Evaluating the cost-benefit analysis of onsite childcare for employers

Household brands like Johnson & Johnson and Whirlpool offer onsite childcare services to help employees find work-life balance, and because it’s a practical move to satisfy today’s workforce. More and more organizations are investing in it, but should you jump on the bandwagon of building an onsite childcare center? Learn the benefits and challenges before deciding.

What are the benefits of onsite childcare?

Making childcare a part of your compensation package has plenty of benefits for staff, which they transfer to the organization.

Increased recruitment

Today’s job seekers demand more from their employers. Based on a survey, 69% of women applicants with children aged 5 and below will likely choose a brand offering onsite childcare or financial support with childcare expenses. Such a benefit is a big draw among talent.

Boosts retention

A similar result is observed when retaining workers. Roughly 40% of those thinking of moving to a less-demanding job will reconsider their decision if management offers onsite childcare services. Meanwhile, 38% say they will stay if they receive financial assistance for childcare. Adding this perk helps working parents have one less thing to worry about.

Increased productivity

Work productivity demands focus, so work-life balance rarely comes on parents juggling childcare on top of other responsibilities. As a consequence, they’re pushed into choosing between their jobs and caring for their kids, which is unfair.

In businesses that offer onsite childcare, employee absences are lower by 30% and job turnover is reduced by 60%, translating to higher productivity. Supporting team members and solving problems affecting their performance allow them to focus on bringing you results.

Improved employee loyalty

Over 8.7 million children in the U.S. go to pre-primary school institutions, meaning an equal number or even more salaried parents require childcare. During the pandemic, about 45% of mothers with kids aged 5 and below quit their jobs, citing childcare as the main reason for doing so. About 14% of fathers did the same due to the lack of support from their companies.

Loyalty doesn’t come for free — it takes more than competitive pay and career advancement opportunities to gain smart employees’ commitment. Offering childcare is an excellent strategy to persuade them to stay after an annual assessment. That one benefit makes you stand out from the rest of the competitors.

What are the costs of onsite childcare to employers?

Price is a key consideration because an onsite childcare facility is a long-term commitment.

High initial and ongoing costs

Offering this benefit requires an investment. Renovations on an existing facility licensed for 76 children can set you back $55,000, depending on the necessary work. Initial costs can rack up to $95,000. Building a structure from scratch will cost more.

You should be able to get a rough estimate for the entire thing during the planning stage. Include associated costs in the equation, like staff compensation, permits, equipment, insurance, maintenance and utilities. Many of these you must settle regularly.

The organization can claim a tax benefit of up to $150,000 and deduct up to 35% from the taxable income — 25% for facility expenditures, and 10% for resource and referral expenditures. However, the facility must be operational for 10 years or the credit is forfeited.

Extensive background checks for staff

Another concern is the thorough new-hire screening, which some states require monthly or yearly to comply with standards. Hiring is already a challenge because of the shortage of workers. The sector has lost 88,000 jobs or 8.4% of its pre-pandemic workforce. If you add the stringent, ongoing standards the staff needs to complete to pass inspections, staffing alone is enough reason for businesses to put onsite childcare on the back burner.

Legal concerns

Childcare facilities are subject to state regulations and standards associated with health and safety, educational programming, liability insurance, and staffing, so there’s a possibility of a lawsuit when failing to comply with these rules. The complications that come with it make it challenging to implement.

Licenses and permits

Most operators of onsite childcare facilities need licenses or permits, starting with the staff credentials and background clearances to state-required paperwork, like safety certificates. If your brand deals with chemicals, the chance of getting approval is low. Comprehensive paperwork is another factor that stops employers from offering it.

Related: Steps to modernize your benefits offering for working parents

How to conduct a cost-benefit analysis

A cost-benefit analysis will help you assess whether onsite childcare will deliver a good return. Here are three steps to do so.

1. Identify key metrics

Segment your employees to determine what percentage are parents and require childcare. Then, quantify the ROI through reduced turnover, absenteeism rates and productivity of this workforce. With this, you can compare the pros and cons using numbers, which will help you decide whether the benefits outweigh the expenses.

Remember to add the estimated tax benefits and other savings associated with productivity. Years down the line, single workers may decide to have children, so consider that, too.

2. Collect data

Survey your team for feedback to get insights into their childcare demands. If only a small group needs it and its impact on your bottom line will affect the business, it makes more sense to delay it. Meanwhile, offer alternatives like childcare subsidies, flexible work hours or remote arrangements.

3. Analyze the findings

Review the figures and evaluate if you should give onsite childcare a go. If you’re not ready, communicate with your employees and opt for alternatives.

Offering onsite childcare can improve productivity

It all boils down to whether it’s mutually beneficial. Saying yes to it ties your organization to many legal and management responsibilities and at the same time advantages in terms of increased employee loyalty, retention and productivity. Undoubtedly, onsite childcare merits employees in all ways, but is it the same for your organization? Do a cost-benefit analysis to find out.