A Matter of Money - Expenses

In my last post I wrote about the daily rates charged by various home based childcare providers but that barely begins to cover how widely net incomes can vary. I know some home based providers try to break down their income to an hourly wage and lament they earn less than minimum wage. I've also heard it said that unlike centre based ECE's whose wages and hours are set by their employer, home based providers have more control over their income, expenses and hours. For this scenario let's ignore the differences in number of spaces, the ages of the children in care, daily rates etc. Let's just consider how expenses and work hours can affect a home based childcare provider's income. What can be controlled and what can't be.

The Childcare Space - the building in which it is located. A portion of the cost of the childcare home's utilities, taxes and mortgage interest is considered a business expense but the amount is dependent on how much of the home is used for childcare and for how many hours per day. Do they have a large dedicated childcare space or shared childcare/personal space? What type of neighbourhood is the home located in (property tax rate)? Has the home been purchased recently or is it nearly paid off (mortgage interest costs)? Is the home large or small, old or new, energy efficient or old technology (utility costs)? All those factors will affect the total cost of operating the childcare home.

Does the childcare home have limited hours, offer flexible hours to accommodate parents working various shifts or maybe they are even 'open' 24 hours/day, 7 days/week. Offering extended hours does not generally increase income - in fact, the net income could actually be lower. Drop off times for evening childcare are usually earlier than pick-up times for daytime care so enrolling one evening child and one daytime child will still require two spaces due to the period of time they overlap. The provider does not have all the children present at the same time which results in a longer workday and higher expenses too.

In short - more space & longer hours = more deductions and lower net income.

The Learning Environment - my personal favourite topic - the toys, equipment and furnishings in the childcare space. Is it set up as a traditional home - living room, kitchen, bedrooms etc - are there simply a few toys stored in a corner, spare room or a closet? Is the home larger than the family that lives there needs - an extra room or unused basement has become childcare space. Has the provider given up much of their personal space to create multiple classrooms?

Did the provider make no real changes to their own space and simply accommodates the children like part of their extended family? Did they convert a large space into an elaborate facility - purchasing expensive, high end equipment and furnishings designed specifically for commercial childcare facilities? Did they opt for more economical furnishings and take the chance they will need to replace things often? Do they design and make their own toys and furnishings using recycled materials - very little expense but a lot of 'unpaid' work hours.

How long has the childcare program been operating at this location? How long do they intend to stay in business? Does/did the provider have their own children who have outgrown items which are now used for the childcare program? Is this a primary or secondary income for this household? All of these factors will impact the amount the provider has already invested or is willing/able to invest in the space now or in the future.

The Programming - what types of activities do they offer? Structured or spontaneous? Formal instruction or free play? Do they have all the latest technology available for the children to use with purchased curriculum software? Do they have regularly scheduled field trips, hire instructors or attend group classes for music, recreation, or art? Do they use printed worksheets, packaged product crafts, or watch movies/TV? Some of the most expensive activities will require the least amount of provider time/effort.

Training/networking - does the provider regularly attend workshops, conferences and meetings with other educators? These types of learning opportunities allow the provider to increase her own skills and be less likely to need to outsource programming. However, they can also be expensive. For the home provider there is not only the cost of course registration but also wages for substitutes, lost income for closures, or additional unpaid time after regular work hours.

Supplies - what does the provider require the parents to send with their child? Certainly parents are responsible for sending personal items like clothing, diapers and possibly bedding for their child but some providers may also have an additional supply list. These periodic supply lists can include items such as tissues, sun screen, glue, paper etc much like annual school supply lists. Some even ask parents to supply grocery staples like boxes of cereal, crackers, pasta etc or to pay additional fees for some provider supplied items or services.

Meals - does the provider supply all or some meals or is the parent responsible for sending food with their child every day? Many providers supply snacks but some also provide breakfast/lunch/supper depending on their operating hours. If they provide meals do they buy/prepare food in bulk to save money? Do they purchase individual serving sizes and many processed items to save time? Do they seek out the best quality, organic products that can be found locally? Do they offer alternatives for children/families with dietary restrictions?

What other tasks may a provider be willing to pay someone else to do? Bookkeeping/accounting? Cleaning? Again, this is a matter of making a choice between higher expenses/lower net income or longer work hours/higher net income. A provider may not feel it is necessary to pay high premiums for disability insurance and benefit packages if they have a spouse with coverage. If childcare is the main or only income for the provider's family then this insurance may be essential - or the premiums may be beyond the possibility of their limited budget.

So yes, home based childcare providers do have some control over how much or how little they spend on operating expenses for their childcare facility and how much they leave for salary. I think what is more important to note is WHY the providers are making the choices. Maybe the provider enjoys cooking for the children in her care or maybe she knows the food she gives them is the only healthy food they will get that day. Maybe childcare is the only income for this provider's family and the budget is too tight to afford any 'extras' for the program. Maybe the provider enjoys working with children but the second income isn't a necessity for her family - she spends more on her program specifically to lower her taxable income.

A long time ago I was told that childcare centres spend about 80% of their income on wages for their staff - I assume that number is still fairly accurate today. Maybe home based providers should try something similar.  Stop trying to take what little money is left after expenses, dividing it by the hours they work and complaining that it is not a livable wage. Instead, try counting 80% of your total gross income as your salary and pay the appropriate taxes on that income. Then take the remaining 20% and use it for your program expenses. Then you can start complaining about how little you money you have to operate a quality childcare program.

A Little Rant

I call January ‘The Birthday Month’.  Including my family members and the current group of children in care there are five birthdays in January.  This year one of the January birthdays is a significant one – an infant becomes a preschooler.  This brings me to my beginning of my little rant.

In Manitoba childcare a child is moved from an infant space to a preschool space when they turn two.  For me, as a licensed family childcare provider with an Early Childhood Educator II classification, that also means that the daily rate that I can charge for that child drops by nearly $10 per day.  I still have the same children in care for the same number of hours per day but my income is lowered by over $200 a month.

Considering that I have five preschool spaces of which no more than three can be infants my income can vary greatly.  If I have three children under 2 years old and two children aged 2-5 my monthly income will be more than $600 higher than if all five preschoolers are over 2 years old.

Don’t get me wrong, I understand why the parent fees for childcare – rates set by the province – are higher for infants than for preschoolers.  In centre based care there is a different staff to child ratio for the various age groups. Infant groups are smaller so their staffing costs are higher per child.

However, in family childcare costs are higher for preschoolers than they are for infants.  Preschoolers eat more food, they use more craft supplies, and if we go on a field trip there will generally be an admission charge for the children over two years old.  As for the workload – infant care is a different type of work but it is not more work than providing a quality program for a preschooler.

Having said all that, I would also like to mention that my personal favourite age group to work with is the 2 to 3 year olds.  So, I guess you could say the decrease in my financial income is balanced out by greater enthusiasm and excitement.

Some family childcare providers are not willing to accept the financial loss.  I get phone calls from parents whose child is about to turn or has recently turned two.  They have been told by their current childcare provider that they no longer have a space for them.  I tell them to call the Manitoba Early Learning and Childcare Program and complain – this is not considered an acceptable practice.  It is not a widespread problem but it does exist.

The opportunity to build a caregiver/child relationship as a child grows from infancy, through preschool years and onward is one of the greatest benefits of family childcare.   A caregiver who dismisses a two-year-old child for the financial benefit of enrolling another infant is no different than the one who lets the children watch TV all day because it is cheaper than providing a quality childcare program. Fewer expenses, less work = higher income.

Then there are also the unlicensed childcare providers – who have no enforced regulations and who often charge rates that are higher than those allowed by licensed providers.  How many parents whose children are in unlicensed care know that these homes can have a maximum of four children under the age of 12 years old including their own?  How many of these unlicensed providers (and parents) realize that their homeowners insurance doesn’t cover liability for the children in their care?  Do they have the required business insurance?  Who checks?

That’s my little rant.  I don’t have any solutions.  I don’t know how to fix a system that sometimes provides greater financial reward for practices that are not always the best.  It’s a good thing that most childcare providers don’t choose money over children.  The truth is that poor quality childcare programs can still exist because the demand for childcare far exceeds the supply.