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Deciding on Dependent Care Isn't Child's Play

October 1, 1995
Related Topics: Benefit Design and Communication, Featured Article
It's fairly easy to look at such cost-free benefits as flextime and casual dress days and say, "Yes, with a few minor workplace adjustments, this will benefit everyone." It's a little trickier when you have to start deciding on which benefits should stay and which ones should go. Most successful companies will tell you to really look at the return on investment:

  • Is the program truly boosting the bottom line in some plausible way?
  • Is it truly helping employees balance their lives?

One particular conundrum facing companies is child care—which, depending on the company, may do both of the above—or neither. "I think child care is a bit peculiar," says Levering. "It affects a fairly small percentage of most work forces. And it's not like some other benefits where you're really trying to help employees balance their time. You're trying to help them take care of some personal things through the company."

Some companies, such as Memphis-based First Tennessee Bank, opt for a sick child-care center over regular child care. Through a survey, the company ascertained that in Shelby county alone—the bank's headquarters—it was losing about 1,500 days of productivity within a given year. Last year the bank formed a partnership with several other companies to open a center. "Our break-even goal was to get at least 100 days of productivity back, and within the first nine months of its first year, we've done that," says Pat Brown, vice president and manager of family matters.

Why not offer onsite child care as well if the bank could afford it? "We asked our employees what issue was impacting their productivity, and they said it was their kids being sick," says Brown. "They also wanted onsite child care, but we couldn't justify that. With the sick-child care center, we show an immediate return on productivity, and we're starting to track to see if we also retain those employees longer."

While many companies are unsure of the return on investment of owning or supporting their own child-care centers, the idea remains popular. In a 1994 Towers Perrin survey of more than 100 large employers on work-life practices, 13% owned or supported their own child-care services, and another 13% were planning to do so. But with serious expenses for a fairly small portion of most companies' work forces, is offering child-care centers really the way to go?

Consider this: According to the Bureau of National Affairs, absenteeism related to child-care problems costs U.S. businesses approximately $3 billion annually. A company-owned child-care center provides daily care for children, but so does any reliable outside child-care center. The problem arises most often when a child is sick, and a center won't take him or her in. That's the most common reason for a child-care problem that will cause a lost workday. That's also the reason Knoxville-based East Tennessee Children's Hospital chose to offer sick-child care over regular care. Says Paul Bates, vice president of human resources: "The interesting thing for any organization that's looking into an onsite child-care center is that only a very, very small portion of your employees use it due to space constraints. Is it really a benefit to the organization to help 100 employees when you have 1,000?" Instead, the hospital allows its 900 employees to plan for dependent care through spending accounts funded through voluntary contributions from their paychecks—up to $2,000. It also connects employees with the University of Tennessee's child-care resource and referral service. "That way we're doing something. We're helping out but not carrying all that responsibility," says Bates.

Companies with a large number of employees with young children may find, however, that an onsite child-care center would be the greatest thing for the company. It really depends on the need. Bob McDowell, national director of HR for New York City-based Coopers & Lybrand, has experimented with several child-care situations for the company's 16,000 employees. For instance, for a while the company flirted with weekend child care to assist more demanding business areas, such as tax practices that are very busy from January through April. Employees seemed to have few weekday child-care problems—the trouble occurred when they had to drop in the office on Saturdays or Sundays. "There seemed to be a lot of interest in weekend child-care arrangements, so we tried to do it. It didn't work. People are too scattered geographically and often work at client offices, so setting it up at a central location where the office was didn't make any sense." The company instead chose to go the referral route—a practice that has been a success. For instance, one senior consultant was closing a key half-million dollar job. At the last minute, she lost her nanny and was faced with staying home for a few days and jeopardizing the deal. Instead, she was able to call Coopers & Lybrand's family resource service, interview four candidates in the evening, and didn't miss a day of work. The whole set-up cost the company less than $150. "Now does that contribute positively to the profitability of the organization?" asks McDowell. "You bet it does."

Personnel Journal, October 1995, Vol. 74, No. 10, p. 92.

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