James G. Beierlein / James E. Van Horn
Professor of Agricultural Economics / Professor of Family Sociology
Agricultural Economics and Rural Sociology
Penn State University
Copyright/Access Information
An onsite or offsite center is sponsored by an employer or union
at the worksite or at another location. The center can be operated
by the employer or by a nonprofit or for-profit child care provider.
Employers usually pay all start-up costs, operating losses occurring
in the early stages of the center before it is fully enrolled,
and some portion of ongoing operational expenses. Parent fees
cover the balance of the center's operating expenses.
These centers can serve infants (sometimes babies as young as
6 weeks old but more often as young as 3 months old) to 5-year-old
(pre-kindergarten) children. Some centers admit school-age children
before and after school (if transportation is available and the
children are nearby), on school holidays, and during the summer.
These centers can also include emergency or drop-in care for employees
who normally use other child care arrangements but whose arrangements
have fallen through for the day.
Hours of operation typically accommodate employees' work hours.
Usually centers operate within the hours of 6:30 a.m. and 6:30
p.m., although those sponsored by employers are sometimes open
during evenings, weekends, and legal holidays as well.
Child care centers are licensed by local, state, and/or county
authorities. They can be legally structured in many ways: as a
department of the company operated in-house or by an outside operator,
a wholly owned subsidiary, or a separate nonprofit corporation.
Each approach has advantages and disadvantages and should be considered
in terms of how it best accomplishes the goals of the company
and responds to the needs of the employees.
- Attracts and retains employees.
- Cuts absenteeism and tardiness caused by unreliable child care
arrangements.
- Improves the quality of employees' work and productivity by
lessening distractions about their children while they are working.
- Improves morale by demonstrating that the employer cares about
employees.
- Start-up funding must be provided, which may require a larger
investment than some other options.
- There may be some exposure to liability, although it can be
substantially lowered through the legal structure and operation
arrangement of the program.
- There is generally a need to subsidize the operating costs of
the center.
1. CONDUCT A NEEDS ASSESSMENT
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.
2. CONSIDER ESTABLISHING A MANAGEMENT-EMPLOYEE COMMITTEE TO HELP
PLAN THE PROGRAM OR SERVICE
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.
3. DETERMINE PROGRAM FEATURES
The program features selected should be based on data from the
needs assessment, including:
- number of children
- age groups
- sizes of groups
- child/staff ratios
- hours of operation
- staffing patterns
- food service
- level of quality
- level of subsidy
4. DEVELOP THE EDUCATIONAL PROGRAM
The program should be articulated before planning and design can
begin, as both will affect the facility design. At a minimum,
decisions about the program should include:
- the philosophy
- level of quality
- educational goals to be stressed
- curriculum activities for the different ages of children
5. DETERMINE THE TYPE OF FACILITY
Management will decide whether the facility to be provided will
be new construction or renovation of an existing facility. A child
care specialist or 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 or renovation. Both advisors
will be necessary to design a successful facility.
6. SELECT THE SITE
Employer-sponsored centers are often located near the parents'
workplace, or they may be geographically separate from the sponsoring
company but adjacent to the worksite. The following criteria should
be considered in site selection and design:
- INDOOR SPACE: Approximately 60 to 100 square feet per
child indoors is needed, generally, on the ground floor.
- PLAYGROUND: Approximately 75 to 100 square feet of outdoor
space per child for children who are playing outside at the same
time, generally, is required.
7. DETERMINE THE LEGAL STRUCTURE
The center can be a department of the corporation (or unit within
a department), a wholly owned subsidiary, or a separate corporation
(either for-profit or nonprofit). The corporation can also subcontract
the operation of an in-house center to an outside child care operator.
The control or liability continuum influences the legal structure
the employer selects. An employer may want a structure in which
he/she has control over quality and other aspects of the program;
however, the more control the employer exercises, the greater
is his/her liability. It should be noted that corporate centers
have not had liability problems, no matter what their legal structure.
When an employer subcontracts program operation to a child care
operator, the first level of liability is carried by the operator.
A separate legal structure created for the program also gives
the employer some distance from the program and thereby lessens
the exposure to liability.
Another option to consider is incorporating the parents as a nonprofit
parents' association to oversee the administration of the child
care center. This association would be responsible for contracting
with a provider and monitoring the safety and quality of care.
If a child care center is organized as nonprofit, it may qualify
for tax exempt status under section 501c3 of the Internal Revenue
Service code. It is then eligible to receive tax deductible donations
and certain grants.
If an employer is planning to contract with a not-for-profit organization
to run the center, he/she should contact the state department
of human services to inquire about the availability of Federal
Title XX funds (for children from low income families). This department
can also give information about the Child Care and Adult Food
Program (CCAFP) through which the United States Department of
Agriculture provides partial funding for food.
A final decision concerning legal structure should take place
after consultation with the corporate attorney and the child care
benefits specialist.
8. MAKE FINANCIAL PROJECTIONS
START-UP COSTS: Start-up costs 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.
- Marketing costs, such as promotional materials, meetings, and
newsletters.
- Consultation and design fees.
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 may be tax advantages to employers who form a center that
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.
Among the items the operating budget should include are: teaching
and administrative salaries, benefits, staff development, facility
and grounds management and maintenance, equipment and supplies,
insurance, transportation, food, advertising, replacement reserves,
and miscellaneous expenses. The largest budget expenditure is
usually payroll. A center that offers high quality service spends
70 to 80 percent of its income on payroll. Consultation with a
child care expert will help determine all needed budget items.
Most corporate centers require some level of operating support
from the company in order to maintain reasonable fees and program
quality. A cost-benefit analysis should be conducted that compares
short-term start-up costs and long-term operating costs with the
productivity, absenteeism, recruitment, and turnover advantages
that an onsite or offsite center will provide. A child care benefits
specialist can assist in this analysis.
9. PLAN THE MARKETING STRATEGY
A publicity campaign is advisable to attract employees quickly
so that the center can operate cost efficiently as soon as possible.
The campaign may 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.
10. PREPARE FOR CENTER ADMINISTRATION
Administrative responsibilities for a child care center include:
- Determining program philosophy.
- Planning curriculum and activities.
- Setting operating, admission, and personnel policies and procedures.
- Managing finances.
- Keeping records on finances, children, and management decisions.
- Mobilizing resources (funding resources and volunteer services).
- Supervising operations.
- Developing staff (recruiting, hiring, and training).
- Promoting parent involvement (developing newsletter, information
forms).
- Handling employer-center relations, community relations, and
publicity.
Additional administrative activities include:
- Planning for the Physical Plant: A procurement list for all
equipment and supplies must be prepared. Arrangements for janitorial
and trash collection services must be made.
- Planning for Proper Nutrition: An appropriate food service system
must be developed. Food can be catered or prepared in-house. It
is less costly to prepare meals and snacks in-house, but a cook
must be hired and a kitchen constructed that meets building codes.
In many locales a full commercial kitchen is required for the
preparation of meals. The center may wish to apply for funding
from the U.S. Department of Agriculture, which makes funding available
to partially reimburse child care programs for food costs through
the Child Care and Adult Food Program (CCAFP).
- Assuring Quality: An employer cannot afford to support the development
of an inferior quality program. Such a program would reflect badly
upon the employer, would not be as effective at solving problems
of productivity or recruitment, and could potentially present
a liability risk. Some methods to assure quality are:
PREPARING THE CURRICULUM: The preparation of a developmentally
appropriate
educational curriculum is essential. The National Association
for the Education of Young Children has information on an appropriate
curriculum. The curriculum should also be developed with advice
from a child care specialist.
11. PROCURE A LICENSE
All licenses and permits required by government agencies to open
and maintain the center must be procured.
12. DEVELOP AN EVALUATION MECHANISM
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 cost effectively. Periodic program evaluation
can pinpoint trouble areas and allow administrators to improve
program quality and make it more cost effective. For example,
employers should examine:
Depending on the structure of the child care program, the evaluation can be carried out by one or a combination of the following: the board of directors, program director, department head supervising the program, child care specialist, or an evaluation task force.
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) can 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).