Business & child care: corporate America is finally listening to its employees' requests to help solve the day-care dilemma.
Since 1963, the percentage of women in America's workforce has shifted from 34% to 45%. By the year 2005, women are expected to make up 57% of all new entrants and almost 50% of the workforce. Keeping pace with this trend is the urgent demand for comprehensive and dependable child care assistance.
African-American families are hit especially hard by the child care crisis. One-third of the black population is under age 18. But according to the National Black Child Development Institute Inc. (NBCDI), only 36% of black children under 18 lived with both parents in 1991, compared with 67% in 1960. "The mothers of most African-American preschoolers are employed. But since women are often in lower paying jobs, their financial situation is tenuous. Getting increased benefits for child care has become critical," explains NBCDI executive director Evelyn K. Moore.
Even among middle-class black professionals, finding quality child care is as much an issue as affording it. Over 16 million workers, or almost 60% of the workforce, are dual career couples with children under 18, according to the Bureau of Labor Statistics. However, there are only 80,000 day-care centers or preschools to care for the 13 million children six years and under. And, another 16 million children attending kindergarten or grade school need after-school care. This child care shortage, especially infant care, is rapidly creating a crisis in the workplace.
Child and dependent care problems are already having a serious impact on worker absenteeism, recruitment and retention--and affecting America's bottom line. Compounding the problem is the Family and Medical Leave Act, which mandates that businesses with 50 or more employees establish time-off policies for employees and their families.
Even as large corporations pare down their workforce, work-family benefits simmer as a front-burner issue. Senior executives and human resource managers tackle the question of whether business can and should get involved in the child care issue.
"Companies lose good people when they can't come to work because of poor child care arrangements," argues NBCDI's Moore. "Until a country--its government, private businesses and communities--cares about its children, it cannot continue to thrive."
"Quality child care is one of the most critical issues facing our employees," says NationsBank spokesperson Martha Larsh. "We're trying to identify programs that work best for our employees, depending upon their job requirements and family needs, to help them balance their responsibilities at home and to help them be more responsive to customer needs at work."
An estimated 5,600 public and private employers provide some form of child and dependent care assistance, and another 500 offer elder care assistance. Companies typically develop these programs because: 1) a valued employee has difficulty arranging child care and is forced to leave the company; 2) more women in the executive suite make child care a personalized issue for senior managers; or, 3) they finally realize that as more women join the workforce, the need for dependable day-care arrangements will continue to increase.
More and more American companies are slowly waking up to these new realities. To continue attracting the most qualified workers, businesses must help employees identify viable child care options. The bulk of these corporate efforts fall into four areas: flexible scheduling, financial assistance, referral sources and direct services.
While added costs are a factor, businesses can no longer afford not to provide child care options. "It's a way to attract and retain the best workers," explains Theodore Childs Jr., director of diversity and head of Workforce Solutions, a work-family human resources division of IBM. "As the demographics of the workforce continue to shift, it will be essential that businesses meet family demands in order to retain a qualified labor force," he continues.
"I think there's a lot less resistance today to addressing family issues," comments William L. Johnson, superintendent of manufacturing for the IBM Technology Head Assembly plant in San Jose, Calif. "If someone is out, we must use backup specialists or pull someone from another line or facility. Managers realize we must combine work life with personal life if we are to be productive," he summarizes.
Human resource managers like Valerie T. Hamilton of Sterling Winthrop Inc. in New York City admit that the corporate environment is still evolving on the conflict between work and family needs. However, there are growing signs of improvement, she feels "Employers are grappling with the issue of what is feasible and what are the most effective ways to support our people," she says. "But all companies must educate themselves and their employees that this is not a woman's issue or a female issue. It is a family issue that affects everyone, so it affects business."
Flexible Schedules In Demand
The latest trend in work-family benefits are alternative work schedules. Surveys have found that flexibility is the benefit most in demand by employees. According to the New York City-based Families and Work Institute (FWI), flex-scheduling is offered by 77% of large corporations, although only 45% have formal written policies. Flex-time, job sharing, part-time schedules, work-at-home and 9-80 workday (80 hours of work over nine days in exchange for a three-day weekend every other week) arrangements make a signficant impact on employee productivity. FWI also found that women who work for flexible bosses are seven times less likely to quit their jobs and more likely to return to work quickly.
On the surface, the cost of implementing a flexible schedule is nil. It lies primarily in rearranging how work is accomplished rather than providing dollars to support child care options. However, flexible arrangements are not suited for all companies, divisions or positions. For instance, while employees in a manufacturing company working on the line cannot perform their jobs from home, job sharing or 9-80 workdays may be a viable option. The key is to think creatively about the task to be performed.
Why Businesses Like DCAPs
The Economic Recovery Act of 1981 made child care benefits a tax-deductible item for working parents. Since the act's inception, more companies have been taking advantage of the deduction by creating Flexible Care Spending Accounts. A centerpiece of this benefits package is its Dependent Care Assistance Plans, or DCAPs, which allow employees to reduce their tax liability by setting aside up to $5,000 pre-tax dollars of their salary to pay for child or elder care. Though employers incur administrative costs, they come out ahead, too: The company pays taxes only on the lower income. Ultimately, DCAPs allow the company to offer a child care benefit, while not costing it any money.
Even in companies where DCAPs are available, they aren't always widely used. The reason: Employees may not accurately project how much they spend on child care annually. If you don't use all the money you set aside, you lose it. For employees who don't set aside the maximum deduction of $5,000, a DCAP credit is applied on a sliding scale ranging from 20% to 30% of the household income. And, the amount of credit you can claim may not be worth the paper hassle.
Assume, for example, that a dual-income family makes $55,000 annually. They spent $6,000 last year on child care for their two children. One parent puts $3,000 in pre-tax income into a company DCAP program. When filing their tax return, the couple is allowed to claim the maximum child care exemption of $4,800. The difference between the exemption and the set aside is $1,800, of which 20% (determined by income) is eligible for a tax credit, in this case, $360.
Discounts And Subsidies
Some employers help reduce costs by securing discounts directly from child care providers. For-profit centers looking to attract more children often agree to give the employees of these companies a modest discount--usually 5 to 10% off--on their services. In return, the companies guarantee the child care center a minimum number of participants. Besides negotiating the arrangement, there is no cost to the employer.
However, some child care providers, such as Roberta Bergman of the Child Care Company of Dallas, believe that discount initiatives are "depressing the quality of child care offered." Instead, child care and compensation experts suggest that companies opt to help employees defer costs by paying the difference.
Some companies do just that by subsidizing an employee's child or elder care costs. Typically, vouchers, coupons or checks, made payable to licensed child care providers, are offered to employees with family incomes under $30,000.
Gwendolyn Harrell, a bank teller for NationsBank in Columbia, S.C., is taking advantage of the company's subsidy benefit, Child Care Plus. A working mother of 9-year-old twin girls and another 3-year-old daughter, Harrell says the program has subsidized 50% of the $10,000 she and husband, Jesse, spent on child care last year. Individuals earning less than $29,000 per year and families making less than $35,000 per year qualify for the subsidy; children must be under the age of 13. Starting in 1994, employees with custodial care will also qualify for the program.
"Child Care Plus gives me the option to choose a higher quality of care and education than I would otherwise be able to afford," says Harrell. Before starting to work for NationsBank four years ago, the Harrells relied on their parents and relatives to pick up the twins from kindergarten and keep them in the afternoons. Now, the couple can afford to send their daughters to a licensed child care center two blocks from their school that provides transportation for the girls.
After the birth of her third daughter, Harrell used the program to obtain infant care only five miles from her home. "I went back to work after five weeks," she says. Now all three children attend the child care center--day care for the 3-year old, and after-school and summer programs for the twins.
Because of the cost related to such programs, only 1% of companies offer subsidies to their employees. Since not all employees will qualify, there are also equity issues to be considered. But companies that do offer these options receive a tax break, since an employer does not pay FICA taxes on the amount of the subsidy.
Resource And Referral Services Are Favored
A popular dependent care option for both employers and employees are resource and referral services designed to help employees identify child care resources in their area. The cost to employers is usually minimal, since companies contract with one of 200 outside national referral agencies, such as Work/Family Directions in Boston, for a fixed fee. The advantage of this system is that it allows employee needs to be tailored and can cover a wide scope of services, from identifying in-home care providers or family day-care homes, to child care centers or after-school and summer programs. There is no cost to employees, since the employer has picked up the cost of the service.
"If I'd had this kind of service when my older children were kids, I wouldn't have had so many problems finding care," says Bill Johnson, the IBM manager in San Jose, Calif., and father of 2-year-old twin girls. A remarried widower, Johnson raised his three now collegeaged children alone for 10 years after their mother died. "I went through difficult times finding and keeping child care. The referral service made it much easier today," he adds.
The drawback, however, is most often in the quality and scope of services offered. Human resource and child care experts caution that when contracts are made with large referral agencies, managers should find out whether the agency has a smaller satellite office or subcontracts with smaller agencies. Local services provide more specific information about child care in that area. The more specific the referral information, the more beneficial it is to employees.
"Our company referral agency was helpful in finding organized child care, but not in finding individuals for in-home care," says Cassandra Philippeaux, director of employment and employee relations for corporate headquarters at Sterling Winthrop in New York City. The referral firm supplied her with a list of agencies that could provide nannies and a listing of family day-care homes, but Philippeaux did not like the caregivers the agencies sent.
Because she had difficulty finding quality care, Philippeaux went back to work without a sitter. "My husband took off three weeks from work to stay at home with our son. I considered taking a personal leave of absence and thought my career was going to end abruptly," she says. Three nannies and 15 months later, the couple now uses a family day-care home they found via the same referral service, an option they reconsidered now that their child was older. "It's a service that companies should offer, but employees should know the type of references the agency is best at offering."
Child Care At Work
Perhaps the most widely sought-after corporate child care benefit are on- or near-site child care centers. The Roche Child Care Center sponsored by Hoffman-La Roche is considered a model facility in the corporate child care business. The tan two-story house on a tree-lined street in a residential neighborhood of Nutley, N.J., looks almost like any other house on the block. But it is home-away-from-home for 133 children, ages 18 months to 12 years, whose parents work for the pharmaceutical giant.
When the firm decided to open its own center, they spent two years contracting with a child care center five miles away from its headquarter plant. But employee needs--accessibility to the job, quality of care, affordability for a cross-section of employees and a shortage of child care spaces--were not being met. So in 1980, the company renovated a home it owned on the back lot of its headquarters, and developed a model based on the economic goals of the company.
"This is a department like any other," claims Dianne Keel Atkins, director of corporate child care services for Hoffman-La Roche. "Whatever policies apply to the rest of the company apply here, from staffing and operations to budgets and benefits." All teachers on-staff at the center have bachelor's degrees in early childhood or elementary education and several have or are working on their master's degrees.
An average of 450 to 500 employees per year utilize the company's child-care services, including resource and referral services. Employees spend $440 per month for full-time, on-site care. The center is open five days a week year-round from 6:45 a.m. to 6 p.m. to accommodate workers who must report to work by 7 a.m. Employees like Rudolph Brown say the Roche Child Care Center, where he brings his 5-year-old daughter, Kalea, has kept him with the company. "I've been offered other opportunities elsewhere, but they didn't have a child care program or one like Roche's," says Brown, a compensation and systems consultant. "When looking at the possibility of changing jobs, I also look at the kind of education and child care that will be available with a move."
While child care centers located on or near a company site sound perfect, they are costly to establish and support and may not be the most effective use of corporate dollars. Besides financial concerns, zoning, health, fire and school codes must be taken into consideration. Additionally, there may be equity issues for companies that have more than one location; most on-site centers tend to be located at a company's headquarters.
In an employer-sponsored and -operated center, a company usually pays all the start-up costs and often subsidizes part of the fees or operating expenses. Some companies form a consortium with other employers in need of the same services to establish an off-site center they all can utilize while sharing the financial costs of operating it. In several cases, developers of corporate office parks are contracting with major child care providers to manage facilities that developers will build and use to attract corporate clients. In other cases, corporations are going into partnership with developers to build the facilities they need, which the companies, in turn, manage.
ProLine Hair Care Co. in Dallas (ranked No. 36 on the BE INDUSTRIAL/SERVICE 100) was looking at starting an on-site center with another company and the developer of an office park, but the cost was too high. An on-site center would have been too expensive for the company to co-venture, and wasn't affordable for its 230 employees, most of whom were production assembly workers with limited incomes.
Other companies interested in providing on- or near-site child care are offering emergency child care when arrangements break down. It took several years of planning and two attempts before communications giant Time Warner Inc. opened an on-site emergency day-care center in its New York City headquarters in September 1992. Over 650 children were enrolled in the service during its initial months of operation; employees were not charged during its first year of service. Open from 8:30 a.m. to 6 p.m. Monday to Friday, the center can accommodate up to 30 children, ranging in age from six months to 12 years. "I like the feeling from parents that you've saved their lives. You build an immediate relationship that they're very thankful you're here," says Patti Maltese, manager of the Time Warner Children's Center.
Business Boosts Child Care Supply
Taking a different tactic, a growing number of companies are choosing to boost the supply and access to affordable, quality child care. In September 1992, 137 private and public sector businesses collaborated to form the American Business Collaboration for Quality Dependent Care (ABC Project), a $26.9-million project funding over 200 broad range child and elder care programs in 44 communities in 25 states and Washington, D.C. Their goal: to attract and retain a productive, and motivated, workforce by increasing the availability of child care by 1994.
The CEOs of 11 major corporations (including American Express, AT&T, IBM, Johnson & Johnson and Xerox), along with the state governments of Maryland, Minnesota and New York, established the fund with an initial joint contribution of $25.4 million. Since then other businesses have joined the effort. ABC's emphasis runs the gamut, from offering financial assistance and augmenting existing services to providing funding for teacher training and certification and creating new child and elder care facilities and family day homes.
When Sharon Matthews was offered a chance to relocate to IBM headquarters in Armonk, N.Y., from Charlotte, N.C., she and her husband, Ron, also an IBM employee, seized the opportunity and used the company's child care referral service to help them identify options near home and work. "My daughter, Erin, now commutes with me to a child care center across the street from my office," says Sharon. IBM contributions helped to develop this facility.
"The need for business involvement is high," says IBM's Ted Childs. "One company cannot afford to invest what employees need to make their problems go away. But, they can leverage their dollars by pairing up with others. It's a way to help people come to work and minimize their worries while at work," he concludes.
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|Date:||Dec 1, 1993|
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