A recent report, Parents Under Pressure: The U.S. Surgeon General’s Advisory on the Mental Health & Well-Being of Parents, recommended ways that employers can expand policies and programs that support the well-being of parents and caregivers in the workplace. This can include offering access to child care on site (or in the community, which will be addressed in a future blog). The International Foundation of Employee Benefit Plans’ Employee Benefits Survey: 2024 Report found that 6% of U.S. organizations currently offer on-site or near-site child care. The likelihood of offering on-site child care increases with employer size, according to Mercer’s Survey on Health and benefits Strategies for 2025, which found that 9% of employers with 500+ employees and 13% of employers with 5,000+ employees offer or will offer on-site child care in 2025.

This blog is intended to help employers seek feedback from parent employees on child care needs and understand what on-site options would entail, like how to operate, start-up time, investment and ongoing costs. It can be intimidating to get started. States may offer support for employers getting started with on-site care and/or grants or tax incentives for operation.

Industry and Workforce Needs

Recent news about on-site child care primarily focuses on meeting needs for parents working shifts during nontraditional hours, when center-based or in-home care isn’t available. “Although on-site centers have typically been clustered in city centers and wealthy suburbs, near corporate headquarters and office workers, [Chief Executive of Bright Horizons Stephen] Kramer said there has been a shift toward lower-income, rural areas that are more likely to be ‘child-care deserts.’ As a result, today’s employer-run daycares are increasingly being built not for white-collar executives, but elementary school teachers, airport luggage handlers and hourly workers who toil on assembly lines,” Abha Bhattarai reported in The Washington Post article, Newest way to woo workers: Child care at airports, schools and poultry plants.

Due Diligence

Could on-site child care help your organization recruit and retain a productive workforce? The due diligence goal is to understand what your workforce’s child care needs are, what the gaps are, and whether on-site child care would fill those gaps initially and how the on-site model will handle fluctuations in enrollment over the years. Talk with or otherwise gather feedback from employees who are parents of small children about what support they need to find and maintain quality affordable care for their child(ren)—Ask about their current child care situation, their preferences for care, their challenges and opportunities, and what support they need to find and maintain quality care for their child(ren).

The primary challenge with on-site child care is that parents have a variety of child care needs that could make on-site care impractical or undesirable. Here are some questions to consider asking parent employees about their needs and preferences.

1. Do they have convenient, affordable and quality child care?
2. Do they have a family member or friend providing unpaid child care?
3. Are they looking to change their child care and when?
4. Are they or the other parent considering staying home due to lack of child care?
5. Do they have a child with special needs?
6. Location: Do they want child care at the worksite?
   • Employees may prefer care located closer to home, near the other parent’s worksite or some other location.
7. Schedule: On what days and at what times is child care needed? (i.e., hours per day, time of day, days per week, hours per week). Are these set, or do they vary from week to week?
   • Some child care centers require enrollment five days per week, which a family might not want or need. Here, the organization should determine what days and hours of operation would meet business needs. For example, shift work (open at 5:30 a.m. for first shift), weekends or overnights (hospitals with rotating shifts).
8. How old is/are their child(ren)?
   • Infant care (up to age two) costs more than higher ages because it requires a low teacher-to-child ratio. Some centers don’t take children under two.
   • If children are school-aged, do employees need before or after care integrated with school district bussing or other transportation? Summer care needs are another issue with school-aged children.

Operational Considerations

Employers can either directly operate on-site child care or contract with a vendor to operate. Directly operating an onsite care facility has additional considerations.

• Employ daycare center staff who typically are benefits-eligible
• Time and resources to attract and train daycare staff
• State regulation and licensing (e.g., compliance, reporting)
• Insurance and liability

Regardless of the operational model, the employer decides location, facility/building needs, days and time of operation, age of children included, spaces available per age and fees. Plans should be in place for capacity issues (i.e., scaling with their workforce, seeking enrollment from community members if under capacity with employees’ children).

Cost Considerations

Generally, on-site child care operations are not profitable. “Child care is a highly regulated industry with slim profit margins. Businesses entertaining on-site child care must be fully aware that the benefits gleaned from the project will come from employee retention and productivity and not necessarily excess revenue from the child care program,” according to the Business-Child Care Partnership Tool Kit from the Wisconsin Department of Children and Families: Project Growth. Also, employers often subsidize tuition to some extent, which could be a percentage anywhere in the range of 20% up to 100% or a low flat dollar rate (e.g., employee pays $2 per hour per child) to make care affordable.

If appropriate real estate and facilities are not in place, then upfront costs include leasing or buying property, remodeling or new construction. A posting on Governing, Child-Care Gaps Continue to Strain Colorado Families by Judith Kohler, described the costs and time associated with construction.

• In the spring of 2021, child care problems loomed large for Loryn Duke, the communications director at the Steamboat Ski Resort, and some of her colleagues. Steamboat Ski Resort officials found a building to rent less than a mile down the road from the base of the ski area. The owners gave the OK for the building to be remodeled. “It took us 15 months to go from idea to doors open, which is insanely fast,” Duke said. “To figure out what they needed to do and how to finance the center, resort officials worked with Executives Partnering to Invest in Children (EPIC) which teamed up with the Colorado Department of Early Childhood to offer employers a ‘design lab’ to provide technical assistance and guidance on business plans and funding sources,” Governing reported. Steamboat Child Care Center opened in December 2022.
• Another participant in the EPIC design lab—Community Hospital in Grand Junction, Colorado—opened its Adventure Academy child care center in September 2023 on hospital grounds. The 7,500-square-foot facility is set to accommodate 100 children and will cost about $5 million, the Governing article said. Community Hospital received the Early Childhood Champion Award in September 2024. The new facility has significantly bolstered the hospital’s ability to attract and retain top talent by addressing a critical community need, the award recipient video said.

Pros and Cons

Given all the personal and business needs outlined in the due diligence, operations and cost, below are pros and cons for employers offering on-site child care followed by pros and cons for employees receiving on-site child care.

Pros of On-Site Daycare for Employers

• Boost recruitment
• Boost retention
• Boost productivity
• Boost attendance
• Boost loyalty (employees feel like the employer is investing in them)
• Boost morale (presuming that capacity meets demand for all the workers who want the care)
• Motivate hybrid or remote employees to return to the office

Cons of On-Site Daycare for Employers

• Implementation presents a challenge for employers with a multi-state workforce (or multiple locations within a state) to provide equitable benefits
• The location could be incompatible with remote or hybrid workers.
• If on-site facilities are at capacity, then a procedure for waitlisting or otherwise prioritizing enrollment needs to be enforced (e.g., priority for siblings, lottery system) which can impact recruitment, retention and morale.

The following are the pros and cons for employees about working for an employer offering on-site daycare.

Pros for Employees

• Simple commute
• Work life balance (e.g., employees can visit children during breaks for feedings or lunch)
• Career development/better earnings and career opportunities because of continued employment
• Cost typically below market rate when employers subsidize tuition fees
• Reduced stress
• Peace of mind

Cons for Employees

• If a parent suddenly loses their job, they must find a new job and new child care.
• Employees can perceive golden handcuffs, meaning they feel they cannot leave the organization or seek other employment as long as they need child care.

On-site child care isn’t common, but it’s increasingly offered in industries like manufacturing, aviation, school districts and hospitals, where it meets workforce needs. The primary benefits to employers are boosted recruitment, retention and productivity. Stay tuned for a future blog on employers offering child care subsidies for employees to obtain child care in their community.

Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.