Information for Employers Looking to Partner with a Childcare Business

Employer-sponsored childcare is one of the many coveted benefits you can offer to existing employees and prospective ones. Ways to offer this perk include adding an onsite childcare service or partnering with a provider in your community. Find out more about employer-sponsored childcare and its potential benefits to help you determine if it is the right option for your business.

	Topics Covered:
	Benefits for Businesses Requirements for Small Employer-Based Childcare Benefits for Providers Creating a Service Agreement Requirements for Providers Who Partner with Small Businesses Requirements for Providers Who Partner with Large Businesses

Benefits for Businesses

Providing childcare benefits to employees can offer employers numerous benefits. These perks include improved productivity, a tax credit, and a way to attract and retain existing talent. And the benefits are not only for large corporations. Small businesses with 100 or fewer employees can have on-site childcare that is easy to operate with fewer regulatory requirements than a standalone childcare center.

High Return on Investment

A study from Boston Consulting Group and Moms First found that employers who offered childcare benefits to their employees saw a return on their investment (ROI) between 90% and 425%. The ROI compared the costs of investing in childcare benefits to the financial gains from improved retention and better productivity.

New Career Progression Opportunities

Parents without access to affordable childcare may opt to change careers. Sixty-three percent of parents reported changing careers to better afford childcare. Such disruptions can halt upward mobility within a company, potentially limiting their lifetime earnings. At Steamboat, 70% of the parents working for the company noted that childcare benefits allowed them to stay in the workforce.

Employees who had childcare benefits from work found themselves able to accept more assignments and take on new opportunities for career advancement. In the Moms First study, a majority (78%) of employees reported that childcare benefits positively impacted their careers.

Increase in Productivity

Among employers who offered childcare benefits and participated in a 2023 Care.com survey, 80% reported improved productivity among their employees. With 53% of those surveyed aiming to increase worker productivity, offering childcare benefits seems like a simple solution.

Tax Credit

Businesses that provide childcare benefits for their employees may qualify for a tax credit. The credit amount depends on the amount spent and the things the money is spent on with a maximum credit of $150,000 per year.

Part of the credit comes from 25% of your expenditures in creating and operating an onsite childcare facility or contracting with an outside childcare provider. The remaining portion is 10% of what you spend on childcare referral services or resources.

To claim this credit, fill out IRS Form 8882. If you have questions about whether your business qualifies for this tax credit, talk to a qualified tax professional.

Better Benefits to Attract New Talent and Retain Existing Employees

In the same Care.com survey from 2023, attracting new hires and employee retention was the second top driver of benefits programs, with 49% of employers choosing it in the survey. Childcare benefits were reported to be a popular means of attaining this goal with 78% of employers who offering childcare benefits claimed that the addition correlated to a boost in recruitment and retention of employees.

Return to Top

Requirements for Small Employer-Based Childcare

Texas has lower requirements for childcare facilities located on an employer’s property if the business has fewer than 100 people. Other requirements for the childcare facility on site to qualify as a small employer-based childcare operation are:

• Has 12 or fewer children of the employer’s employees under its care
• Is on the premises of the employer
• The employer has fewer than 100 full-time employees
• Have no minimum standards to meet per Licensing
• Has a child to caregiver ratio of no more than four to one
• Does not have routine Licensing inspections unless allegations of neglect or abuse occur

For employers, another important rule is 745.461, which regulates the location of the parents in relation to their children in small employer-sponsored childcare. This rule requires parents to work and be physically present in the same building as their children for most of the day. While parents can leave the building for meetings or meals, they cannot leave for more than four hours in a day or 10 hours during one week.  

Combined with the tax credit and the reduced restrictions, a small employer-sponsored onsite childcare operation is a financially feasible way of offering extra benefits to retain and attract new employees and raise in-house productivity.

Return to Top

Benefits for Providers

Childcare providers who work with employers to offer childcare also stand to gain from the relationship. First, for all providers, partnering with an employer offers a steady source of income from the company’s employees. Additionally, when creating a contract with an employer, providers have the freedom to negotiate optimum rates.

For those who work in on-site employer-sponsored childcare facilities, the employer may cover the rent and upkeep costs of the property, reducing operations overhead. Similarly, licensing requirements for small employer-sponsored on-site childcare are much lower than for standalone centers, making opening a new childcare operation in partnership with an employer a simpler option for someone new to the industry.

Return to Top

Creating a Service Agreement

Employers of large or small businesses should have a service agreement with the childcare provider they contract with.

The Texas Workforce Commission in 2023 offered Childcare Expansion Initiative funding to childcare providers who contracted with employers. Though the program ended, the service agreement templates the Workforce Commission provided can be valid outlines to use when creating your own contracts. Generally, your agreement with a childcare provider, whether they work onsite or off, should include the following:

• Employer’s name
• Childcare business’s name and detailed information, including hours, age range of children served, and type of care
• Whether the childcare business is on-site or off-site
• Number of employees who will use childcare
• Whether the employer pays for their employee’s childcare and how much of it they pay
• If the employer covers any other financial needs for the childcare business, such as rent of an on-site facility
• Start and end dates for the contract

The above suggestions should serve as the start for creating a contract. However, do not use this advice in lieu of legal counsel. Consult with a lawyer to ensure that you have a correct, legally binding document that both parties agree to.

Having these details set out at the start of the partnership will prevent miscommunications in the future. Employers gain the benefits of providing childcare for their workers, and the providers have a guaranteed customer base of employees’ children.

Return to Top

Requirements for Providers Who Partner with Small Businesses

If you want to partner with a small business, you’ll have a distinct set of requirements for running the childcare facility and applying for the facility’s compliance certificate. These steps only apply if you will have an on-site childcare operation in a small employer’s business.

Requirements for Small Employer-Based Childcare Operation

As a childcare provider, you must meet basic education, training, and experience requirements before offering childcare for a small employer-sponsored facility. The basic requirements to be a caregiver in this type of facility are:

• Be 18 years old or older
• Pass a background check
• Have a high school diploma or the educational equivalent
• Have one of the following credentials:
  • Day care administrator’s credential
  • Certified Childcare Professional credential
  • Child Development Associate
• Documentation of your credential and regular renewal to keep it active

The following requirements are the same for caregivers at licensed childcare centers:

• Know the facility’s operational procedures governing how to and to whom to release children, discipline, and guidance
• Know the locations of first aid kits and fire extinguishers and know how to use them
• Undergo an overview of recognizing and reporting child abuse and neglect
• Complete eight hours of pre-service training before caring for children
• Complete 15 clock hours of annual training
• No flags on a background check that preclude from working with children

Application Process for Small Employer-Based Childcare Businesses

The application process for a small-employer-based childcare business does require an inspection of the facility, though Licensing will not require annual inspections after an initial approval. Follow these steps to get your childcare business a Certificate of Compliance:

1. Complete the Small Employer-Based Child Care or Temporary Shelter Care Facility Application. You will need a floor plan with the inside and outside of the childcare facility outlined for this application.
2. Send the completed application and required forms to your local CCR Licensing department.
3. Wait for completion of Central Registry and criminal history checks for all caregivers and prospective caregivers.
4. Wait for Licensing to make its initial inspection of the property to ensure that it meets sanitation and fire safety minimum standards.

Unless a report of alleged child abuse or neglect comes to CCR, your facility will not need to undergo future inspections.

Return to Top

Requirements for Providers Who Partner with Large Businesses

Only employers with fewer than 100 employees qualify for a small employer-sponsored on-site childcare facility. However, providers of standalone centers can contract with larger employers to provide care for the employees of those bigger companies.

Since large businesses will likely have a significant number of employees’ children at a childcare facility, the company will most likely partner with a licensed childcare center that has capacity for 13 or more children. These types of facilities must follow all Licensing requirements for larger childcare centers.

If a large employer chooses to partner with several smaller childcare operations, they can do so, but each facility needs to adhere to the state’s guidelines for that type of business. For instance, home-based businesses need to follow the state’s requirements for licensed home-based childcare operations.

Return to Top