One way that employers can support employees with child care is by offering to subsidize their child care costs. Employers can contribute up to $5,000 a year to the cost of each employee’s child care without the subsidy being added to the employee’s taxable income. Employers can do this in a number of ways:
· Make direct payments to employees with children; workers can spend the money however they see fit.
· Partially subsidize childcare with select child care providers; employees and companies share the cost of child care.
· Contributing to an employee’s dependent care flex spending account)
· Paying for emergency or back up child care
Offering child care subsidies can increase employee satisfaction and engagement leading to higher levels of productivity. Employers who supply child care subsidies can take advantage of an annual tax credit of up to $150,000 a year if they use it for qualified child care facilities and services. According to the IRS, “the credit is 25 percent of the qualified child-care facility expenditures, plus 10 percent of the qualified child-care resource and referral expenditures paid or incurred during the tax year.”
Back-up childcare assistance gives employees a safeguard for when spouses get sick, schools close, and other unexpected issues arise. For businesses, back-up childcare assistance is a highly effective and moderately inexpensive benefit. Businesses partner with service providers to offer complimentary emergency childcare at an employee’s home or at the provider’s local location. Companies can structure back-up childcare assistance benefits as they do sick days: Employees are entitled to a certain number of days but after are required to pay a partial fee.