For many companies, backup care is a realistic alternative to providing full-time child-care benefits or building an in-house child-care facility. Full-time centers are expensive, and come with licensing and liability headaches. With real estate construction estimates of between $125 and $175 per square foot (depending on geographic region), the total capital cost to design and build a full-service center can exceed $2 million, even before factoring in the cost of staffing, equipping, and operating it. And once a company commits to an on-site center, there is little flexibility, even if its workforce needs and demographics change over time.
Further, a company unwilling to fully invest in and subsidize a center (including all capital costs and at least one-third of operating costs) risks having the program fail.
A few years ago, Credit Suisse First Boston took a look at full-service care, but the cost and licensing regulations created an impasse, says Judy Heicklen, managing director of CSFB in New York. “We didn’t go far down that path before realizing that full-service care wasn’t going to work,” she says.
One problem was that CSFB couldn’t get a full-service day-care license, since it has no dedicated outdoor space. Instead, the company decided to expand its backup-care program, even though CSFB was in the middle of a companywide cost-cutting effort. “We quickly realized that backup care had a clear impact on attendance and productivity,” says Heicklen. “There was a compelling business case to make the benefit more accessible, despite the budget implications.”
The company ended up selecting ChildrenFirst to provide care out of its centers in eight cities near CSFB offices. CSFB won’t reveal how much it pays for the benefit, but the typical membership fee to an outside center can cost employers between $20,000 and $40,000 annually per facility, depending on the size of the center, its location, and the structure of the program.
Employees have embraced the concept, says Heicklen. “The benefit is open to all of our staff, and it allows us to reach employees at every level, regardless of where in the country they are located.” CSFB doesn’t keep track of its return on investment, but Heicklen insists the benefit saves the company more money than it costs. “It’s been very successful for us,” she says.
Others say that the returns for backup child care are easier to measure than those for full-service care. According to WFD Consulting, a research firm based in Watertown, Massachusetts, for every dollar invested in backup care, employers can expect a return of $3 to $4 in productivity and reduced turnover. This ROI is usually calculated by comparing the daily expense of offering care to average daily salary multiplied by workdays saved.
Offering backup child care can also save money by reducing turnover, because many working parents are forced to leave their job when a child-care arrangement breaks down. According to the Families and Work Institute, the cost of replacing an employee is estimated to be about 150 percent of a professional or management employee’s annual salary, and about 75 percent of an hourly employee’s salary.