Kid Stuff

How to create affordable alternatives to on-site day care

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Every company president should know the statistics by now. Half of all mothers with preschool children work outside the home; 80% of all women in the work force are of childbearing age, and 85% to 90% of them will become pregnant sometime during their careers; estimates are that in 1990, there will be 10.4 million children under the age of six with working mothers. Combine those numbers with an inadequate supply of child care, and what you've got is a growing number of employees -- mothers and fathers -- spending a sigificant portion of their workday worrying about their children.

Even though child-care assistance has been considered a tax-deductible benefit for employers since the passage of the Economic Recovery Tax Act of 1981, many companies have been slow to respond. If you are among those chief executive officers who think your only option is an on-site day-care center, you're not alone. But you are wrong. Summa Associates Inc., a Los Angeles-based child-care benefit-planning firm, reports that of the 2,300 employers (excluding hospitals) that provide some type of child-care assistance, only around 150 have on-site centers. As it turns out, the types of assistance you should consider offering your employees are less expensive and often more effective than opening a company day-care center.

While they are still few and far between, consortiums have begun to appeal to a growing number of companies. The best way to deal with child care, these companies have found, is to pool their resources. In Tysons Corner, Va., for example, 20 companies recently put up a total of $100,000 to start a day-care center that will open its doors this fall.

The Milton Co., a builder and developer with $100 million in sales and more than 350 employees, is one of the companies participating in the consortium. "The majority of our employees are in the age range where they have school-age children or young children requiring day care," says Debby Ladd, Milton's director of human resources. She had also noticed that more female employees were requesting maternity leave, a sure sign that child-care problems were bound to follow. Ladd's observations were confirmed by Cheri Sheridan, president of PAL Corporate Child Care Inc. and the force behind the Tysons Corner Play & Learn Children's Center (TCPAL).

Sheridan had studied the demographics of northern Virginia, had interviewed personnel managers and employees, and had found that "the gap between the need for care and the actual number of spaces available was about 800." She also discovered that each parent of preschoolers costs employers $1,800 a year, "either because they are on the phone or away from their offices because of child-related problems." For Milton and the other companies involved, the statistics hit home.

The most attractive feature of the project for the participating companies is that even though they are footing the bill to start the center, they won't have to worry about running it or about potential liability. Sheridan's company has found a site to lease, has recruited and screened teachers, and will manage the independent, nonprofit facility.

To raise the start-up money, the companies paid a tax-deductible $1,500 for each space they wanted to reserve at the center for their employees, an amount that is separate from tuition. Unused slots will be available to the public, but the original sponsoring companies will get first shot at any new openings. And each year, says Sheridan, the companies can get priority enrollment for their employees by paying a set fee.

Such consortiums as TCPAL allow companies to have a direct impact on the supply of child care without actually getting into the day-care business. To be successful, though, a consortium needs a committed individual to act as a linchpin. Sometimes that person is a consultant, like Sheridan. And sometimes it's a developer who wants to use a day-care center to help market space in an office park. In rare instances, it is a company president. Whoever it is, a prime mover is needed to make sure the financial projections are realistic, to check into state and federal regulations, and to ensure that the companies involved are protected from liability and that they are contributing their fair share. Some consortiums are set up so that participating companies can offer in-kind services, providing the center with janitorial or printing services, for instance, or footing the bill for a year's supply of milk. But whatever the structure, all consortiums need a champion.

Companies also can get together to provide other types of child-care service. In the Orlando area, for example, a group of nine companies has formed a kind of public/private partnership with Community Coordinated Child Care for Central Florida Inc. (4C), a local organization that is funded primarily through federal block grants and the United Way. The companies contract with the agency to provide their employees with, among other related services, information on the availability of child care.

Before joining the consortium, says Frank Robinson, vice-president of Philip Crosby Associates Inc., "we were finding that our telephone system got jammed immediately after school." The $40-million consulting firm, which specializes in quality management (#188 on the INC. 500 in 1985) has been using 4C's services for the past six years, and Robinson calls it "peace of mind for the parents." Employees phone the agency directly to find out about openings in day-care centers or family day-care homes, all of which are monitored by 4C for quality and adherence to state regulations.

Philip Crosby Associates also provides financial assistance through 4C -- up to $25 a week per child -- to help its employees with tuition costs. The firm pays the agency directly, which then disburses the funds to the providers for a 10% service charge. The subsidy is tax free to employees and tax deductible for the company. Close to 15% of Philip Crosby's 250 employees benefit from the assitance, at a cost to the company of about $700 a month. Robinson considers that a small price to pay for what the company gets back. "We absolutely have seen more productivity," he says. "And I believe attendance is better."

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Donna Fenn

Inc. contributing editor Donna Fenn is the author of Upstarts! How GenY Entrepreneurs are Rocking the World of Business and 8 Ways You Can Profit From Their Success (McGraw-Hill, 2009). Both this blog and the book examine the ways in which GenY is changing the entrepreneurial landscape with new approaches to starting, growing, and managing their companies. Learn more at http://www.upstartsrock.com/.