If you want to hire and retain the very best workers for your small business, there’s one thing that can help: great employee benefits. Over the last several years, big businesses like Starbucks and Best Buy have added childcare benefits to their list of employee perks. Small businesses should consider it, too.
Supporting the parents on your payroll can make it easier to recruit and retain top talent. In August 2024, the US Surgeon General issued an advisory on the mental health and well-being of parents and called for a cultural shift in programs and policies to support them. Parents are stressed out, and employers who offer what they need to juggle home and office will become the small businesses that people with growing families will want to work for now and in the future.
What are the advantages of providing childcare benefits?
Helping working parents can mitigate the gender pay gap. According to a March 2024 report, “Playbook for the Advancement of Women in the Economy,” research has shown that if the cost of child care is reduced by 10 percent, employment for mothers can increase by 0.25 percent to 11 percent.
When offered to full-time employees as part of a robust benefits program, employer-sponsored child care can promote a healthy work-life balance. It helps alleviate the childcare challenge for working parents to seek and oversee affordable, high-quality support. This enables them to focus more easily on their professional responsibilities and career development.
Types of childcare benefits
Employers can provide for child care needs in many ways, such as:
Child care subsidies
Employer-sponsored child care
Tuition reimbursement
Partial or full reimbursement for caregivers or nannies
Reimbursement for after-school program tuition
7 ways small businesses can support working parents
1. Make child care cheaper with subsidies.
The cost of child care is high, with a price tag that can be too expensive for many families:
According to Care.com’s 2025 report, the cost in 2024 was an average of $343 per week for an infant in daycare, up from $321 in 2023. A nanny is even more expensive, at an average of $827 per week in 2024, for infant care, up $61 from 2023.
To help their employees, some companies shoulder part of that burden by subsidizing their employees’ childcare bills with stipends, negotiating discounts with local childcare providers, or providing on-site childcare centers. Upwards is a platform for home daycare owners. The startup helps childcare facilities get licensed, manage bills, and communicate with parents. But it does something any small business could do—subsidizes part of the cost of its employees’ child care services.
The out-of-pocket cost of the discounts is manageable because it works with in-home daycares, which are typically 30 to 40 percent cheaper than care at a larger center, says Upwards CEO Jessica Chang. And it’s a permanent solution for her employees who, thanks to the benefit, have locked in affordable care for their kids from 6 weeks to 6 years old. That leads to happier employees who produce more on the job: I get a lot more out of it than what I put in,” says Chang.
2. Don’t forget your tax break—and the tax benefits for your employees.
As an employer, you get a pretty nice tax credit. When you directly pay for your employees’ child care expenses, the Internal Revenue Service (IRS) lets you claim up to $150,000 each year from 25% of the qualified child care facility costs and 10% of the qualified child care resource and referral expenditures paid or incurred during the tax year.
Plus, offering Dependent Care Flexible Spending Accounts (Dependent Care FSA or DCFSA) is another way small business owners can help their employees cut costs, so pretax earnings can be used to pay for qualifying dependent care expenses for children younger than age 13. (DCFSAs are also used for expenses associated with caring for spouses or family members who are dependents and can’t care for themselves.)
3. Embrace flexible work options.
Flexibility can mean everything to any employee, but especially a parent. Flexible schedules and other parent-friendly policies—such as working from home or hybrid options—can attract top talent, reduce absenteeism, reduce burnout, and improve employee mental health.
“As more millennials become parents, it’s not just about them anymore. It’s about their child and their [spouse],” says Chang, who is also a mother. “We have found great talent because of our policies and because of our flexibility.”
4. Set predictable schedules.
For businesses that can’t easily provide flexible schedules, make it predictable instead, says Rich Franklin, founder of KBC Staffing. Predictability is key for any employee, but especially those who must arrange reliable child care.
A consistent schedule for hourly workers will result in less turnover and fewer missed shifts, Franklin says, because workers can line up child care with plenty of notice and are less likely to skip out on work. “Having the schedule change on them at the last minute is a big problem,” he notes.
5. Be your employees’ backup when they need it.
A sick kid can upend all kinds of work plans for parents and employers—and the financial costs, as a result, add up. A 2023 report measures that the lack of access to high-quality and affordable child care has led to $122 billion in lost earnings, productivity, and revenue for the US economy every year.
To offset those costs, more businesses are offering backup child care for their employees. This means they cover or subsidize the costs of emergency care when a child is sick, or child care arrangements fall through for a set number of days each year.
Companies that work with businesses to provide backup care for their employees include:
Smaller babysitting businesses across the country can also help. Rachel Charlupski, founder of The Babysitting Company, which has 2,500 vetted sitters across the country, says she regularly works with companies of all sizes to support on-site employees and remote workers in a pinch.
“For businesses that have remote workers, if they have to come in for something, we have babysitters come in to assist with child care,” Charlupski says. “And if a child is sick or home from school for any reason, we have partnerships to provide discounts for their employees.”
6. Yes, you could offer daycare at work.
Daycare centers aren’t just for major corporations anymore. Franklin of KBC Staffing once worked with a small bookkeeping agency where most employees were women in their 20s and 30s. Because of those demographics, the agency’s owner brought in a childcare worker and turned the space in the office into a daycare facility open to any employee with kids under age four.
Employees paid a small fee for their children to attend, much less than if they were sending their kids elsewhere. Eventually, the owner let the center’s manager bring in a few more children from neighboring businesses to help him cover some of the costs.
The effort paid off for the owner. Because they no longer had to worry about daycare drop-offs and pickups, employees came in earlier and stayed longer each day. “He probably got another hour or an hour and a half of work out of people every day,” Franklin says. “That’s a pretty big productivity gain.”
It’s an unusual situation, Franklin admits. Depending on how it’s set up, it could also be costly. Before you move forward, you’ll want to check with local and state regulators to determine what licenses or permits may be required to operate an on-site daycare at your business. But remember, a business owner can deduct any expense involved in setting up and running the program, including equipment and supplies, up to $150,000.
7. Build it into your culture.
Incremental shifts and small gestures to support working parents can be just as important as the big changes like on-site daycare, says Lori Mihalich-Levin, founder of Mindful Return, which helps new parents navigate the transition back to work.
Together, those small and big efforts build a workplace culture where parents feel supported and encouraged to grow and advance in their careers, Mihalich-Levin says. “It’s a huge retention tool,” she adds. “There’s the saying, ‘Culture eats strategy for breakfast.’ If you don’t have culture, you don’t have anything else.”
These are some steps employers can take toward building it:
Launching a workplace support group (aka employee resource group or ERG) where parents can network and share advice. The Harvard Business Review provides tips for making a working parents’ group effective, including ensuring that events don’t conflict with daycare or school pickups or drop-offs. This Boston College Center for Corporate Citizenship article includes examples of how different companies have set up, implemented, and utilized their ERGs for parents.
Setting up discounts with a breastmilk shipping company could be essential for businesses where employees take frequent business trips. Milk Stork and FedEx are among the companies that provide the service.
Establish new management policies to ensure working parents don’t experience any difficulty when they have to handle family matters, such as leaving early or needing to take off to care for a sick child. You can also avoid setting early morning meetings (like before 9 a.m.) or late afternoon ones (like after 4 p.m.) to allow for easy daycare drop-off and pickup.
Whatever you do, if competing for and retaining the very best employees is a top priority for your business, now is the time to make childcare assistance part of your playbook.
FAQs
Is an employer required to offer childcare benefits?
No, employers aren’t required to offer childcare benefits to their employees, but employers can get state and federal tax credits for offering childcare benefits to their employees. Plus, providing childcare support is an amazing way to show employees that you value their work contributions and personal well-being.
How can small businesses offer childcare benefits to employees?
Small businesses can offer childcare benefits in a handful of ways: by paying for daycare costs directly, subsidizing employees’ childcare costs, offering dependent care flexible spending accounts, creating a daycare program at their workplace, or creating policies that give parents more flexibility with their work schedules so they can be there for their kids.
How do childcare benefits affect employee eligibility for government childcare assistance programs?
Employer-provided childcare benefits can reduce the amount of childcare assistance an employee receives from the government. That’s because employees can’t claim the same expenses for both government tax credits (like the Child and Dependent Care Credit) and employer-provided childcare benefits.
Can childcare benefits be offered to remote or part-time employees?
Yes, employers can absolutely offer childcare benefits to remote and part-time employees. These can take the same form as benefits given to full-time, on-site workers: daycare subsidies, discounted subscriptions to care services platforms, childcare reimbursement programs, and emergency childcare services.
