Subsidized / Reimbursed Child Care or Referral
Employers who reimburse or subsidize employees’ child care pay all or part of approved arrangements and/ or reserve slots at particular facilities for employees’ children. Through child care referral, employers offer resources to parents to help them find child care in the area.
Research or Recommendations from National Organizations
The average yearly cost for infant care in North Carolina is $9,480 per childFootnote # 4, and the average yearly cost of care for a four-year-old is $8,113 per child. That means the annual cost of care is more than the annual cost of tuition for an in-state public college.
Subsidizing care allows employers to help defray some of these costs. Child care can be subsidized in a number of ways. Examples include:
- subsidizing the cost of care at an on-site center;
- paying membership fees for an online emergency or back-up care service;
- contributing to employees’ dependent care reimbursement accounts;
- establishing relationships with child care providers and offering a discount to employees who use providers from the network; or
- giving vouchers directly to employees to use at preferred child care providers.
Subsidizing care can also support local child care providers by offering them a stable revenue stream, thereby helping the business stay sustainable or even grow.
Employers who contribute to employees’ dependent care reimbursement accounts should be aware there are maximum total contribution limits of $5,000 for single taxpayers and married couples filing jointly or $2,500 for married people filing separately. In 2021, the federal government increased the limit to $10,500 for individuals or married couples filing jointly and from $2,500 to $5,250 for married individuals filing separately, but this is for 2021 only.
Employers considering child care benefits should explore the tax benefits. Employers can receive a federal tax credit of up to 25 percent of qualified child care expenditures and 10 percent of qualified child care resource and referral expenditures. The credit is capped at $150,000, so employers would need to spend about $430,000 total to receive the full credit. Additional investments beyond the cap are not deductible.
Child Care Referral
Employers can help employees access care by providing referral services through North Carolina’s Child Care Resource and Referral (CCR&R) network.
CCR&R services can be a cost effective option, because they qualify for the federal tax credit. Employers can contract for educational workshops and/or to support expanded referral services for employees, including:
- educational sessions available at the employer’s site or virtually;
- materials about developmentally appropriate practices and information about the quality rating system;
- individually tailored referral services with vacancy checks;
- reviews for specialized services, such as for families with special needs such as developmental delays;
- medical support; and more.
Range of Practices in the United States
- Child care was difficult for families to find even before the pandemic, and the pandemic has made it more difficult to find and keep child care.Footnote # 5
- Yet just 11 percent of workers had access to any workplace child care benefit in 2021.Footnote # 6
- Low-wage workers, who often have the greatest difficulty finding and paying for high quality child care, are less likely to receive child care benefits at work. Only six percent of workers whose wages were in the bottom 10 percent had access to any child care benefit in 2021.Footnote # 7
- More than eight in 10 working parents say they wish their employer offered some sort of child care benefit.Footnote # 8
- Child care is unaffordable for the 85 percentFootnote # 9 of parents, who spend 10 percent of their income or more on care. The U.S. Department of Health and Human Services has estimated that affordable care should cost no more than seven percent of a family’s total income.
Let’s Get Started.
Need additional support to get started?
Partner with a child care resource and referral agency. To find an agency near you, search the North Carolina Child Care Resource and Referral Council’s online directory. Agencies can help by offering:
- On-site classes for employees who are parents.
- A review of employers’ organizational work- life culture and guidance on developing family-friendly policies and procedures.
- Guidance on employer-sponsored subsidies to help employees afford the cost of child care.
- Assistance setting up and implementing on-site child care.
- Assistance developing an emergency plan for on-site child care in the case of inclement weather, natural disasters, or other emergencies.
- Help with child care referrals for parents.
Connect with your local Partnership for Children. The North Carolina Partnership for Children’s Smart Start network organizations also offer helpful resources for employers who wish to put together a child care referral list for parents. Find your local Partnership for Children. Here’s an example child care referral guide from the Buncombe County Partnership for Children.
Partner with the Child Care Services Association (CCSA). CCSA can manage an employer’s subsidy program. They work with employers to decide what is covered; who can qualify; and what the parameters of the policy should be. CCSA also contracts with the child care providers on behalf of employers. Email Dr. Linda Chappel, Senior Vice President of CCSA, at firstname.lastname@example.org, to find out more about this service.
Location: Wilmington • Year Founded: 1914 • Number of Employees: 75
For anyone who thinks having child care at work would be a tempting distraction, Katie Tate, chief program officer for the YWCA Lower Cape Fear, disagrees. “I usually try not to interrupt her school day,” Tate says of her daughter. “However, if they’re having a class party or it’s her birthday, of course I’ll be there and it’s easy.”
The onsite child care offered by the YWCA is a huge benefit in and of itself. Tate has been with the organization for nine years and has had two children during that time. “We are very fortunate to work for an organization that provides child care. Having my children go to the same place that I go every day is one less thing I have to worry about; it is one less stop in the morning and one less stop in the evening. Knowing that they’re in the building with me is comforting.”
But what really makes the difference is that for employees of the YWCA Lower Cape Fear, the cost of child care is subsidized. For a working parent with two children in child care, this can amount to more than $7,000 in savings annually.
The YWCA advances their mission to eliminate racism, empower women, and promote peace, justice, freedom, and dignity for all through a remarkable array of programs, outreach, and events. For families in the community, the YWCA can be a life saver—a go-to for affordable, quality child care from infancy through adolescence—offering full day care, half day, after-school, and summer care—and parenting support for teens through grandparents.
The decision to subsidize their child care programs came about after Charrise Hart, chief executive officer, read the Status of Women in North Carolina report from the NC Department of Administration’s Council for Women & Youth. The report emphasized that what women really need to excel is pay equity.
“In the nonprofit sector, you may not be compensated as highly when compared to the corporate sector,” says Hart. “So, we asked ourselves, ‘How are we implementing our mission?’ With our mission to empower women, it starts with us. It starts right here at home.”
The YWCA decided to develop a policy that encourages employees to take advantage of the programming they have in place for the community, and any employee was eligible to sign up. Full-time employees receive a 50 percent discount off of youth programs and child care services, and part-time employees receive a 20 percent discount. Today, almost 40 percent of employees take advantage of this benefit.
“We want to make work-life balance easier for our employees,” says Hart. “You could have a three-year-old at the early learning program and a seven-year-old that’s picked up from school and transported to the YWCA for after-school care. You can take your children home at the end of the day at an affordable price. Nothing can beat what we offer, and I’m proud of that.”
Pamella Spencer, program coordinator, has three children, two of whom are involved with the YWCA’s child care programs. Her 5-year- old daughter attends and her older son, who attended when he was younger, chose to return to the YWCA to fulfill his volunteer requirements as a freshman at Isaac Bear Early College. For Spencer, the program is ideal: payment for child care comes out of her paycheck as a deduction each month, and her daughter is cared for by her coworkers.
“The YWCA is a women’s organization and the majority of our staff are women,” says Spencer. “We have a strong network of support here. I’m glad that my children are surrounded by all of these strong women. We love the YWCA. That’s why we’re here.”
Tate and Spencer both agree that they have much stronger relationships with their colleagues as a result of having their children in child care at their workplace.
They also understand that having child care on-site is not feasible for all employers. However, what they do suggest is that employers could partner with a child care provider and offer subsidies for tuition, registration or activity fees.
“Child care is the biggest expense for families,” says Tate. “There are always ways employers can help out if they can be creative.”
Sample Benefits at YWCA Lower Cape Fear
- The YWCA has the oldest retirement plan for women in the United States. Full-time and part-time employees in the United States are eligible for retirement.
- Health insurance
- Life insurance
- Paid time off, including sick, vacation, and holidays
- On-site child care available
- Child care and aquatics discount for full-time and part-time employees
- North Carolina Early Childhood Foundation. “The Research Basis for Family-Friendly Workplaces.” June 14, 2018. https://files.familyforwardnc.com/wp-content/uploads/2018/04/NCECF_FFNC-policyfactsheet-061418.pdf. Return to footnote #1 referrer
- North Carolina Early Childhood Foundation. “The Research Basis for Family-Friendly Workplaces.” June 14, 2018. https://files.familyforwardnc.com/wp-content/uploads/2018/04/NCECF_FFNC-policyfactsheet-061418.pdf . Return to footnote #2 referrer
- North Carolina Early Childhood Foundation. “The Research Basis for Family-Friendly Workplaces.” June 14, 2018. https://files.familyforwardnc.com/wp-content/uploads/2018/04/NCECF_FFNC-policyfactsheet-061418.pdf . Return to footnote #3 referrer
- Economic Policy Institute. “Child care costs in the United States.” https://www.epi.org/child-care-costs-in-the-united-states/#/NC Return to footnote #4 referrer
- Mitchell, Josh; Lauren Weber and Sarah Chaney Cambon. “4.3 Million Workers are Missing. Where did they Go?” The Wall Street Journal. October 14, 2021. https://www.wsj.com/articles/labor-shortage-missing-workers-jobs-pay-raises-economy-11634224519?mod=article_inline Return to footnote #5 referrer
- U.S. Bureau of Labor Statistics. “National Compensation Survey: Employee Benefits in the United States, March 2021.” September 2021. https://www.bls.gov/ncs/ebs/benefits/2021/employee-benefits-in-the-united-states-march-2021.pdf Return to footnote #6 referrer
- U.S. Bureau of Labor Statistics. “National Compensation Survey: Employee Benefits in the United States, March 2021.” September 2021. https://www.bls.gov/ncs/ebs/benefits/2021/employee-benefits-in-the-united-states-march-2021.pdf Return to footnote #7 referrer
- Care.com. “This is how much child care costs in 2018.” July 27, 2018. https://www.care.com/c/stories/2423/how-much-does-child-care-cost/ Return to footnote #8 referrer
- Care.com. “This is how much child care costs in 2021.” June 10, 2021. https://www.care.com/c/how-much-does-child-care-cost/ Return to footnote #9 referrer