Save Money with Your Childcare Business: Risk Avoidance

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Are you prepared for a Department of Labor audit? Did you know the average penalty paid to the DOL is $157,000? Many of us in the childcare business cannot afford a penalty of any kind, let alone a fee as high as that. You are constantly looking to save money on your childcare business.  We give you some tips on how to be better prepared for an audit so surprises like this don’t put your business at risk.

Risk Avoidance

An important area to be prepared for in the childcare business is how you plan on putting out the “fires” that pop up here and there. Some of these items may sound basic in nature, but when you are under the pressure of an auditor or the press, being organized and prepared with a plan is critical.

With the Department of Labor, nothing can be scarier financially than a Department of Labor audit. These audits can be generated simply because of the industry and region you are in, but more likely you will experience an audit because of a disgruntled former employee who felt they were not treated fairly or paid correctly. Whether or not the issue has any merit is secondary to having your records in order. If you receive a request for a Department of Labor audit, you can expect to produce for review the last three to five years of daily attendance sheets, vacation records, employee files, I-9 forms, employee handbooks, policies…and the list goes on. Fulfilling this request alone can be a full-time job.

To ensure that you do not find yourself scrambling you should always have:

• All of your employee records securely filed and stored. Licensors in some states require them to be onsite at that center, so you will want to take precaution to secure them.

• Consider using an electronic time clock for staff to check-in and check-out daily. Be sure that it is also backed up with your payroll company or childcare workflow management childcare service in case of an audit. Look to get back-ups onsite also. If you do not have this electronically, be sure to collect, date and file your attendance/time cards for your staff if they are on paper.

• Know your dos and don’ts with when your staff must be paid and when they don’t have to be paid. For instance, in some states, staff must be paid when taking any training that is associated with their job, while others states require pay only when the training is specific to that employer and not to their professional certification. If your staff member is sending emails on weekends for you, came in to paint the office, or attended your company’s families picnic, you will need to educate yourself on what your risks are if they are or are not paid during these types of events.

These issues and many more can have enormous consequences. Even if the audit stemmed from one complaint from one employee about only one issue, if you are not organized on all areas and the auditor senses that you may not be in compliance, they will start to “pull the thread” to possibly find other areas. Did you know that if you give shirts to your staff and require that they wear them, in some states you must offer an option to launder those shirts each night? One childcare facility did not offer to launder the shirts for five years. All it took was for one staff member to complain. After the audit, the owners accrued a penalty payment of $34,500 payable to the Department of Labor for what seems like such a minor oversight. The Society of Human Resources Management states that the average Dept. Of Labor infraction penalty in the United States is $157,000. Do you have that kind of money available to spend on penalties? I know I don’t!


Anthony A. D’Agostino, Founder and CEO of Inspire! Care 360, is also the owner and operator of Inspire! Learning and Childcare and Crayon Campus in Western NY. Anthony has also been a leading principal with companies such as Ernst and Young, Pearson Education and Xerox Corporation, implementing practices in areas of Human Resources, Adult Training and Development as well as Employee Engagement and Communication.

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