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Nearly 50% of working families lost access to the child care they used before the pandemic1 and a recent survey of more than 5,000 child care providers across the country suggests 40% of child care centers may be forced to close permanently.2 Given the uncertainty around school re-openings and the impact of balancing work, child care and virtual learning needs, this issue will continue to impact employers and employees alike. To ensure a productive and engaged workforce, employers will need to address this growing need.
Even before the pandemic began, there was a shortage of quality child care resources in the U.S. The pandemic’s impact on schooling and child care has only made the balance of work and home life more difficult. A recent poll by the Bipartisan Policy Center3 points to high levels of stress on working parents:
For employers, there is no universal solution but in conversations with Ayco’s corporate partners, one common theme has emerged—the need for flexibility.
The range of child care options is rapidly changing to meet this growing need. A number of organizations are stepping up to offer new solutions. Employee demographics, job structure, business needs and cost must be considered when designing offerings. Costs can vary substantially among options. Employers need to weigh the added cost of child care benefits against the potential costs of decreased productivity and recruiting, hiring and training new talent if an employee needs to leave the workforce to manage child care issues.
Although no consistent trends have yet emerged, here are some of the unique alternatives we’ve seen companies employ.
The extension of work from home (WFH) arrangements into 2021 and even 2022, along with the increased flexibility to modify work hours, helps employees accommodate child care needs throughout the day. Unfortunately, working outside of the office and adjusting work hours may not be possible for all types of jobs. As a result, requests for working part-time or as part of a job-share are growing.
Many employers expanded leave benefits during the height of the pandemic. The most common strategy we’ve seen among Ayco’s corporate partners was the addition of 10–14 days for COVID-related needs. As the pandemic continues, many companies have considered permanently expanding their leave policies and some are even implementing unlimited time off.
In addition to paid leave benefits, employees are also using federal benefits such as FMLA or time permitted under the Families First Coronavirus Response Act.
A number of companies are creating cost-effective, internal forums/platforms to connect parents who share similar concerns.
These support groups provide an opportunity for employees to share best practices and collaborate on innovative solutions—like “nanny-sharing” or “learning pods” which allow groups of families to share the cost of hiring a nanny or teacher.
Currently, EAPs are offered by 75% of Ayco’s corporate partners. While employees typically associate an EAP with mental health support, many of these programs actually offer a number of additional benefits, including assistance sourcing child care providers. EAPs that offer child care resources can be valuable and cost-effective for employees at this time.
Additionally, as working parents continue to struggle with the stress of balancing work and family life, they should be encouraged to take advantage of the mental and emotional support services provided under their EAP. We have seen a number of companies increasing the number of visits allowed under their plans and adding virtual and digital access to help employees through this challenging time.
There are a number of other employer-paid benefit platforms that can help employees find qualified caregivers for general care or educational assistance. These benefits typically offer online tools, apps and direct access to specialists who act as a concierge for evaluating and finding the appropriate child care assistance.
As the need for assistance with virtual learning has grown, a number of organizations, such as Wellthy, Bright Horizons, KinderCare, Learning Care Group, Helpr, and Care.com have expanded their platform beyond traditional child care to provide support by:
Each of these child care resource platforms have their own unique offerings.
These benefit platforms are often structured as an employer-sponsored resource. Although most companies do not shoulder the full cost, many subsidize a portion and structures vary by company and service. For example, a benefit provider that offers assistance in finding and coordinating care options may charge a fixed subscription fee based on the population size and demographics, a per-employee monthly rate (typically $1–$4), or a per-case fee which could range from $200–$500.
A benefit provider that offers access to care/learning through referrals, facilities, or in-home may charge the employer a flat annual fee based on their employee population, with employees offered discounted rates for the actual care used.
Several of Ayco’s corporate partners have started making qualified educators available to parents, in group sessions or one-on-one, to provide best practices for assisting their child’s virtual learning.
Histroically, a very low percentage of employers have offered onsite daycare. However, this could change given increased employee needs, high demand for scarce child care resources and the extra space created by the need to minimize group gatherings in conference rooms and cafeterias.
Companies such as KinderCare, Vivvi and the Learning Care Group are available to analyze under-utilized office space and make recommendations on how to set up a safe child care center. These companies can also provide trained specialists to run the centers, including qualified teachers and healthcare professionals.
This voluntary benefit has been growing in popularity for several years. Before COVID-19, about 20% of Ayco corporate partners offered a back-up care benefit. Common providers include Bright Horizons, Care.com, Helpr, Cariloop and Learning Care Group, although a number of others are now providing this service to employers.
These programs provide help for a fixed number of days per year (10–15 days on average) when regular care is unavailable, through a database of fully-vetted caregivers. This year, we have seen a growing number of companies increase this total by as much as 10–20 additional days. Providers generally offer access to in-home care and some, like Bright Horizons, also provide child care centers.
Most of our corporate partners subsidize a portion of the cost for these services, enabling employees to pay a discounted rate for care.
Employers might consider adding or expanding the ability for employees to purchase more PTO to care for children. A number of our corporate partners currently offer a vacation buying program and this year, a few have added to the number of days that can be purchased.
Another option is to create a PTO donation fund. These funds can allow employees to donate their unused time to other employees, generally under well-defined criteria for eligibility and use of the donated PTO. Structures often vary company to company. In one example, a company allowed employees to elect how to make the PTO donation—by cashing out the time, donating the net proceeds after taxes and receiving a charitable contribution receipt or by forfeiting the time to the company for a donation on their behalf without paying taxes or receiving credit for a charitable contribution.
Download our memo on the special tax considerations associated with PTO Donation Funds.
These funds can be set up and funded by employers to assist employees with certain qualifying expenses arising due to a qualified disaster. A small percentage of our corporate partners have established COVID-19 emergency funds which permit reimbursements for family living expenses, including child care. As the pandemic continues, more companies are considering these funds and some are expanding on previously created funds. For example, one company recently announced they would double the allowed child care reimbursement to $5,000.
Download our memo for details and tax considerations associated with qualified disaster relief funds.
Currently, a very small number of Ayco corporate partners provide a contribution to employee DCFSAs. However, we have recently seen a few companies considering this option to help with increasing child care expenses.
Employers considering adding a contribution to DCFSAs, should be aware of the following rules and also be sure to coordinate the contribution with other dependent care assistance programs offered for applying the excludable limit:
Keep in mind that some of these employer-paid benefits may be considered taxable income to the employee unless qualifying for an exclusion under the tax code, such as the Section 129 Dependent Care Assistance Program exclusion. Employers should work with their tax adviser to ensure proper eligibility for the exclusion and the coordination of applicable limits.
As many schools open with hybrid models or remain fully virtual, child care resources and services that supplement or replace in-home instruction from parents are in high demand. Many employers are adding and expanding benefits to alleviate the stresses on working parents and minimize the loss of quality talent. Although there is no “quick fix” or “one-size-fits-all” remedy, the many options detailed here are now available for employers to provide their employees with needed, affordable child care solutions.
1RAPID-EC Research Group, June 2020.
2National Association for the Education of Young Children (NAEYC), July 2020.
3Bipartisan Policy Center, Nationwide Survey: Child Care in the Time of Coronavirus, April 2020.
For disclosures relating to this article, please click here.
By Brandon Ross