Supporting your workforce

You might be thinking more about the culture of your workplace. You might be thinking about ways to reward and invest in staff. You might also be thinking about ways to attract good staff to your program. There are many reasons why you should give better pay or benefits to your staff. Here are a few of them:

Employee Satisfaction: Offering benefits lets your employees know they are valued and that you support them. Happy and healthy employees are more engaged employees!  

Retention: Benefits can help you keep and get good staff. When jobs are empty, you might have to turn away families who need care. When there are fewer well-trained employees, the stress of doing more work can hurt the staff you already have. This can cause them more stress and make them want to leave.

Recruitment: Offering benefits and/or increased compensation such as hiring bonuses can help you become more competitive in a tight labor market. When recruiting new staff, such benefits can serve as the deciding factor between two job offers. 

Cost Savings: Offering benefits could have financial consequences for your business through reduced training costs, increased enrollment stability, less administrative time spent on recruitment and hiring. Employee turnover costs companies’ money and time, and you could lose out on filling your classrooms without enough qualified staff to care for children.  

Use the following tools to understand what you might be able to offer your employees  

First, decide if you want to give a one-time benefit or keep investing in your employees.

Depending on what you pick, some choices will help your employees and your business more in the long run than others. For example, you could invest in paying for your employees' school one time. Even though this only affects your budget once, it will help your employee in the long run. They will learn valuable skills and knowledge they can use for a long time.

The ideas that have a long-term impact could help you more than the ideas that have a short-term impact. This means you could see benefits in the future if you invest in your staff in these ways. Use the tool below to see what effect different choices can have on you and your employees.

Supplemental pay is reported in a separate part of the W-2 that you provide your employees at the end of the year instead of under regular wages.  

Supplemental pay is taxed at a different rate and most payroll taxes are not included. 

After choosing a plan to help your employees, you will want to know how it will affect your budget. How much will it cost? Will you have to pay for it for one month, four months, or keep paying for it after your award money is gone? The plan you thought was best for your employees might not work with your budget or long-term goals. For example, paying for school might not work with your budget after your award money is gone. But, maybe paying for a training course, which costs less, would be a better choice. Use the tool below to see how the different choices could affect your budget.

Now, you should have a good idea of what policy you could offer your employees, one that makes sense for your business and for your staff. 

There are several ways you can choose to supplement your employee’s regular compensation.  

It might make the most sense for your business to offer time-limited or one-time benefits to your employees rather than increasing their salary for the long-run. For instance, supplemental compensation is pay that is above and beyond regular pay which can include: bonuses or rewards, premium or hazard pay, and temporary pay increases.  

Bonuses  

A bonus or reward is a one-time lump sum payment that boosts your employees’ overall income with no obligation to offer additional bonuses or rewards in the future.   

Bonuses can be useful in attracting new employees to your organization or to retain existing employees and reward them for their hard work. Below are two common examples of bonuses that child care providers could think about issuing their staff.  

Hiring Bonuses: If you want to attract child care workers to your business, you can give bonuses and rewards to new employees. For example, you can give a new employee a one-time $1,000 bonus after they have worked for 3 months, 6 months, or even a year. You can also give the bonus in smaller amounts to encourage the employee to stay with you. This is similar to retention bonuses, which are explained below.

Retention Bonuses: Retention bonuses can be an opportunity for you to reward your existing employees who have been loyal to you or with you for years. This option is similar to a hiring bonus but would be given to employees who have been employed with you for a longer period of time. You may also want to consider offering retention bonuses alongside hiring bonuses so that your longer-term employees do not feel left out or forgotten. For example, you could offer employees a bonus of $100 for each year they have been with you, as a way to encourage employees to stay longer.   

A reward is a very similar idea to a bonus and are given for specific reasons without any obligation to offer them again in the future. For example, a monetary reward could be given to employees going above and beyond to help clean classrooms or coming in early to help welcome children one by one due to safety protocols.   

Bonuses are often issued separately from an employee’s regular paycheck, so that it is very clearly separate income.   

Temporary pay increases 

A temporary pay raise is when you choose to pay your employees more, but only for a short time. It has a clear end date. Temporary pay raises can really help keep staff happy and make them want to stay. But, they need to be used carefully.

When thinking about raising employee pay, you need to know how much it will cost. This will help you be ready to pay for it. To know how much more it will cost, you need to compare your current costs with the new costs. This includes both pay rates and taxes. It is important to tell your staff that this is a temporary benefit.

When thinking about your current pay plan, do you give benefits to your employees? Can those benefits be better? Pay is often the most important thing when an employee is deciding to take a job and stay in it. But, benefits are also very important. They can give employees a lot of extra money. Here are some benefits you can give your staff. If you decide to change your employee benefits, make sure you share information that helps your employees see the value in them. They should be able to easily understand the benefits and know how to use them.

Free/reduced cost child care benefit for staff  

Often, child care teachers and staff have children who need care. This can make it hard for them to come to work and be there when you need them. It is also a big cost for employees who have children. Giving a discount on child care for your staff's children is a great benefit that most child care programs can easily do. This will give staff peace of mind. It can also help them pay for child care, which usually takes a lot of their money. This will give them more money to spend on other important things, which will give them more take-home pay.

You can offer a set discount on child care at your business. You can also offer a bigger discount for employees who have been with you longer. For example, you can give a 4% discount for each year the employee has worked for you, up to 16% total. So, an employee who has been with you for 2 years can get an 8% discount. An employee who has been with you for 10 years can get a 16% discount. You can offer a set discount for any employee who has worked for you for more than a year. You might also want to limit the number of children each staff member can get a discount for, such as 2 children per staff member. It is great to have your staff's children at your child care business. But, you do not want all of your clients to be your employees if you are giving a discount.

Paid time off  

Paid time off (PTO) is one of the most common benefits. It is also widely liked by staff. This can include paid holidays, vacation, and sick days. Giving PTO can help businesses stay competitive and attract good staff. This is helpful even when they cannot pay the most money for the job. Having PTO can help staff feel better. This can help lower stress and burnout, especially in a hard job like child care. You can also give extra sick days, which many employees would likely like because of the pandemic. Any extra PTO should be written down clearly. This lets staff know how much will be available, how it will add up, how it will carry over between years, and when the benefit will end.

Professional development assistance/ tuition reimbursement 

Staff training is a key part of the child care business. There are rules about staff training. The more your staff knows about child development, the better the experience will be for the children. Many staff members may want to learn more, earn a certificate, or get a degree. Many providers find they can give these benefits to staff by taking part in programs like Texas Rising Star.

Retirement contributions  

Retirement plans help employees save money. This helps them meet their long-term money goals. Employees who choose to join will need to put some of their pay into the plan each pay period. The benefits of these plans are: 1) tax savings for the business and the person and 2) the chance to get a set amount of money, or a match to their money, from their employer. This will help their money grow faster and help them earn more money during retirement.

Investing in staff like this can help your business and your staff grow. They are the most important parts of any strong child care program. These programs can also make you a more popular provider for families and help you get more children over time. It can also help you show and improve your quality through Texas Rising Star (and get money from the program too).

There are a number of retirement options including, individual and company 401Ks, SEP IRAs, and SIMPLE IRAs. A business coach can help you weigh your options.  

Health insurance/assistance with premiums  

Health insurance is very important to employees and people looking for a job. It will likely attract them to your business. Data shows that child care staff are less likely to have health insurance than other teachers. This makes it harder for providers to find and keep teachers. If you can only offer one benefit, health insurance is a good one to think about. In addition to medical care, this can include dental, vision, and medicine coverage.

Usually, you would find a benefits provider and offer your employees certain benefits from them. You could pay for part of the cost and the employee would pay the rest each pay period. Another choice is to simply arrange the health plan coverage for your staff, offering coverage but not paying for any of it.

Another choice is to give your employees a Health Savings Account (HSA) or a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). An HSA is a savings account that your employee owns. It helps them save money for medical costs. HSA money can be taken off your business's income tax. It gives you cheaper benefits that can work with your current health care plans. QSEHRAs are agreements where employees pay for their own health costs. Then, you pay them back. This plan needs employers to first create a plan and set how much money they will pay back. Employees will then pay for their own health insurance and medical bills. They will give proof of their costs. Then, the employer will pay them back up to the set amount.

Incentives and rewards  

Simple, cheap things like a monthly or weekly pizza party or giving meal delivery gift cards once a week or month can really help your staff feel more appreciated. You can also think about giving a gas or transportation benefit. This helps employees pay for the cost of getting to and from work.

Money can also be used for substitutes or temporary staff. This lets you give your staff mental health days on a rotating schedule. Or, it can pay for your fees when you close for an extra day. This day off is not vacation or sick leave. It is just a day for staff to relax and get back on track during this hard time.

Teacher classroom supply stipends/reimbursement  

You might have staff who pay for supplies for students or for the classroom out of their own pockets. If this happens, you can give your staff a one-time payment to cover the cost of classroom supplies. Or, they can buy new supplies that will make the classroom a nicer and more fun place for both teachers and children. Staff who want to get paid back should show the original receipt for their purchases.

As a child care business owner, you should already be very familiar with regular payroll, where you’re providing regular compensation to your staff for their work on an hourly, weekly, or annual basis. Regular payroll is taxed for income as well as unemployment, social security, and other programs.  

It is important to make sure that all of your employees are on payroll and classified correctly. Otherwise, you can be liable for:  

• 100% of the employer taxes you should’ve been contributing all along.
• A portion of the employee’s contribution to payroll taxes. (Yes, you read that right: the employer has to pay a portion of the taxes they would never have paid in the first place.)
• Subject to criminal fines for thousands of dollars.
• The price of any missed benefits and other compensation such as paid time off that the worker didn’t get as a contractor.   

Benefits are important for getting and keeping staff. Child care providers should try to add them whenever they can. You should learn as much as you can as you research your choices. You should understand what is available and what questions you should be asking.

Too many child care owner/operators and owner/directors don’t see a regular income from their business. You work hard, but don’t pay yourself regularly. As a staff person of the child care program, you can and should pay yourself regularly.  

Regular pay is better for you and your family. Yes, you want to keep your child care business afloat, but you also need money to pay your own expenses and costs — rent or mortgage, utilities, food, etc. — which must be paid on a regular basis. Having the cash on hand to pay them will help you keep up with your bills and avoid using credit cards until you do pay yourself.   

Making the decision to pay yourself is the first leap. After that, these are the basic steps to ‘make good’ on your promise to yourself:  

1. Open a business bank account
2. Know what is coming in and going out. Use your budget and cash flow to help inform the amount that you will pay yourself
3. Commit to an amount, even if it is low
4. Keep track of your draws, even on a simple piece of paper or spreadsheet
5. Be mindful of your anticipated tax obligations and set some money aside to cover taxes  

Do you have a budget?  

Budgeting for how these changes will impact your business is important. An annual budget is a critical tool for managing your child care business. A strong budget can help you plan ahead for what you will spend and monitor your actual revenue and expenses and your ongoing costs and revenue. You can start building your budget in 4 easy steps:  

1. Gather Documentation
2. List Income
3. List Expenses
4. Track Annuals and Build the Next Month  

Do you understand your taxes?  

It is important to understand how your changes to employee benefit packages and compensation will impact your taxes at the end of the year. Before deciding on benefit levels and packages, you will want to consider how much in taxes you might have to pay and consider that in your decision making process.  

As with any action you take that affects pay, a bonus, reward, or temporary pay increase should be given via a formal written communication to your employee, either by letter or email that includes:  

1. Why they are receiving the one-time bonus.
2. How much the bonus is.
3. When they will receive the funds.
4. That the payment is one-time in nature and will not impact their salary or typical compensation.  

A simple communication to an employee, might be:  

Dear ,  

Thank you so much for your additional efforts. Your contributions helped ensure that the children in our care stayed safe and continued to learn.  

In gratitude for these efforts, we are going to award you a one-time bonus in the amount of $XXXXX, which will be paid out in full on your next pay period on MONTH, DAY, YEAR.   

Thank you again for your efforts.   

Sincerely, 

As you can see, the communication could be very simple and short, but it is important to record the terms. If you are using a bonus as an incentive for staying at your business, you should also put it in writing at the time you make the commitment. In this care, an example letter you might give to an existing employee or new employee communicating a bonus might be:  

Dear ,  

Thank you for your commitment to work [or for continuing to work at] our child care center. In our efforts to keep the best staff members, we are offering you the potential to earn a bonus at the end of six months, provided you continue to have satisfactory or better performance and remain employed with our organization during this time. The bonus will be $XXX paid out in your payroll as of the date six months from now, on MONTH DAY, YEAR.  

We are excited for your continued work and contributions with our child care center.   

All the best,  

For temporary pay increases, you want to ensure that in no way are you making a commitment to a permanent pay increase. Employees should understand they would return to their original wage levels after the temporary pay increase period ends. Once again, make sure there’s something in writing that tells the employee clearly what the terms of this agreement are, specifically:  

1. The amount of the temporary pay increase
2. Why they are receiving it
3. How long it will last
4. What the employees pay will go to once the increase ends
5. That the increase is dependent upon continued satisfactory performance.  

A letter to an employee communicating a temporary pay increase might be: 

Dear , 

I’d like to confirm that we are temporarily increasing your salary by X%, as we’ve discussed, in recognition of your extra efforts. This moves you from $Y an hour to $Z an hour. This is a temporary pay increase and will start on MONTH DAY, YEAR and end on MONTH DAY, YEAR (with your continued satisfactory performance or better and employment with our organization). 

We look forward to being able to compensate you at a higher level during this period to reflect your extra efforts. 

Sincerely, 

Disclaimer

The information contained here is for educational purposes only and is not intended to constitute legal, tax, or financial advice.