3 ways child care benefits can help employers and employees

The national child care crisis hit home for Justin* when his two young children — Brendan (2) and Laurie’s (4) — child care center closed abruptly on a Thursday afternoon, asking parents to pick up their children immediately because they were short-staffed. 

“I was shocked because it was in the middle of the day,” says Justin, who works in logistics. Later, the center notified parents that they'd be closed the following week — or until they could find enough staff to re-open. This scenario has played out across the country.

Finding and affording care for children has long been a challenge for families. Today, there is a lack of approximately 50,000 child care jobs nationwide¹ — and more than half of Americans live where there are three or more children under 5 for every child care spot available.¹

Plus, child care service costs increased more than twice the overall inflation rate in 2023.² And with COVID-era child care funding ending, it’s estimated working parents could lose almost $9 billion a year in lost earnings due to cut work hours or leaving their jobs — which could financially impact the companies losing those employees.³

Fortunately, employers have options and can offer benefits that can help lessen the child care challenges facing working parents.

A deepening child care crisis

Low wages contribute to staffing shortages, leading to temporary and permanent closures of child care centers. For example, the average child care worker in the United States earns just $15.42 an hour, as of May 2023.⁴ While further rate hikes to increase employee pay is an option, this could make care even more unaffordable for some families.

According to the U.S. Department of Health and Human Services, child care is considered affordable when it costs families no more than 7% of their household income.⁵ Yet respondents reported in a recent Care.com study that they spend an average of 24% of their household income on child care. In 2023, the average weekly daycare cost was $321 (up 13% from $284 in 2022).⁵

With all the challenges, securing consistent child care can be a daunting task. And that’s with ample lead time. Finding care with only a day or two of notice because a center abruptly closes? For many, that's not feasible. So instead, when faced with this situation, some working parents may struggle to find a solution that works.

The impact of this issue reverberates across companies and individual careers. Parents struggling with child care often miss career-enhancing opportunities, such as additional training and promotions. Women, and especially women of color, are disproportionately impacted. Faced with few child care options, many women miss work or put their jobs on hold.

Inadequate child care also costs businesses and taxpayers. According to a ReadyNation study, the economy is losing about $122 billion a year.⁶ And companies lose an average of $1,640 per working parent due to lost revenue and hiring costs because of insufficient child care — a total of $23 billion each year.⁶

How employers can help

Employees can't wait for a nationwide solution to their child care shortage — they need help now and parents are looking to their employers for help.¹ According to a Care.com survey, 80% of 500 HR executives said child care benefits have a positive influence on productivity, and 78% said they boost recruitment and retention.⁷

Here are three ways employers can support their employees through this crisis by offering smart solutions that help parents find and fund child care:

1. Alleviate the stress of finding care

Finding and vetting child care options can feel like a second job. Wellthy can provide personalized family care support to employees that can help reduce stress by connecting them with quality, affordable child care solutions that fit their needs:

• Finding and vetting babysitters or nanny agencies
• Researching tutors and supplemental learning options
• Securing availability in after-school programs, camps and extracurriculars
• Finding quality, affordable and reliable back-up child care options
• Identifying financial support opportunities through local and state programs

Each parent is matched with a care coordinator who provides choices based on their budget, needs, and other relevant circumstances, reducing the work of the search — and increasing the likelihood of finding care that works.

Wellthy also provides resources for those caring for children with disabilities and/or aging family members, including: helping with tasks such as managing and sourcing aides and therapists, navigating state and employer-sponsored benefits and medical coverage, assisting with transition of care and tracking down insurance approvals.

In addition, Voya Cares® offers informational resources, services and thought leadership to employers to help support their aging and caregiving employees and those with disabilities and special needs with education and available caregiving resources.

2. Make affording care easier

Finding child care is the first hurdle — and paying for it is the next. This is where a Dependent Care Flexible Spending Account (FSA) can make a meaningful difference.

This type of FSA enables employees to save pre-tax dollars that can be used to pay for eligible dependent care expenses incurred while participating in the plan. Employees can withdraw the funds tax-free to pay for qualified expenses such as daycare, afterschool care, preschool and even summer day camps. However, the children must be under 13 or other tax dependent who resides with the employee and is physically or mentally incapable of self-care.

The accounts do have a contribution limit in 2024 of $5,000 for married or single filers ($2,500 for those married, filing separately). And like other FSAs, the funds don't roll over year-to-year, so employees need to plan how much they want to spend annually.

Employees must spend the entire balance before the end of the plan year or they will lose any unspent dollars. While some plans may offer a grace period or extender, that is determined by the employer. It’s important for companies to clearly communicate with employees how these accounts work.

Note, employees can't use the child tax credit and a Dependent Care FSA simultaneously. That said, the tax savings provided by accounts give employees a way to make their child care dollars go further.

Employer-provided child care subsidies can give companies offsets to their federal taxes. The exact tax breaks vary, so be sure to check with your tax advisors.⁷

3. Leverage Employee Assistance Programs (EAPs)

Many employers offer EAPs as a mental health resource for employees, but did you know EAPs can also offer child care support or resources? Some EAPs offer employees personalized attention for multiple work-life needs, including help with finding child care.

EAP specialists can give referrals to child care providers and information about additional child care resources available to employees. In addition, the programs can connect parents to other resources that can help them stay mentally and emotionally well as they navigate work and family life.

A fit for families

For Justin, the sudden closure of his children's daycare highlighted the precarious nature of child care and how a change can upend life at work and home. It's familiar stress for families around the country. However, support from employers can help and encourage employees to stay engaged, productive and maybe even lessen the stress of navigating child care challenges.

By providing benefits that can help employees find child care and other resources for their needs, employers can reduce the burden on working parents and encourage a workplace that genuinely supports parents and families.

Interested in learning more about our FSA options — and how we can help support your employees who are working parents? Connect with a Voya representative today.