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
Under a purchase of space program, the employer arranges to "own"
a specified number of spaces in a child care program. Parent fees
may cover most or all of the cost of any spaces used, but the
company typically picks up all or a portion of the cost of the
unused spaces. Thus, the program can afford to keep the spaces
open for the company.
A variation on this approach is when the employer does not hold
the space open indefinitely but has first right of refusal to
all or a percentage of spaces as they become available. This method
is less expensive but usually involves some financial or in-kind
service exchange between the employer and the program.
In a discount program, the employer arranges for employees to
have a fee lower than that typically charged to parents. An employer
can make this arrangement with a single child care program or
with various programs. The difference in fees is usually absorbed
by the company through a financial contribution to the program.
Some programs that would otherwise not be full offer a discount
that is greater than the employer's contribution. Discretion should
be used in these cases as the program may not be completely full
because of its poor quality.
- No capital investment or start-up costs.
- Can provide child care at an affordable price for employees'
children.
- Can serve a wide age group of children.
- Requires minimal management and administrative responsibility.
- Ideal for small companies with relatively few employees or large
companies with small numbers of employees at any one worksite.
- Additional spaces can be purchased as more employees apply for
the discount.
- Can be reduced or modified according to employees' needs.
- Attracts positive public relations because of the company's
support of existing child care programs in the community.
- Employees' choices may be limited to certain programs.
- May be viewed as an endorsement of some child care providers
(a potential exposure regarding liability).
- Child care programs may not be available, accessible or in ample
supply, to make the arrangement effective.
- The company may be supporting a child care program that is not
of high quality.
- Discount arrangements are most available from poorer quality
programs, unless the employer pays the full cost of the difference.
A needs assessment should be conducted among employees to determine the need for and interest in this kind of assistance. A sample needs assessment with suggested questions can be found in this file under "Questionnaire." Assessing the needs allows employers to determine the types of slots to purchase.
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.
There may be a number of programs near a company's location that are suited to the child care needs of employees. The local child care Resource and Referral service or Extension home economist should be able to assist an employer in locating the existing programs. If there is no Resource and Referral service, an employer may wish to contact the local child care licensing agency to ascertain the programs licensed in the locality.
By buying a number of spaces, the company has leverage to negotiate for a discount. An employer can decide to negotiate with a number of programs or with only one. The more programs involved, the more choices employees have for child care suitable to their needs. The company may want to establish quality or other criteria for the selection of programs to protect itself from exposure to liability.
A company may decide to subsidize part of the child care costs
by offering a discount to employees. A sliding fee scale, based
on the employee's income and/or family size, could also be developed,
or an employer may choose to pay a flat fee per child. An expert
in developing child care programs could assist an employer in
choosing the appropriate arrangement.
A Dependent Care Assistance Plan (DCAP) should be set up for any
ongoing employer contributions to make them nontaxable to the
employee. Since DCAPs are regulated through the Internal Revenue
Service, a tax consultant or local IRS agent could assist the
employer in its establishment.
A company may also decide to pay the child care programs a bulk
sum to reserve the spaces for its employees beforehand; employees
would then be responsible for paying the weekly/monthly balance
directly to the child care program.
Employees should be informed about all of the child care programs that are participating in a purchase of space/discount program as well as the fee structure and payment system. They should be encouraged to visit the programs so that they can make the most informed decision. An employer could publicize the program through informational flyers, notices on bulletin boards, seminars and meetings, and articles in the company's newsletter.
In order to determine costs, use of the service, and other operating matters, employers should establish financial management and record keeping systems. They should also develop a system of payment to the service provider that is best suited to the company's needs.
The costs will vary based on the type of programs chosen for purchase, cost of each slot, number of slots negotiated for, administration of payment, and average costs of services in the locality. The percentages of the discount to the company and employee may also vary according to the factors mentioned above.
Legal assistance may be required in negotiating contracts with
child care programs to ensure limited liability. A tax consultant
or local IRS agent can assist in establishing a DCAP for any ongoing
contributions.
You may want to consult with your local Cooperative Extension
Service home economist 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.
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).