B2B Payments

How Childcare Centers Adapt To Fluctuating Payroll Needs

The pandemic has had a particularly disruptive effect on the world's children with tele-education now the norm in the U.S. and across the globe.

But it's not only the rise of online classrooms that is changing the way the youngest generation lives. Although parents are largely still working from home, their need for childcare remains intact — and with many childcare centers still unable to fully open due to social distancing requirements, this industry has faced its own unique challenges to ensure business continuity without compromising quality of care.

Like many sectors, the childcare arena has taken the pandemic as an opportunity to accelerate digital transformation.

JoAnn Kintzel, CEO of Procare Solutions, a company that develops technology for childcare center back offices, recently told PYMNTS that the sector has an opportunity to accelerate modernization, particularly when it comes to payroll.

"The childcare industry represents a wide swatch of business, from small, in-home daycares, to large, multisite enterprises," she said. "What makes this industry unique when it comes to payroll is that many organizations are pen-and-paper — meaning they do everything manually."

Like many other sectors, the childcare space is run by entrepreneurs and professionals who have "more work than time," she added, particularly within smaller entities. Digitization and automation of back-office functions like payroll can help to reallocate more resources back to value-added operations — like caring for children.

A Remote Environment

The challenge of remote working is not easily overcome when it comes to childcare.

In an April survey from the Bipartisan Policy Center and Morning Consult, researchers found that 43 percent of parents who are working remotely continue to need childcare, and only 8 percent said they saw no change in availability of childcare.

At the same time, 60 percent of childcare programs shut down entirely at the time of the survey, leading to professionals being furloughed, or for smaller players, use of Paycheck Protection Program (PPP) funds to compensate employees.

Childcare centers are shifting their available hours, with some services turning to video conferencing in a sort of virtual babysitting setting.

All of his has profound impacts on childcare providers' compensation. Not only are schedule changes and closures impacting compensation for caregivers, but compensation can also shift depending on whether a provider is caring for a child in-person or via teleconference.

Kintzel noted that in the wake of the pandemic, service providers are embracing digitization to overcome some of these challenges that would have otherwise added extra manual workloads when calculating employee hours and compensation.

"Since the pandemic began, we've seen many centers move their operations onto a software platform to allow for more ease and agility, as well as the ability to run their centers remotely," she said. "From a payroll perspective, that means they have shifted to a more automated approach — time sheets and payroll calculations are all managed through a software platform."

A Digital Migration

Before the pandemic, childcare was inherently an industry all about human interaction. With the digitization of care, however, industry players large and small have an opportunity to embrace technology not only in their child- and parent-facing services, but in the back offices as well.

For Procare, the opportunity meant a recently-announced partnership with payroll technology provider Gusto, a FinTech that Kintzel said was able to address the unique payroll needs of the childcare arena. That includes seamless adjustments to employee compensation based on current market conditions, as well as the ability to integrate with employee time sheet data for automated compensation calculation.

And as the childcare sector continues to progress in its payroll digitization efforts, she noted that the industry is increasingly embracing ACH and direct deposits to pay its professionals.

"Health and safety concerns from COVID-19 have only accelerated the move toward digital payroll," said Kintzel. "Contactless payments are becoming increasingly popular because they mitigate the need for in-person interactions."

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