Employee Benefits for Working Parents

A robust mix of family-friendly benefits can boost loyalty, reduce turnover, and attract new talent.

Access to affordable, high-quality child care is a top priority for workers with young children. So is work-life balance. Employers who offer benefits that address these priorities see it pay off in numerous ways.

Your workplace no doubt already provides some of the benefits described in the sections below. However, you may find ideas on how to enhance current policies, or ways to broaden your benefits package to make it more attractive to current and potential employees – and therefore more beneficial to your organization’s bottom line.

Help Provide Child Care

For working parents with young children, finding affordable, high-quality child care can be a huge challenge - made even more challenging when they factor in location and their work schedule.

As an employer, you can lower the barriers to finding care by helping underwrite the cost of child care at a nearby facility, or even by providing on-site care.

When parents have access to care - and the peace of mind that their child is safe and in a nearby location - they will be less distracted, more productive, less likely to miss work or be tardy, and much more likely to be loyal, long-term team members.

Here are some options to consider:

Contract with Child Care Provider - Employers can fully fund or partially subsidize a number of slots within a child care facility for their employees to use.

Support Back-up or Emergency Child Care - You can contract with a provider for occasional care for employee's children when their regular child care arrangements are disrupted due to illness, emergency, or scheduling problems.

Create a Child Care Consortium - Neighboring businesses can pool their resources to jointly support a child care center. This typically works best for employers in large office buildings, industrial complexes, or central city locations.

Offer On-Site Child Care - Large employers may have the resources and enough employees with small children to create an on-site child care facility. This arrangement is very appealing to working parents.

For any of these options, your business may be eligible for a federal tax credit equal to 25% of expenses for employee child care.

The maximum credit allowed per year at $150,000. The credit is part of the general business credit and can be claimed any time within three years of the due date of the return.

For details on qualified expenses and how to file, see IRS Form 8882: Credit for Employer-Provided Childcare Facilities and Services.

Dependent Care Flexible Spending Account (FSA)

For tax purposes, the IRS views Dependent Care FSAs as a type of DCAP (Dependent Care Assistance Plan), which is why the terms are often used interchangeably.

A Dependent Care FSA is a plan set up by the employer but funded by the employee with pre-tax dollars, similar to a Healthcare FSA.

Married employees who file a joint tax return and unmarried employees may contribute up to $5,000 each year to their Dependent Care FSA accounts. The annual limit for married employees who file separate tax returns is $2,500. Employee contributions are usually made through payroll deductions.

For the employer, dollars processed through a Section 129 DCAP plan reduce the amount paid to FICA, FUTA, or workers’ compensation premiums (depending on your state) on pre-tax employee dollars. These savings can add up to as much as 20 percent of every dollar being passed through the plan.

ECE AT WORK: WHAT OTHER EMPLOYERS ARE DOING

Supporting Work-Life Balance for Working Parents

Chevo Consulting, LLC, in Rockville, Maryland, prides itself on providing a supportive, family-friendly culture. As part of its benefits package, this management consulting firm offers a Dependent Care Flexible Spending Account (FSA).

Read the Case Study

Unlike a Healthcare FSA, employees may only receive reimbursement equal to the amount they have actually deposited. This means there is no liability to you as an employer (as there can be with a Healthcare FSA) - since employees can't be reimbursed for more than is available in their Dependent Care FSA account.

In addition, employees with children who need child care will likely see a Dependent Care FSA as a valuable benefit, because by paying for care with pre-tax dollars, they stand to save approximately 20 to 40 percent on their child-care expenses (depending on their tax bracket). Qualified expenses are for services that allow the employee to go to work.

In general, most families will enjoy a bigger tax break than from claiming the federal child care tax credit.

Dependent Care FSA contributions not only escape federal income taxes, but also Social Security and Medicare tax. The higher an employee’s tax bracket, the bigger the benefit.

You can also allow up to $500 of your employee’s dependent care FSA balance to be transferred into the next year’s plan. Additional excess funds do not roll over year to year and are forfeited if not used.  

Employers can also make contributions to employees' Dependent Care FSAs. However, the combined employer and employee contributions still can't exceed the IRS limits. For example, if an employer makes a $2,000 contribution to a Dependent Care FSA that has a $5,000 limit, employees may only contribute up to an additional $3000.

Also note that employer contributions to Dependent Care FSAs are not a matchEmployees receive the full contribution amount regardless of what they elect to contribute to the FSA - even if they don't make any contributions.

Your plan administrator can provide a calculator for employees to use in order to anticipate how much they need to contribute to cover anticipated child care costs, to avoid over contributing.

For more information on eligible expenses, employees can consult the Investopedia's article on the Benefits of a Dependent Care FSA.

Dusty Rood, President and CEO of Rodgers Consulting, Inc., on using the Toolkit to make employees' lives easier.

Parental Leave Policies

One of the most powerful steps employers can take to increase retention and loyalty is to allow parents time away from work to welcome a new child into their family.

Offering parental leave, especially if you can provide paid leave, makes it much more likely that new parents will return to work, saving you the cost of recruiting and training new workers. Furthermore, parental leave is a benefit that is important to both mothers and fathers.

What is the law?

The nationwide policy in the United States concerning parental leave is the Family and Medical Leave Act (FMLA) which applies to all public agencies, all public and private elementary and secondary schools, and companies with 50 or more employees.

 

The law entitles new parents unpaid leave and job protection for up to 12 weeks after the birth or adoption of a child. To be eligible, employees must have worked for the employer for more than 12 Months and 1,250Hours, and work at a location where the company employs 50 or more employees within 75 miles.

 

For in-depth information about requirements and compliance, visit the U.S. Department of Labor FMLA web page.

Options for Parental Leave

Whether they are covered by FMLA or not, an increasing number of employers offer broader policies than what is required by law.

Here are some ideas for how enhance your current parental leave policies:

  • If already offering unpaid leave, offer paid parental leave.
  • If already offering paid leave, increase the number of weeks of paid leave.
When Google increased its paid maternity leave program from 12 to 18 weeks, the rate of female turnover after maternity leave was reduced 50%.
  • Offer short-term disability insurance that will provide coverage to new mothers. The typical timeframe a woman is considered disabled following delivery of a baby without complications is six weeks, or eight weeks if a C-section is performed.
  • Offer flexible re-entry scheduling for a period of weeks or months when employees return to work after taking parental leave, such as the ability to work reduced hours or telecommute.
  • If your workplace is not covered by FMLA (which guarantees 12 weeks of unpaid leave to both parents) and you currently only offer maternity leave, expand the policy to include paternity leave, or make your parental-leave policy gender neutral.

For more on why it's smart management to offer parental leave to both parents, see this Harvard Business Review article: A Winning Parental Leave Policy Can Be Surprisingly Simple

See also the Department of Labor Policy Brief Paternity Leave: Why Parental Leave for Fathers is So Important for Working Families

Paid Time Off & Flexible Work Arrangements

In addition to providing parental leave for new parents, you also can support employees with young children through your paid time off policies and a variety of flexible work arrangements.

PARENT-FRIENDLY PAID TIME OFF

Employers in Montgomery County must insure that any paid-time off policies adhere to the The Montgomery County Earned Sick and Safe Leave Law and the Maryland Healthy Working Families Act.

You may be able to go beyond what these laws already require in order to design leave policies that will help you attract and retain employees with young children, and also cut down on absenteeism related to child care challenges.

One possible approach is a Paid Time Off (PTO) bank that combines traditional vacation time, sick time and personal time into a single bank of hours/days for employees to use when they take paid time off from work. If a PTO bank is feasible for your organization, it can give all employees, including parents, greater discretion on how to their time off.

For guidance on creating a PTO policy and whether this type of policy is a good fit for your business, see this article from Paychex: Creating a PTO Policy to Meet Your Business Needs.

Flexible WORK ARRANGEMENTS

A 2019 survey by FlexJobs found that 80 percent of employees would be more loyal to their employers if they had flexible work options.

For parents of infants and young children, flexibility is not only highly desirable, but often their top priority in choosing where to work.

Flexible work arrangements can involve scheduling, location, or a combination of both. Here are some options to consider:

Compressed hours: Allow employees to work their normal number of hours in fewer days. For instance, an employee who works 40 hours a week could choose to work four 10-hour days rather than five 8-hour days.

Telecommuting: If your business is compatible with telework, try giving employees the option to work from home or a remote workspace one or more days per week. For parents trying to coordinate child care and work schedules, telecommuting can simplify their daily routine, reducing stress and distractions so that they can focus on work and get more done. To begin with, time usually spent commuting can be spent working, and you may also see an increase in productivity. A two-year study at one company showed a 13.5% productivity boost among full-time telecommuters.


Flexible daily hours:
Give employees the option to adjust their regular arrival and departure time. For instance, an employee who typically works 9 to 5 might choose to work 8 to 4, or 10 to 6. This allows parents to choose a work schedule that doesn’t conflict with drop-off and pick-up times for child care.

Flextime: Allow employees the freedom to change work schedules from one week to the next depending on the their personal needs. Under a flextime arrangement, an employee might be required to work a standard number of core hours within a specified period, but how many hours they work each week can vary.

Daily flexibility: You could also give employees the option to to occasionally arrive later, leave earlier, or take an extended break during the day. Establishing some basic day-to-day flexibility can allow working parents to avoid child care scheduling conflicts, and also to respond to child care challenges.

Flexible re-entry for new parents: When employees return to work after parental leave, provide flexible scheduling options to ease the transition, such as reduced hours, job sharing, or telecommuting.

Part-time work: Parents with young children may be interested in working but unable or unwilling to work full time until their children are in school. This option can be especially appealing if you are able to offer some or all of the benefits that are available to full-time employees. When you consider the direct and indirect costs of replacing an experienced employee, keeping someone on part time may be advantageous.

Job sharing: This is when a full-time position that can be shared between two or more employees. For the employee, this results in a similar situation to having a part-time job, but as an employer, job-sharing arrangements give you the ability to have built-in coverage and continuity.

Some types of workplaces, such as manufacturing or retail, aren't compatible with most of the flexible work arrangements described above. For guidance on taking a broader approach to flexibility, see this article from Gallup: Thinking Flexibly About Flexible Work Arrangements.

For more information on flexible work arrangements, including legal considerations, see this SHRM guide: Managing Flexible Work Arrangements

Case Study

How a Small Business Offers Family-Friendly Flexibility

Text Design, Inc., located in Frederick, Maryland, is a small business with a ECE-friendly culture built around flexibility and communication. This small graphic design studio offers its employees flexible hours and anytime work-from-home access.