SETTING FEES
National Network for Child Care's Connections Newsletter
Kim Goodfellow, M.S.
South Dakota State University
Copyright/Access Information
Setting the fee you charge for the care you provide can be tricky,
especially if you are just starting out in the business. There
are three basic factors you need to consider when setting your
fees.
1. How much can families afford to pay?
2. What the "going rate" is in your community?
3. How much do you need to charge to make a living?
How much families can afford to pay is the first piece of information
you will need to investigate. Economists tell us that, in general,
families can afford to budget approximately 10% of their income
for child care expenses. That leaves them enough for other necessary
expenses such as housing, food, and clothing. While you want to
be sensitive to a family's budget, it is not your responsibility
to help all parents afford child care. It is your responsibility
to set up a good child care program based on sound business practices.
Keep in mind there are some government subsidy programs to help
low-income families with child care costs. Unfortunately, they
are often full with waiting lists. There are also two tax credits
available to families that can help to lower parents' taxes or
increase their refund. These are the Earned Income Credit and
The Dependent Care Credit.
Next you need to investigate what the going rate' is in your community.
This can be accomplished by calling your local child care resource
and referral agency or child care licensing office. You can also
contact other child care professionals in your area to see what
they charge. You will want to know both the average rate charged,
as well as the range of rates charged. If you have more to offer
families in terms of your education, your experience, and/or the
kind of program you plan to offer, you may choose to set your
fees at the high end of the scale. Some providers are tempted
to undercut the "going rate." Sometimes this works,
but many people believe that you get what you pay for, so it can
work against you.
Now that you have determined what parents can afford to pay and
what other child care professionals are being paid, you need to
determine what you need to be paid. Before deciding this, there
are some issues to consider. First of all, you are a small business
owner, and generally businesses try to make a profit. Child care
professionals are kind and caring individuals who have subsidized
the actual cost of child care for years. In their efforts to care
for others, they have hurt themselves and their own families financially.
Child care is a valuable service to families and to society. It
should be paid for accordingly. The difficulty is that families
often simply cannot afford the cost of quality care.
Secondly, you will incur many costs as you set up and run your
child care business. You will want to consider the operational
costs of toys, equipment, paper goods (paper towels, toilet paper,
etc.), art supplies, food, house/center repairs, electricity,
insurance, water, and rent. Once these expenses are subtracted,
hopefully you will have some funds left for your salary and benefits.
After you have studied these factors, you will be ready to set
your rate. You can charge for your services on an hourly rate
or on a flat weekly or monthly rate. Each type of payment has
its advantages and disadvantages. The hourly rate is most beneficial
when you have full-time children in your care a minimum of 40
hours per week. The hourly rate is less beneficial if you have
several part-time children because you lose money the hours they
are not in your care. In the case of several part-time children
you may want to charge a flat rate. By charging a flat rate, you
will not lose as much money on part-timers as with the hourly
rate because families will be paying for a slot, not hours of
time. Charging a flat rate also alleviates disagreements about
hours of care received. The amount you charge for full-time children
will of course be higher than that of part-time children.
Besides the fees you set, you may also want to consider the following
additional policies that affect your revenue.
- Will you charge different rates for children of different ages?
Some providers charge higher rates for infants and toddlers because
they require more attention.
- Will you charge for days when a child is absent due to illness
or vacation? Some providers charge for these times because overhead
expenses are the same whether the child is there or not.
- Will you charge for your holidays or vacation? Some providers
charge for these necessary benefits.
- Will you charge a fee when parents are late? Some providers
do so to reduce the number of late parents..
A local resource and referral agency or child care licensing office
can provide information about the kinds of policies used by family
child care providers in your area. You can also ask providers
in your community or neighborhood what policies they have in place.
Setting appropriate fees is one of the most important decisions
you will make for your business. Remember to include in your decision
what families are able to pay, what other providers in your area
are charging, and what you need to charge to make a reasonable
salary. Remember to consider the needs of children and families
first when you decide what to charge to provide quality care and
remain in business. When good child care providers have to leave
the profession because they cannot earn enough to stay in business,
everyone suffers.
Child Care Workers Alliance (1990). *Between a rock and a hard place: Raising rates to raise wages*. Minneapolis, MN: Author. This contains useful sections for family child care providers such as: Talking to Parents about Raising Rates; Raising Rates if You are a Wimp; Raising Rates to Improve Quality; Sliding Scales, and; Scholarships and Fixed Fee Percentages. Cost: $5. For more information, contact:
Child Care Workers Alliance
310 E. 38th Street, Room 226H
Minneapolis, MN 55409
(612) 823-5922
Patten, P. (1993). Raising revenue in family child care using rates, fees, and policies. *Family Child Care Connections*, 2, 4.
Windflower Enterprises (1992). *The Language of Money and Family Child Care*. Colorado Springs, CO: Author. Cost: $15. Contact:
Windflower Enterprises
142 S. Claremont Street
Colorado Springs, CO 80910
(719) 520-1614
The National Center for the Early Childhood Workforce (formerly Child-Care Employee Project) is a national organization dedicated to enhancing the compensation, working conditions, and training of all child care professionals. There is a $25.00 subscription fee to become a member and to receive their Compensation Initiative Bulletin. For more information, contact:
National Center for the Early Childhood Workforce
733 15th Street, N.W., Suite 800
Washington, DC 20005
(202) 737-7700
To find out about the child care resource and referral agency nearest you, contact the National Child Care Aware Hotline at 1-800-424-2246.
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