James G. Beierlein / James E. Van Horn
Professor of Agricultural Economics / Professor of Family Sociology
Agricultural Economics and Rural Sociology
Penn State University
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Employers located in large office buildings housing several organizations,
in industrial complexes, or in downtown areas with several companies
may find this approach feasible for their employees' needs.
Consortium centers have also been developed through coordination
between a real estate developer, companies in the developer's
business park, and a child care organization. In these cases,
the catalyst to form these consortia often has been the developer
of the child care organization.
The amount of control that a corporate consortium member wishes
to exert over the child care program may have implications for
corporate liability. A new nonprofit corporation may be established
to provide the child care, and contributing corporations may provide
board members to the child care corporation if they wish.
Consortium members generally share start-up costs and in return
receive priority enrollment for their employees' children. Sometimes
specific numbers of slots are set aside for each company; in other
instances, arrangements for consortium members are more informal.
Operating costs, however, are usually funded through a combination
of parent fees and contributions from the employers. Member corporations
may choose to subsidize their employees fees through a voucher/reimbursement
program.
- Resources, liability, and costs are shared.
- Small employers can participate.
- Large size of the combined labor force protects the center from
long-term underenrollment.
- May involve complicated negotiations among firms.
- Center may be able to serve only a limited number of employees
from each participating firm, thus diluting the management value.
- Recruitment/public relations value is reduced.
A needs assessment should be conducted among employees to determine the interest in this type of assistance. A sample needs assessment with suggested questions can be found in this file under "Questionnaire." This questionnaire may be copied and distributed among employees as it is written, or changes may be made to reflect the needs and interests of a business.
A joint management-employee committee may be useful in developing the program. It can foster a sense of program ownership among employees and provide a forum for them to give input into design features of the program or service.
Employers may wish to contact other employers in the area to determine their interest in forming a consortium. These may be companies in a specific industry or diverse companies with similar goals.
Employer members of the consortium may want to establish committees to represent users of the facility in the planning and program design phase, to implement the program once it's finalized, and to work with the architect and the child care specialist on the design of the facility.
The program characteristics selected should be based on the
needs assessment data and recommendations of the committee or
company personnel on program design, including:
- number of children
- age groups
- sizes of groups
- child/staff ratios
- hours of operation
- staffing patterns
- types of food service
- level of quality
Consortium members should decide whether the facility to be provided will be new construction or renovation of an existing facility. Your local extension home economist can help in site selection and analysis, space requirements, applicable design, and state and local code requirements. An architect may then be engaged to develop working blueprints, in concert with the child care specialist, and oversee construction/renovation. Both advisors will be necessary to design a successful facility.
The legal structure of the center must be determined. Participating companies may establish a nonprofit entity in which each company has representation to manage the center, or companies may permit the board of directors to be comprised of parents and community representatives. Additionally, the center may operate as a for-profit program. The legal structure affects the tax deductibility of ongoing contributions to the program.
START-UP COSTS: Consortium members should develop a budget
that includes all start-up costs in order to allow participating
employers to determine their share and how it will be collected.
Start-up costs may include build-out costs if the center is to
be in an existing facility or construction costs if a new center
is planned. Start-up costs usually include:
- Facility build-outs or new construction costs per square foot.
- Space requirements per child, as well as parking space, playground
space, and green space.
- Equipment costs.
- Salaries and benefits to personnel who are involved in setting
up the center or who may require training.
- Insurance coverage.
- Licensing fees and other permits required.
- Fees for technical experts, such as legal consultants, accountants,
or child care experts.
- Marketing costs, such as promotional materials, meetings, and
newsletters.
Employers should also consider that operating losses may result
at the beginning of the program due to underenrollment. These
losses can be considered part of start-up costs.
There are tax advantages that may apply to employers who form
a consortium and may lower the costs of an employer's investment.
Information on tax incentives should be obtained from the Internal
Revenue Service or a tax advisor.
OPERATING COSTS: Preparation of the month-by-month and
annual operating budgets should be accomplished with the assistance
of someone who understands the child care industry. The budget
should take into consideration enrollment assumptions and bad
debt assumptions and must cover true and accurate costs.
The largest budget expenditure is usually payroll. A high quality
center spends 70 to 80 percent of its income on payroll. This
percentage is an indicator of quality that can be used if the
employer is considering contracting with an established child
care provider. Employers may survey local centers to determine
the range of salaries. The local chapter of the National Association
for the Education of Young Children or an extension home economist
can be helpful in determining average salaries for the locality.
Salaries in corporate centers are typically well above market
rates in order to avoid the high turnover common in child care.
Food can be catered or prepared in-house; therefore, an employer
may wish to consider catering costs in developing an operating
budget. Many locales require a full commercial kitchen for the
preparation of meals, and building codes must then be checked
for conformity to local regulations.
Other operating costs include facilities (rent and maintenance),
equipment and supplies, insurance coverage, transportation, advertising,
and miscellaneous expenses.
Most corporate child care centers require some level of operating
support from the company in order to maintain reasonable fees
and still maintain quality. A cost-benefit analysis should be
conducted that compares short-term start-up costs and long-term
operating costs with the productivity, absenteeism, and turnover
advantages that a consortium center will provide. A child care
benefits specialist can assist in this analysis.
The decision about how the center will be managed is determined in part by the legal structure of the program. If a nonprofit entity is to run the program, the board must select a child care program director and establish program policies and procedures. If, alternatively, an outside management firm is to operate the center, then the firm must be selected and a contract drawn up. That firm will then be responsible for the remaining administrative tasks, including licensing, equipping, and staffing the center and developing curriculum, policies, and procedures. Another option would incorporate the parents as a nonprofit association to oversee the administration of the center.
A publicity campaign is advisable to attract employees to use the program quickly so that the program can operate cost efficiently as soon as possible. A campaign could include: notices to employees, open house tours, brochures, and announcement of a center opening date in the fall when parents may be changing child care arrangements.
Pre-enrollment and regular enrollment procedures must be developed, taking into account agreements by participating employers of how the slots will be allocated among the companies.
Consortium members may wish to develop a system for the evaluation
of their child care program. Evaluation assesses the degree to
which the child care program fulfills the program's goals and
objectives and determines whether the goals are being met in the
most cost-effective way. Periodic program evaluation can pinpoint
trouble areas and allow administrators to improve program quality
and make it more cost effective. For example, employers could
examine:
- How many employees are being reached by the service, how well
the employees' needs for child care are being served, and how
well the children's developmental needs are served.
- Program curriculum and support services to evaluate how well
they fulfill the goals derived from the program philosophy.
- Cost of program components to uncover inefficient methods and
to initiate efficient methods for delivering services.
- Changes in amount of participation in program services which
can lead to cost saving changes in the program.
- Effectiveness of the center in controlling absenteeism and turnover,
enhancing recruitment and public relations and achieving other
management goals.
Legal counsel can advise on legal structure and profit/nonprofit
status; prepare articles and bylaws for new child care corporation,
if needed; advise on profit status; file application for 501c3,
if needed; and advise on liability issues.
A certified public accountant (CPA) should advise on tax issues
and conduct an annual audit.
You may want to consult with your local Cooperative Extension
Service to help determine child care needs. The Cooperative Extension
Service could also present educational programs on child care,
parenting, and other work/family-related concerns for employees.
Other people in your community may be consulted in planning a
child care assistance option. You should consider: nursery school
teachers, director or staff of day care centers, child care Resource
and Referral agencies, local Cooperative Extension 4-H agents,
retired persons with child development backgrounds, vocational
technical schools with child care curriculum, community colleges,
and local child care sponsoring agencies (such as a child care
council or community action agency).
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