, and absenteeism. The workforce demographics for home healthcare companies are predominantly women, and I want to research if this will be an attractive benefit for home healthcare companies to offer. I am also interested in finding out the return on investment associated with employer-sponsored childcare, as well as other benefits that are not easily measured. As a single mother, I am interested in knowing the pros and cons of employer sponsored childcare, to aid my decision in future career endeavors.

I hope to discover solid evidence that employer-sponsored childcare is effective in attracting and retaining qualified employees. If there is contrary evidence, I want know what the limitations are, and what further research is necessary in this subject matter.

Scope

This paper is going to explore whether employer-sponsored childcare has any effect on employees. I am going to be looking at companies that have successfully implemented this program, and how it has affected their bottom line. There are also those who believe that the absence of a childcare was not the leading cause of absenteeism, but the sickness of a child was more likely to lead to higher absenteeism (Miller, 1984). For the purpose for this research, I will focus on on-site childcare. I will touch briefly on sick-childcare. I will also be researching employer-sponsor childcare benefits from the employees’ point of view, and how it is valued by employees. I will not be discussing pre-paid care, such as employees childcare account benefits. I am focusing on childcare that employers are directly involved in the process.

Terms

Direct Care. Business provide on-site or nearby care centers for daily care, after-school programs, and summer camps (Oekerman, 1997).

Indirect care. Companies contract with existing centers which provide care for employees’ children (Oekerman, 1997).

Emergency care. Businesses arrange care for emergency care in a short time frame including care for sick children (Oekerman, 1997).

Prepaid-care. Companies institute special accounts into which employees contribute pre-tax income to be used toward child care (Oekerman, 1997).

Referral care. Employers contract with referral services that maintain up-to-date information on child care available in the area (Oekerman, 1997).

On-site childcare. An on-site childcare is one that is funded by the employer at the job-site or at another location, and the employer usually pays the start-up and operational cost ( Oekerman, 1997).

Worksite childcare. See Onsite Childcare.

Absenteeism.

Back-up care.

Afterhours care. Are childcare services that are provided outside the normal business hour of nine to five PM.

Near site.

Chapter Two: Literature Review

This chapter will review literature on the effect of employer sponsored childcare on employees. This section will begin with a brief overview of employer sponsored childcare, and then provide research on some of the problems identified by employees. Research on the effects of employer sponsored childcare on retention, recruiting, absenteeism, and productivity is presented next. Findings from studies on employers’ commitment are covered in this session, and the last session is about ethical consideration followed by a brief summary.

Issues affecting employees in childcare

Contrary to popular belief, employer on-site daycare is not a new phenomenon. Evidence has shown through research that employer-supported childcare extends at least as far back as the Civil War, when on-site childcare was offered to the women who sewed for soldiers (Miller, 1984, McIntyre, 2000). As more women entered the workforce in the 70s, the idea of on-site childcare expanded to hospitals, government, and private companies (McIntyre, 2000). As the country experienced labor shortage in the 90s, employers were compelled to offer benefits like on-site childcare to encourage nonworking women to join the workforce (Keyser & Hartley, 2002, Connelley, Degraff, and Willis, 2004). In 2000, it was estimated that approximately 80 % of children six and under were spending an average of 40 hours weekly in some type of non-parental care (Marshall, 2004 as cited in Sphancer & Burnett-Murphy, 2006). However, quality childcare is still a major a concern for majority of parents today (Keyser & Hartley, 2002).

Childcare crisis. Childcare is listed as one of the major crisis’s that businesses, government and human resources department are faced with (Zampetti, 1990, Duncan, Edwards, Reynolds & Alldred, 2004). However, on-site childcare is still lagging in its growth, and it has not grown as much as anticipated (Oekerman, 1997). Nevertheless, the demand for childcare has increased significantly, with the increase of women in the workforce (Keyser & Hartley, 2002). It is also projected that over 85% of the workforce in the next five years will be working parents, and there has been a significant increase in the number of single parents’ households in recent years (Keyser & Hartley, 2002). Employees are often faced with the challenge of finding quality childcare that is also convenient (Durekas, 2009). Employers on the other hand, are faced with the challenge of developing a childcare program that will work effectively for all employees, given the diversity in today’s workforce (Zampetti, 1990). A survey conducted in 2000 showed that only nine percent of the 1000 companies with 100 or more employees’ survey had on-site childcare (McIntyre 2000). While this number is significantly greater now than 20 years ago, this still lags behind the demand created by the approximately nine million families with children under six years old that are in the workforce today (McIntyre, 2000, Oekerman, 1997).

Childcare-related issues can hinder an employee from working at their full potential, and has led to employers losing millions of dollars due to absenteeism, decreases in productivity, high turnover, and increased training costs (Oekerman, 1997). Some of the problems cited by parents about childcare are cost, quality, availability and flexibility (Oekerman, 1997; Keyser & Hartley, 2002). Research has shown that childcare issues can cause stress, tiredness, lack of motivation and loyalty, reduced productivity, unauthorized absences and accidents (Connelley, Degraff, and Willis, 2004; Oekerman, 1997). Researchers believe that some of the problems created by childcare crisis can be eliminated or minimized by employers offering on-site childcare (Connelley, Degraff, and Willis, 2004). Supporters of on-site childcare argue that well-designed programs can positively influence parents’ behaviors towards work, improve the wellbeing of children, and positively influence parents’ attitudes towards their job, and life as a whole (Milkovich, 1976).

Cost. The number of parents experiencing childcare crisis has significantly increased over the years (Durekas, 2009). The cost for childcare is significantly high and most low income and single parents cannot afford childcare without assistance (Harper, Densmore & Motwani, 1993). Parents with more than one kid are often faced with the challenge of finding childcare programs that does not cost more than the monthly income of one of the parents (Harper, Densmore & Motwani, 1993). With the current state of the economy and the increasing cost of childcare, the affordability of childcare has created a struggle for many parents (Durekas, 2009). Lack of quality and affordable childcare serves as a major barrier for women returning to the workforce (Skinner & Finch, 2006). Many families turn to informal childcare options, by using family members, however, while this method is cheaper or cost effective, some researchers believe that is not as reliable as a formalized childcare facility (Hughes & Gary, 2005). On-site childcare is advantageous to employees; employers often offer rates that are lower than what other childcare facilities charge in the community (Harper, Densmore & Motwani, 1993). Employers usually pay for the start-up and operating cost, thereby minimizing the overall cost to employees (Oekerman, 1997; Miller 1984).

Quality. Parents are interested in childcare facilities that are of high quality, to ensure the proper growth and development of their children (Abraham & Bowdidge, 1990, Sphacer & Bennett-Murphy, 2006). Quality is a paramount concern for parents, because studies have shown that children who attend quality preschool are more likely to graduate from high school, less likely to end up in jail, and are more likely to pursue advanced education, providing employers with a more highly-qualified workforce (Durekas, 2009; Langland-Orban & Malsbary, 1990). The quality of on-site childcare is viewed by employers as a driving force in attracting and retaining talented employees (Miller, 1984). Employees are attracted to such a company, because of the convenience and peace of mind that on-site childcare offers. Employees are confident that their employers will hire competent, trustworthy staff members that will deliver quality education to their little ones (Durekas, 2009). Parents are demanding higher quality childcare from employers, and companies that are unable to provide such options will seem less attractive to the workforce (Langland-Orban & Malsbary, 1990). Some employers are responding to the demand of offering quality on-site childcare benefits to their employees, by gaining accreditation from nationally recognized institutions and boards (Oekerman, 1997). Employees are no longer satisfied with the minimum standards for childcare, employees expects employers to provide a facility that is on par with other quality programs in the area (McIntyre, 2000; Cohen, 1991). Employers also see on-site childcare as a reflection of their image, and are determined to run a facility that reflects their value (Cohen, 1991, McIntyre, 2000). Running a lower quality on-site childcare can serve as a deterrent for employees to join a company (McIntyre, 2000).

Availability. As more women entered the workforce, the demand for childcare has exceeded the supply (Harper, Densmore & Motwani, 1993). Parents are looking for a program that is high quality and affordable (Miller 1984; McIntyre, 2000). There is also a need for childcare arrangement that is close in proximity to the parents’ worksite, and a facility that provide options for those that do not work during the regular business hours (Leask, 1999). Overall, parents are concerned about the location of the childcare center, the hours of operation, and the availability of space in quality childcare centers (Durekas, 2009).

The demand is even higher when it in regards to on-site childcare (Miller, 1984). There are not many companies that offer on-site childcare, there by creating a greater demand for the service (Miller, 1984). On-site childcare helps to decrease the demand by providing a childcare center that operates during the company’s regular business hours, and having a facility that address the needs of their current work force (Leask, 1999). Some employers offer 24 hours facilities, in direct demand of their current workforce (McIntyre, 2000).

Flexibility. With the increase in single parent households, mostly run by mothers, single mothers find on-site childcare, and emergency childcare as an important tool in assisting them to find balance in their lives (Schandl, 1992). On-site childcare centers save parents time and provide flexibility, because parents do not have to drive to separate locations during their commute to work thus saving them time (Oekerman, 1997; McIntyre, 2000). On-site childcare also provides the flexibility for parents to work longer, because parents are not in a hurry to pick-up their kids before the daycare closes (Kiger, 2005). The flexibility of parents having their kids close by benefits employers, because employees are still focused on their task at hand at the end of the work day, instead of being concerned about getting to their kids’ childcare on time (Zampetti, 1991). It is believed that the flexibility enhances the overall productivity of employees, because flexibility reduces the overall stress of employees which assist employees in finding a balance in their work and personal lives (Robinson, 2005).

Employers’ response to the childcare crisis

Research has shown that as the country continues to experience an increase in single parent households, most which are headed by women, the type of benefits desired by the new workforce has changed (Zampetti, 1991). Employers are searching for ways to respond to this new demand (Elskick, 2001, Durekas, 2009). Some employers have responded by offering flexible work schedules, providing daycare vouchers, reserving spots in daycares for their employees, and pooling resources to provide appealing daycare options (Hartley & Kelsey, 2002, Kiger 2005). Other companies have gone above and beyond by offering on-site childcare option. Employers who have taken the initiative to provide on-site childcare state that they are seeing results in lower absenteeism, increased in productivity, higher retention and increased employee morale as well as good corporate image (Oekerman, 1997). Others argued that on-site childcare is not the only solution to the childcare issue, and actual benefits associated with on-site childcare are difficult to quantify, and many reports that these benefits have been achieved are based upon poorly designed studies, using such data as employee opinions (Lang-land Orban & Malsbary, 1990).

Advantages of on-site childcare

Recruiting. Researchers agreed that on-site daycare is a way of attracting qualified and more diverse workforces (Connelley, Degraff, and Willis, 2004). Quite often, companies that offer on-site childcare are on the top of the list of “Best Place to Work”, which make such companies attractive to jobseekers (Durekas, 2009). Publicity about a company offering on-site childcare has made companies attractive to employees, and companies are being contacted by potential employees, thus saving the company money in recruiting advertisements (Oekerman, 1997). On-site childcare has in some cases has led to companies saving money in recruiting and having a larger pool of applicants to choose from. According to Connelley, Degraff, and Willis (2004) not only can employer sponsored childcare act as a direct incentive for women to enter the labor market, but it also has the potential to attract and retain fathers of young children who seek to facilitate their wives’ employment or who are single parents. Women and young families are often attracted to such companies, because it offers employees peace of mind (Schandl, 1992, Connelley, Degraff, and Willis, 2004). The idea of having their kids only a few feet away in a safe environment creates security, which is an incentive for potential employees to be drawn to a company (Schandl, 1992). A 1997 study that was conducted by researchers at Simmons College in Boston discovered that companies with on-site childcare had 42 percent of employees named childcare as the reason they had joined the company, and one out five stated they would passed up an opportunity at another company because their desires to keep their kids at the company’s child care center (Kiger, 2005).

Some companies believe that without on-site childcare, they wouldn’t be able to compete in a tight labor market, especially when it comes to recruiting female employees in the high-tech industry (McIntyre, 2000, Schandl, 1992). These employers believe that on-site care is a significant tool for recruiting and retaining high-tech workers (McIntyre, 2000). On-site childcare gave companies a competitive advantage against their competitions, because on-site childcare is different from traditional benefits, and it is been offered by few companies (Schandl, 1992). On-site childcare also shows an employer’s commitment to their employees, which sends a message that the company is invested in the wellbeing of their workforce (Durekas, 2009). On-site childcare also enhances the company’s image, which make the company attractive to new and diverse talents (Durekas, 2009)

Retention. There are many employers who have benefited from higher retention and performance due to on-site daycare (Connelley, Degraff, and Willis, 2004). One such company is Abbott Laboratories, where employees with children in the on-site childcare center have a retention rate three times higher than the norm (Kiger, 2005). Employers are seeing an increase in retention, because of the flexibility and peace of mind that on-site childcare provides for parents (Casey & Grzywacz, 2008). Knowing that their child is only few feet away in a quality facility, serves as a motivation for parents to remain with an employer (Friedman, 1986 as cited in Oekerman).

Companies such as Procter & Gamble has taken proactive steps by opening a 24 hour childcare facility to accommodate night shift workers that are unable to leave their kids home and Trout Blue Chelan Inc, has taken the initiative to run an on-site childcare facility outside the normal business hours (McIntyre, 2000). According to the manager at Procter & Gamble, their new facility is demonstration of their commitment to their employees and has served as an incentive for employees to remain with the company. She further explained that it conveys a message that the employees are cared about, and this has in turn increased employees’ loyalty (Leask, 1999). Companies who offer on-site childcare are starting to see their employees rejecting offers from other companies, and employers are starting to view on-site childcare as a way to remain competitive in the future (Connelley, Degraff, and Willis, 2004, Zampetti, 1991).

Productivity. Researches believe that childcare-related issues can bring about stress and concerns that affect the overall productivity of an employee (Hartley & Kelsey, 2002). Studies also show that companies who offered on-site childcare are experiencing an increased in productivity (Leask 1999, Zampetti, 1991). Managements at such companies believe that on-site daycare creates an environment in which employees can focus their task at hand, alleviate those concerns that serve as a distraction, and affect productivity (Zampetti, 1991). On-site childcare has led to increase in productivity because employees can now concentrate fully on their work, because they trust that their child are been taken care of my competent staff (Leask 1999; Zampetti, 1991). An example is at SAS, where parents are allowed to visit their children during the day or join them for lunch in the cafeteria. According to the company, this has enormously increased morale and performance, and the overall productivity of employees (Leask, 1999).

Absenteeism. The National Child Care Survey reported that in 1990, 15% of all employed mothers missed work due to child care problems (Hofferth, Bayfield, Deich, & Holcomb, 1991 as cited in Oekerman, 1997). Employers lose millions of dollars each year due to absenteeism caused by childcare- related issues (Hartley & Kelsey, 2002). According to Durekas (2009), some large employees can lose close to a million dollar each year, because of absenteeism. Absenteeism is a major concern for employers, because it affects overall productivity, and morale on the job (Miller, 1984; Hartley & Kelsey, 2002). By providing on-site childcare, employers will reap the benefits of decrease absenteeism in the company as a whole (Hartley & Kelsey, 2002). Employees will take fewer unscheduled days off as a result of lack of childcare (Milkovich, 1976). Employers also believe this has led to decreases in absenteeism, tardiness, accident rates, turnovers, and employee stress (Milkovich, 1976).

Several studies have suggested that employers felt absence of childcare was not necessarily a cause of absenteeism among women workers, but the sickness of a child was (Miller 1984, Milkovich, 1976). Parents are more likely to take days off to tend to the well being of a sick child (Langland-Orban & Malsbary, 1990; Herman, Koppa & Sullivan, 1999). Also, most childcare facilities have straight rules about sick children coming to childcare, because of fear of other children becoming infected (Herman, Koppa & Sullivan, 1999; Langland-Orban & Malsbary, 1990). In those cases, parents are left with no other alternative, but to stay home with their sick child. Various companies have arranged for back-up child care, and offer emergency childcare option to help address this issue. It is believed that with backup care, a far greater number of people can be covered than conventional on-site care because it is not being used daily (Kiger, 2005). Other companies have resorted to reserving spots in local child-care centers for employees’ emergency use (Kiger 2005). Emergency childcare has led to employees taking fewer days off, due to less severe illnesses of their children (Schandl, 1992). Some employers have addressed the absenteeism problem by providing afterhours care (Cohen, 1991). One study concluded that by providing afterhours care; companies could minimize absenteeism by 20 percent and recover the cost of an on-site center in five years (Connelly, Degraff & Willis, 2004). The director of Childcare at one company describe on-site childcare as a way to create good morale, bring in younger to middle-age workers that need a second income and have a more stable attendance at work (Leask, 1999).

In some cases, onsite childcare has also encouraged women employees to return to work sooner after the birth of a child, because of the company’s infant daycare (Aschbacher, & Burud,

1989 as cited in Oekerman 1997, Leask 1999). Women are more comfortable having their infant closer to their job, then leaving than in a childcare somewhere across town (Oekerman, 1997). She explained that parents are more secured, because if there is a problem or concern, they are only a few feet away from their little ones. Others argue that employers’ flexibility has an even greater impact on absenteeism, compare to on-site childcare (Miller, 1984). In a study conducted by Casey and Grzywacz (2008), the result show that an increase in perceived flexibility was associated with a decrease in sickness absences and work-related impairment and improved job commitment.

Employers’ Image

Supporters of on-site childcare see on-site benefit as a significant demonstration of the company’s investment in their employees, and what result their policy on childcare will have on employees, and their overall standing in the community (Hartley & Keyser, 2002). Companies that offer on-site child care argue that it is not about breaking even or quantifying the benefits. These employers believe that the savings and benefits obtain from on-site childcare programs are not necessary shown in the numbers but in things such as morale and performance, which are difficult to quantify (McIntyre, 2000; Connelley, Degraff, and Willis, 2004). Companies that sponsor child care programs believe that benefits can be seen in increased recruiting potential, morale, productivity, and quality. It is more of a moral dimension to the company, companies that provide on-site childcare believe that it not done because of profit, but providing on-site childcare is the right thing to do (McIntyre 2000). According to Kiger (2005), “companies are utilizing child-care programs to mitigate one of the most painful and destructive ills of the 21st century economy: parents’ decreasing contact with their kids and increasing alienation from family life”. On-site childcare is a way of helping to strike a balance between work and personal life and a social responsibility of employers that also creates a competitive advantage (Elswick, 2001). Employer sponsor childcare benefits is viewed as a demonstration of an employer’s commitment to employees and leadership in the community, which has resulted in enhanced morale and company image, as well as an increased the company’s ability to attract talents (Durekas 2009). Supporters of daycare emphasize that not only is it the employer’s social responsibility to provide day care services, but also the employers responsibility to properly staffed and designed program (Milkovich, 1976).

Disadvantages

Financial. With all the benefits associated with on-site child care, such as higher retention, lower absenteeism, improved performance and high morale, there are not many companies are jumping to offer this benefit (Morrissey & Warner, 2008, Kiger, 2005). A study conducted in 1998 found 8000 firms on-site or near-site care (McIntyre, 2000). Most companies are afraid to underwrite the cost of starting a new facility because onsite childcare is expensive to start and operate (Land-Lang Orban & Malsbary, 1990). Although there are numerous benefits from opening an on-site childcare, many companies are not willing to commit a substantial amount for start-up cost (McIntyre, 2000). Companies also have to take into consideration the investment in land, buildings, operation of the center, and potential liability issues (Langland -Orban & Malsbary, 1990).

Quality childcare centers are likely to operate at a loss. The capital requirements are substantial, and actual losses and capital requirements have the potential to exceed forecasts (Langland-Orban & Malsbary, 1990). For example, one accounting-firm executive estimates that most hospital-sponsored childcare centers lose $250,000 to $500,000 annually (Lutz 1987, 46, 48 as cited in Langland-Orban & Malsbary, 1990); and another hospital-owned childcare center reports that fees cover only 75 percent of operating costs (Wayne and Burud 1986, 83 as cited in Langland-Orban & Malsbary, 1990). So even though state and federal government offer tax incentives, it still has not been enough to overcome companies’ fear of the added cost and responsibility associated with operating an on-site childcare (Kelley, 2000; McIntyre, 2000). Onsite child care centers are not viewed as money makers, in many instances companies have to subsidize the budget for the operation of one (McIntyre, 2000).

Management. Many employers are not equipped to manage an on-site childcare and some authors (Langland-Orban & Malsbary, 1990) suggest that employers can use many strategies to respond to employee requests for quality childcare that do not require entry into the unfamiliar childcare business or incur a substantial capital investment or operating loss. The management of on-site childcare entails different levels of expertise that companies are not necessarily equipped with (Keyser & Hartley, 2002). Supporters of on-site childcare claim it is the social responsibility of employers to provide a childcare facility that is well-managed (Milkovich & Gomez, 1976). Some companies hired competent childcare aides, but such individuals are not necessarily equipped to manage the day to day activities of an on-site childcare center (Keyser & Hartley, 2002; Milkovich & Gomez, 1976).

Some Langland-Orban & Malsbary (1990) further emphasized that providers of on-site childcare centers may encounter conflicts with employees, particularly regarding annual rate increases, assessing penalties to parents who are late in picking up children, or the decision to terminate the center operation. On-site childcare program is a direct reflection of employers’ commitment to their employees, and without effective management of on-site childcare programs, employers will be faced with dissatisfaction, and complaints from employees which will have adverse impact on recruiting and retention (Keyser & Hartley, 2002; Langland-Orban & Malsbary). Critics however recommend that some employers should stay away from managing on-site childcare programs, because employers that have no expertise in managing child daycare centers increases their companies’ financial risks. Although child-development specialists are often employed, they do not have the expertise to manage an on-site childcare (Langland-Orban & Malsbary, 1990).

Return on investment. The potential to enhance employee recruitment and retention through child daycare exists, but potential savings are difficult to quantify accurately (Segal 1984 as cited in Langland-Orban). There are little to no research on the actual dollars a company saves from offering on-site childcare (Durekas, 2009; Miller 1984). Some researcher argued that a company can attract and retain employees, by offering other childcare benefits instead of investing in an on-site childcare (Zampetti, 1991). Those who support on-site childcare stressed that, the return on investment is can be found in areas such as good public image, decrease in absenteeism, increase in productivity, and employees’ commitment (Kelley, 2006). While the benefits are difficult to quantify, company are gaining competitive advantage which is a substantial return on investment (Zampetti, 1991; Leask, 1999). According to Durekas (2009), “research has also shown a childcare center could save a business as much as $500,000 annually in turnover costs-10 retained workers at $50,000 per worker”.

Ethical Issues

Some of the ethical questions surrounding on-site childcare are: Is on-site childcare in the interest of the child? (Oekerman, 1997) and is on-site childcare fair to everyone