Wages and Compensation

As a child care business owner, it is crucial to understand that paying employees fairly is a long-term investment in the quality, success, and longevity of your business. When employees feel fairly compensated, they are more likely to be satisfied, dedicated, and productive in their work. This leads to a more positive environment and higher quality services provided by your child care business! Paying a fair compensation will also reduce turnover rates, attract top talent, and encourage skill development in your current employees.

It is important to understand the difference between wages and compensation. Wages refer to the money given to an employee for their work, usually calculated based on an hourly rate or a salary. Compensation can refer to both the money and additional benefits that employees receive, like personal time off or health insurance. It is necessary to consider and award both wages and other compensation to employees to ensure fair pay.

Step 1: Clarify the Job and Pool

It is important to clearly define the position you are hiring for, so both you and potential candidates can understand exactly what you’re looking for in the role. Determine and note the specifics you need, including hours worked, job title, tasks, etc. In addition, decide what you are looking for in an applicant. What kind of background, experience, and skills do you want your new employee to have?

Next, determine the pool you will be hiring from. This includes the location, education, and stage of career of your ideal candidate. Are you looking for a local, early-career applicant or will you be offering incentive for an experienced director to move to your area? It is important to define both the job and pool in detail so that you have clear guidelines when determining what fair compensation will look like for the role.

Step 2: Identify Similar Organizations

Next, identify around 15-20 organizations that are similar to yours. Start with business that are already known to you, like competitors and other child care businesses in and around your area. Then, utilize your resources to find even more. Use the internet to search for other organizations that are both local and nonlocal that provide similar services to yours. Do the families you serve know of other child care businesses from their own networks?

Look for businesses that advertise and hire for roles that have similar requirements and job functions to what you’ve defined. When you make this list, it is important to find organizations that are most like yours. If you are operating a large child care center with multiple classrooms, your business, services, and employee roles are likely not comparable to that of a child care home that is based out of the business owner’s house.

Step 3: Collect Data

From the list of organizations that you have identified, search for job listings and hiring ads that are available. Find descriptions and circumstances like the role that you are hiring for. Look at the pay and benefits that these businesses are advertising and pay attention to experience, education, and other requirements that are asked for. All these attributes have an impact on the amount of compensation offered. You can also check salary sites for more insight on the compensation offered. Record the wages and compensation offered for each listing you can find.

Step 4: Analyze Results

Now, you should have a long list of similar organizations to yours and the wages and compensation they offer employees. List the salaries you’ve collected from lowest to highest. Usually, these will fall within a similar range. Ignore any outliers—any salaries that are much higher or lower than the others.

Now, look at the numbers you have. Where does the salary that you plan to offer fall with the others? Ideally, to be offering a competitive pay, you will want to fall within the upper 50% of the salaries you’ve arranged. Be sure to consider total compensation as well. How much PTO are these other businesses offering? What does their healthcare and retirement plans look like? Remember that offering fair and competitive compensation attracts and keeps dedicated employees. If you find that your offered compensation falls low on the scale, it is worth considering paying the employee more and offering more benefits.

What are Examples of Compensation I Can Offer?

Remember, offering benefits in addition to wages will make you a more competitive employer. Investing in the health and wellbeing of your employees through multiple benefits is an investment in the success and quality of your business. It is important to offer common benefits like personal time off (PTO), overtime pay, health care, and retirement. Our guide on how to offer benefits will be useful to you as you learn more about setting up these benefits for your employees.

To stand out as an employer, also consider additional perks that you can offer to your employees. As a child care business, think about offering a discount for employees’ children. Find and assist with professional development opportunities for your staff, like training classes and certifications. Maybe you can offer a health and wellness stipend to help with gym and fitness membership costs. Think of unique and helpful ways to support your staff!

Are There Common Mistakes I Should Be Aware of?

As you determine fair compensation and set up benefits for your employees, it is important to be aware of some commonly made mistakes so that your child care business can continue to grow and thrive:

Ignoring market research: Don’t ignore your own research that you took the time to gather! If you complete your Salary Benchmark data and offer rates less than what your research tells you to, you are likely to be passed over by prospective employees in favor of other business who offer more compensation.
Disregarding legal compliance: When determining wages and compensation, be aware of the legal obligations you must fulfill around minimum wage, employee classification, and overtime pay.
Ignoring employee input: Be sure to listen to employee feedback regarding compensation and the workplace culture. Are many employees not happy with their pay? Have they expressed a desire for more PTO? It is important to listen to employees to maintain a happy and productive environment.
Not considering benefits beyond salary: It is important to consider benefits alongside wages, as fair compensation is made up of both money and other rewards. Offering desired benefits makes you a more attractive employer that top candidates will want to work for. Not offering benefits that your competitors do means that your job listing is likely to be passed over in favor of a business that offers more compensation.

What if I Need More Help?

If you don’t feel confident determining a fair wage or setting up benefits for your employees on your own, it’s always best to reach out to a legal or financial expert who can best advise you. With their help, you can be certain that you are upholding your legal obligations and are offering the best wages and compensation for your unique circumstances.

Additionally, if you’ve done your market research and feel as though you can’t afford to pay your employees a fair wage and other compensation, it may be time to revisit your budget and child care rates. In this case, our guides on budgeting and setting rates may be useful to you.

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Disclaimer: The information contained here has been prepared by Civitas Strategies and is not intended to constitute legal, tax, or financial advice. The Civitas Strategies team has used reasonable efforts in collecting, preparing, and providing this information, but does not guarantee its accuracy, completeness, adequacy, or currency. The publication and distribution of this information are not intended to create, and receipt does not constitute, an attorney-client or any other advisory relationship. Reproduction of this information is expressly prohibited. Only noncommercial uses of this work are permitted.