Balancing childcare and work is challenging for many parents, especially with rising costs and limited availability. This issue affects both families and businesses, as childcare difficulties can increase workplace stress, reduce productivity, and harm employee well-being.

Inadequate childcare support impacts employees and organizations in the following ways:

• Negatively impacts work productivity. A lack of childcare support can cause significant stress for employees, making it difficult for them to stay focused.
• Increases employee turnover. Organizations not offering childcare benefits often experience high employee turnover, increasing hiring and retention costs.
• Reduces employee health and well-being. Parents worried about having childcare support can suffer from mental health concerns like depression and burnout. The inability to get adequate childcare support can impair their work-life balance.
• Results in missed hours due to childcare issues. Employees may frequently miss work hours due to difficulties in arranging reliable childcare.

Advantages of Offering Childcare Support

Some of the benefits of offering childcare support are:

• Increases the ability to attract and retain talent. Childcare benefits significantly influence employees' decisions to stay with their current employers or switch jobs. Employers who offer childcare benefits can better retain and attract top talent.
• Meets the needs of the next generation of parents. Millennials and Generation Z employees prefer jobs with family-friendly benefits, including childcare assistance.
• Helps companies achieve diversity, equity, and inclusion goals. Family-friendly benefits like childcare assistance and childcare leave foster a diverse, inclusive, and equitable workplace.
• Demonstrates a caring and empathetic work culture. Employers who offer childcare benefits show they care about helping employees balance their life and work commitments.

Types of Childcare Benefits

Working parents can be offered childcare benefits in various ways, including the following:

Childcare Subsidies. States offer childcare subsidies funded by the Federal Government to eligible working parents or parents attending school.

Depending on the individual state's criteria, these subsidies can cover the cost of a child's in-home care or attending a childcare center.

Employers can also offer childcare subsidies such as daycare tuition reimbursement to cover the childcare expenses of financially struggling employees.

On-Site Daycare. Employers offering on-site daycare can help reduce employees' commuting time while reducing childcare costs. This benefit can reduce the stress of working parents and the children's separation anxiety while assisting businesses in bringing back employees to the office.

Family Stipends. Family stipends or allowances are financial assistance given to workers in addition to their regular wages to pay for childcare expenses.

Paid Family Leave. While the U.S. does not guarantee paid family leave, 13 states, including Washington D.C., have enacted legislation requiring companies to offer their workers paid family and medical leave.

Employers in the rest of the country can use their discretion to offer paid family leave to working parents.

Flexible Spending Accounts. Working parents can use flexible spending accounts (FSAs) to allot a portion of their pre-tax paycheck into a separate account. Employees can use their FSAs to pay for dependent care expenses like preschool, daycare, after-school programs, and summer day camps (does not include summer school).

Flexible Work Schedule. Many employers offer flexible work schedules like remote or hybrid work to help parents manage childcare.

Backup Childcare. Employers offer backup childcare to parents to take care of sick children or when daycare shuts down to deal with such an emergency.

Eligibility and Enrollment Process

The eligibility and enrollment processes of some IRS-approved childcare benefits are as follows:

Childcare Subsidies. Since 2001, the IRS has provided businesses offering childcare support with an annual tax credit of $150,000.

The employer-provided childcare credit must cover 25% of expenses from a qualified childcare facility plus 10% of the qualified childcare expenditures paid during the taxable year to receive the tax credit.

Qualified expenditures include costs for constructing, acquiring, expanding, or rehabilitating property used as a childcare center or daycare and operating costs.

Dependant Care FSAs. Dependent care FSAs are available for children under 13 and adults who claim them as dependents when they file their taxes.

In 2023, the contribution limit of dependant care FSAs is $2,500 for single filers and married people filing separately and $5,000 for households. The IRS does not allow the funds in FSAs to roll over into a new year.

Takeaway

Offering childcare benefits can be a worthwhile investment for a company. It boosts employee morale, helps attract and retain top employees, and improves workplace productivity.