Why Are Companies Abandoning On-Site Day Care?

While other family-friendly benefits are on the rise, on-site day care is on the verge of extinction.

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Photographer: Kyle Sparks

On any given workday, up to 85 children are running around Patagonia's Ventura, Calif., headquarters. The outdoor retailer offers on-site day care and after-school programs for kids up to 8 years old for its 550 employees. "You cannot miss the children on-site," said Dean Carter, a vice president of human resources at Patagonia. "I hear a kid laughing and playing, and there's something that almost alleviates stress. It just melts off," he said. 

Patagonia estimates the program's cost at $1 million a year, even after it collects dues from parents1 and a $150,000 annual tax deduction. But much like other family-friendly benefits, it has high returns on employee retention and engagement, a point the company hammers home in a new, glossy 400-page book, Family Business: Innovative On-Site Child Care Since 1983. "That was one of the reasons we wrote the book, really setting the business case for it," Carter said.

Yet unlike other family-friendly benefits that are on the rise—such as paid parental leave—on-site child care is on the verge of extinction. Only 3 percent of organizations offer unsubsidized day care services, according to the Society for Human Resources 2016 benefits survey. That figure is down from 9 percent in 1996. "It certainly would be an advantageous benefit, I think, that many people would enjoy having," said Tanya Mulvey, a researcher at SHRM. 

Patagonia employees certainly enjoy it. For parents, in-house daycare is the ultimate convenience. They eat meals with their children and moms can bring nursing infants to meetings or hang out with them at their desks. The childless employees don't seem to mind what some might consider workplace interruptions, Carter claimed. Recently, when a caterpillar decided to turn into a butterfly in the office, a group of enterprising children hung up two large signs to alert passersby. "Your day is lifted when you step over a butterfly chrysalis," Carter said. 

Rick Ridgeway, vice president of public engagement, arrives with his granddaughter at Patagonia for a day of work and play.
Rick Ridgeway, vice president of public engagement, arrives with his granddaughter at Patagonia for a day of work and play.
Photographer: Kyle Sparks

It sounds idyllic, but day care is a complicated, highly regulated industry, and Patagonia has had over 30 years to develop the program. Each state has its own set of rules about staff member-to-child ratios. "The amount of caregivers to kids is a low, low ratio," said Selena Bael, who tried to create a co-working space with child care.

Labor can get expensive fast: Patagonia employs 28 additional people to staff its daycare center in Ventura. After labor costs and rent, Bael couldn't keep costs low enough for parents, and she eventually abandoned the co-working daycare model. She now runs the Workaround, a babysitting swap for co-working parents; it's a model that involves no additional staff members or overhead.

"There is some fear that you may not get a return on child care, that you might not anticipate potential liability," admitted Carter. But, Patagonia claims it recoups 91 percent of its total costs. And you can't put a price on the ability to prototype children's clothing on 85 living, breathing mannequins at any moment.2

Best of all, day care saves Patagonia on employee attrition. The company claims it has 25 percent lower turnover with employees who put their kids in the program. And 100 percent of moms return to work after maternity leave, a stat that the company attributes to the availability of nearby child care. The program has been so successful that Patagonia opened a second infant day care center for the 450 workers in its Reno warehouse. "We found that it's a really good business decision for us financially," Carter said. "It's worth more than the risk of losing valuable employees." 

While a handful of other companies, such as Goldman Sachs, have also seen similar results with day care, most businesses substitute less complex benefits that have similar appeal. Many companies have started offering increasingly generous parental leave policies, for example. About a quarter of organizations allow parents to bring a child to work in an emergency, according to SHRM, and about 68 percent of employers offer tax-free dependent-care, flexible-spending accounts that parents can use to pay for child care. Flexible work hours, another benefit on the rise, also appeal to parents who might need to shift work hours to accommodate their kids' schedules. 

Not all parents want to work with kids right there. "There are people for whom kids at work would be incredibly distracting," admitted Carter. Patagonia had some "instances," he said, without elaborating. It's hard to have uninterrupted work time with kids around. And while children's laughter might alleviate stress, what about when those giggles turn to tears? 

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  1. 1 The company says it charges parents market rates. 
  2. 2 "We could test and fit prototypes for the kids' clothing line right downstairs," reads a line from the new book.