Thursday, July 25, 2024

This niche employee benefit can actually pay for itself fourfold. Boston Consulting Group calls it ‘the easiest talent investment decision you’ll ever make’

Must read

But there’s one type of cost that, if treated right, can bring corporations a fourfold return, according to a new Boston Consulting Group report. That investment? Helping employees with child care.

“Passing up this kind of investment goes into corporate negligence territory,” Reshma Saujani, CEO of Moms First, tells Fortune

But only 11% of large employers offer this help in some form, whether a stipend, backup care services or a full-fledged child care center, according to benefits consultancy Mercer. In the U.S., it’s a fairly niche benefit that is not seen as an investment, and is often first on the chopping block when companies are in belt-tightening mode.

But it turns out that offering child care can yield substantial benefits for the workforce and employers. A report conducted by Boston Consulting Group at the behest of Moms First undertakes an early analysis of the return on investment of offering child care. They found that, for every dollar spent on the benefit, companies get back between $1.90 and $5.25 in the form of higher worker productivity, fewer missed days, and increased retention. 

“This is the easiest talent investment decision you’ll ever make,” the report reads. 

BCG surveyed hundreds of employees and dozens of working parents across a number of benefits programs; it also presented five case studies of companies that introduced child care benefits and documented their effects on workers. Those include Fast Retailing (parent company of Uniqlo, Theory, and Helmut Lang), which offers employees a $1,000 monthly stipend for child care; UPS, which piloted an emergency child care facility at one warehouse location; and Steamboat Ski Resort in Colorado, which two years ago opened an onsite child-care center for its employees and local residents. 

From these incentives, companies benefit from lower turnover.At UPS, for example, retention of hourly warehouse workers shot up to 96% from 69%. They also boast better attendance, as, with child care options, workers avoided between 11 and 16 absences a year, per BCG’s case studies. 

“That’s more than many Americans get in vacation a year,” said Kos. “For an hourly worker, that’s a meaningful amount of pay for their family they’re able to still receive.”

It’s a bit of a flip to consider child care as an investment as companies typically treat it as a cost. Kos told Fortune that even parent-friendly employers could not tell BCG how much they were benefiting from child care programs. “Companies could tell us how much the benefits cost to administer, but they didn’t have really robust ways of measuring return,” she said.

Because of the high costs of replacing good workers and the benefits of productivity, a company could make a child care benefit pay for itself by retaining just 1% of workers who would otherwise have left, according to BCG. 

To be sure, more independent research needs to be done—and it’s unlikely businesses will be able to fill the gap alone, meaning the government will likely need to step in—by subsidizing care for poor families, as New Mexico has done recently, giving incentives to private organizations, or even raising taxes and providing care directly . But it’s telling that, since the pandemic, the care crisis has drawn increased attention, with traditionally pro-business institutions like the Chamber of Commerce endorsing a fix.  

Saujani hopes that re-framing this social need as an investment will inspire more employers to step up and fill the gap.

“Culturally, we’ve always put child care in the space of a personal problem that families have to solve,” she said. “It’s still seen as a social issue, not an economic issue.” But in its importance to workers–and potential as a recruitment tool for employers—it’s on par with health care. 

“You wouldn’t work for a company that doesn’t support your health care costs,” she said. It should be the same with family support, she added: “Lots of people pay more for their child care than they do for their mortgage.”

Subscribe to the CEO Daily newsletter to get the CEO perspective on the biggest headlines in business. Sign up for free.

More articles

Latest article