Time to revisit on-site childcare facilities?

by Iain Hopkins18 Sep 2012

The political hot potato of childcare costs has been raised again – but some employers are taking matters into their own hands.

As reported in The Australian, the Federal Government last week announced that suburbs with childcare shortages faced an overhaul of planning, land and tax laws. It revealed it would widen its planned childcare reforms to push states and local governments to alter the system because of a crisis in places which was stopping some women from returning to work.

Federal Opposition Leader, Tony Abbott, has meanwhile vowed to have the Productivity Commission examine the possibility of extending the 50% childcare rebate capped at $7,500 a year to in-home carers - a move that gained traction with parents. The Coalition's childcare spokeswoman, Sussan Ley, said she did not support the Federal Government's planned changes to state and local planning.

Tom Hardwick, CEO of Guardian Childcare Alliance, Australia’s largest independently owned operator of childcare centres, said that instead of waiting for government action, some employers had been forced to take matters into their own hands, as demonstrated by a sharp uptick in the number of larger corporates now offering on-site childcare facilities.

Hardwick reported that key drivers of that uptake include the need to attract and retain talent in an environment of near full-employment, coupled with a desire to allow women to maintain their career during and after the birth of their children. Further growth has stemmed from recognition of the productivity gains achieved by having children in care close to the workplace.

“That interest doesn’t always translate through to action given lack of knowledge about how to establish a corporate childcare facility, competing budget priorities, complexity, insufficient employee numbers, and tax disincentives,” Hardwick said.

Hardwick noted that it is not always necessary for a corporate to offer a full on-site childcare facility – there are a number of other options available for corporates looking to provide childcare solutions for their staff, such as priority of access arrangements or reserved places, which are cheaper and less complex than on-site childcare arrangements.

However, there may be cost benefits to offering staff on-site childcare. “Where an employer provides ‘on-site’ childcare for their staff, the structure of which falls within approved guidelines, those staff are able to salary sacrifice their childcare fees as an allowable fringe benefit,” Hardwick said.

“Where staff are on the top marginal tax rate and are reasonably high users of childcare, salary sacrifice lowers their net cost as well as lowering employer on-costs.”

Hardwick added that staff who are not on the highest marginal tax rate and who are not heavy users of childcare – for example, a couple of days a week – are generally better off not using salary sacrifice, but instead, relying on access to the childcare rebate to improve their net position.

Guardian’s Jigsaw Corporate Childcare business has a range of relationships with employers that offer a number of different models, including:

 

  • Providing an on-site childcare facility for the exclusive use of the corporate’s staff;
  • Offering a partnered model, where two or three corporates are brought together to create a shared facility for the exclusive use of the corporates’ staff;
  • Providing corporates with a priority of access model, whereby the staff of the corporate have first access to childcare places as vacancies arise; and
  • Providing reserved places at Jigsaw centres whereby a fixed number of places are set aside for that corporate, which then has the ability to provide those places to its staff.

 

“In the arrangements described above, typically the staff member pays the childcare fees direct to the centre – unless they are salary sacrificing – and the corporate pays for the unused places and/or a management fee for the right to places for their staff,” Hardwick said.

 

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