VideoIt's every working parent's scheduling nightmare: a child-care arrangement evaporates during a busy workweek. Cathryn Mehrtens, U.S. director of business development at Latham & Watkins LLP, was stranded when her nanny's father died suddenly and the caregiver needed to return to Jamaica. "She was on a plane that afternoon," says Mehrtens. The nanny's departure left her without child care for her three-year-old son, Gavin, and although it took three weeks to find alternate care for him, Mehrtens didn't have to miss even one day of work at the Menlo Park, California, law firm. That's because her firm offers backup child care.
Through an arrangement with Boston-based ChildrenFirst, Latham & Watkins employees can bring their children to a backup center near one of the firm's 11 U.S. offices. The law firm considers such care a benefit that pays dividends to the firm as well. "One of our attorneys had a child-care provider cancel at the last minute," recalls Mimi Krumholz, chief human-resources officer. "If not for our backup-care program, that attorney would have missed an important deal, seriously compromising client service."
Unforeseen situations like school closings, employee relocations, or an at-home spouse being summoned for jury duty can leave employees who have children with no alternative but to stay home from work. A National Conference of State Legislatures survey found that 80 percent of employees miss work because of child-care problems.
On average, working mothers lose eight-and-a-half days per year, and fathers lose five days annually. The result is lower productivity, stalled projects, and higher turnover. The Child Care Action Campaign estimates that U.S. companies lose $3 billion each year due to absences resulting from breakdowns in child care.
To protect against unplanned absenteeism due to such breakdowns, more companies are offering backup child care. Unlike with traditional "full-service" child care, parents use backup care only when their regular arrangements fall through. Such services may follow one of several models (see "Typical Models for Backup Child Care", at the end of this article). But whether located on- or off-site, all of them typically accept children with as little as one-day or even same-day notification.
Parents are limited to a specified amount of usage per year—usually in the neighborhood of 20 days—and pay a modest co-payment for each day of care, often between $15 and $35. The concept is growing in popularity: in 1993, 5 percent of large U.S. employers offered backup child care as an employee benefit, according to Hewitt Associates. By 2004, that number had grown to 15 percent.
For Emergency Use Only
Backup child care is creating a cottage industry of providers that cater to companies that want to offer the benefit to their employees. ChildrenFirst, established in 1992, and Washington, D.C.-based Lipton Corporate Child Care Centers Inc., established in 1990, have cropped up exclusively to service the backup-care market.
And traditional full-service child-care companies are also entering into the backup-care arena. Bright Horizons Family Solutions, one of the nation's largest child-care providers, with more than 500 centers around the world, introduced the concept via its national network-access program in 1998. The program gives parents at participating companies priority access to available space in existing full-service centers for drop-in emergency care. Some centers are now managed as hybrids, offering both full-service and backup care within the same facility.
For many companies, backup care is a realistic alternative to providing full-time child-care benefits or building an in-house child-care facility. Full-time centers are expensive, and come with licensing and liability headaches. With real estate construction estimates of between $125 and $175 per square foot (depending on geographic region), the total capital cost to design and build a full-service center can exceed $2 million, even before factoring in the cost of staffing, equipping, and operating it. And once a company commits to an on-site center, there is little flexibility, even if its workforce needs and demographics change over time.
Further, a company unwilling to fully invest in and subsidize a center (including all capital costs and at least one-third of operating costs) risks having the program fail.
A few years ago, Credit Suisse First Boston took a look at full-service care, but the cost and licensing regulations created an impasse, says Judy Heicklen, managing director of CSFB in New York. "We didn't go far down that path before realizing that full-service care wasn't going to work," she says.
One problem was that CSFB couldn't get a full-service day-care license, since it has no dedicated outdoor space. Instead, the company decided to expand its backup-care program, even though CSFB was in the middle of a companywide cost-cutting effort. "We quickly realized that backup care had a clear impact on attendance and productivity," says Heicklen. "There was a compelling business case to make the benefit more accessible, despite the budget implications."
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