The child care crisis is hitting working families hard. Not only is it hard to find, with 100,000 fewer child care workers than before the pandemic, but it’s getting more expensive. It’s clear the caregivers at your company could use a break.
One way to help is by providing child care benefits for employees. We’ll break down the different ways of providing child care for employees, some of the advantages of offering child care benefits to employees, and the potential tax credits available.
What does employer-sponsored child care mean?
In a nutshell, it means offering child care benefits to employees that are either partially or fully subsidized by the employer. There are several different types of employer-provided child care benefits, including:
- Access to a platform to find child care providers
- Backup care benefits
- Subsidies to help employees pay for child care
- Direct payments to child care facilities
- Discounts and resources for tutoring and college planning
Less obvious but indirect child care benefits for employees include offering flexible schedules, and the option for employees to work a hybrid or fully remote schedule. This type of flexibility helps employees to better balance their work and care responsibilities.
Why should employers be offering child care benefits to employees?
There are a lot of reasons why your company should be providing child care for employees, but the biggest one is that, frankly, it’s good for business.
Offering a benefit that your employees want is going to make it more likely that they’ll want to stick around. Given that it costs approximately $4,700 to hire a new employee, those savings can add up fast.
Employees are making it clear they want child care benefits, and businesses that offer them are seeing a positive impact.
- 59% percent of our respondents in the Future of Benefits 2022 survey said they are hearing requests for child care benefits.
- 57% plan to start prioritizing child care benefits to boost their efforts to retain and attract talent.
- Child care benefits like Backup Care reduce absenteeism, since employees will be less likely to miss work due to a last-minute care need.
- Child care benefits can also boost productivity as employees are able to better focus on work knowing that their loved ones have the care that they need.
It’s simple. Employees want child care benefits, and when they get them both employers and employees benefit.
What are the tax benefits of employer-provided child care benefits?
If you’re offering child care benefits to your employees, you might be eligible for a tax break. The Credit for Employer-Provided Child Care Facilities and Services allows companies to claim a tax credit of up to 25% of qualified child care expenses. They can also claim up to 10% of qualified child care resources and referral expenses. The credit is capped at $150,000. In order to be eligible for the full credit, businesses need to invest about $430,000 in child care benefits.
One other caveat is that child care services need to be available equally. That means a business can’t only offer these perks for its executive team, they need to be offered company wide in order to qualify for the credit. We recommend checking with a tax professional or the IRS if you want more information on this tax credit, and how it would apply to your business.
Why employer-sponsored child care need to become the new normal
Child care accessibility and affordability continues to be a challenge, as relief for working families is either reduced or never passed into law. Adding family care benefits like child care to their benefits package will go a long way towards helping working families achieve a better balance.
Are you ready to learn more about how child care benefits can help your business?
