Methodology and sources

How the Childcare ROI Calculator produces its estimates, what it rests on, and what it does not claim.

Methodology version 1.1.0, last reviewed 2026-06-10.

What the calculator estimates

For each strategy you choose (dependent care FSA, backup care, a monthly stipend, reserved slots at local providers, Tri-Share, or an onsite center), it estimates one year of employer costs and benefits:

  • Turnover savings. Working parents who take part, times your annual turnover rate, times the share of parent turnover attributed to childcare (28%, BCG and ReadyNation). The strategy's expected reduction in turnover is applied to that group and can never exceed it. Each departure avoided is valued at a replacement cost of 50%, 100% or 213% of salary for entry, mid and senior roles (SHRM and BCG).
  • Absenteeism savings. Workdays recovered per participating parent, valued at salary divided by 250 working days.
  • Productivity recovery. A share of an estimated $3,000 a year in lost productivity per working parent (U.S. Chamber of Commerce).
  • Tax effects. Payroll-tax savings on dependent care FSA contributions (FICA 7.65%, 2026 limit $7,500), and the federal Section 45F credit on qualifying spending for tax years starting in 2026: 40% (50% for eligible small businesses), capped at $500,000 ($600,000 small business).

Net annual return is the total benefit minus the cost after tax effects. The calculator also reports return as a percentage of cost and the months until benefits cover the cost.

Defaults you can change

The share of your workforce who are parents defaults to Hamilton County's share from the Census Bureau's American Community Survey (2024), and you can replace it with your own figure. Salary, workforce size, turnover and which strategies to include are yours to enter. Tri-Share uses an average Hamilton County full-time childcare cost of $16,160 a year from the Brighter Futures Indiana Data Center.

Sources

  • U.S. Census Bureau, American Community Survey, 2024 (workforce composition)
  • IRS, Employer-provided child care credit, tax year 2026 and later (Section 45F)
  • Dependent care FSA limit for 2026 (Internal Revenue Code Section 129, as amended in 2025)
  • Boston Consulting Group (2024), Moms First and ReadyNation research on childcare and employee turnover
  • SHRM and BCG estimates of replacement cost
  • U.S. Chamber of Commerce estimates of productivity lost to childcare breakdowns
  • Published employer backup-care studies, including provider client studies (Bright Horizons)
  • Michigan Tri-Share program results and the Noble County, Indiana pilot
  • Brighter Futures Indiana Data Center, Hamilton County childcare cost

What the estimate is not

  • It is an estimate, not a forecast of your results. The effect of each strategy on turnover, absences and productivity comes from published studies and program results, generally the midpoint of the reported range. Some of those studies come from childcare providers.
  • It is not tax, legal or financial advice. The IRS decides whether a credit applies, and plan administrators set FSA rules.
  • It does not ask for information about individual employees. You enter workforce-level figures only.

The model behind the calculator

The calculator runs on Invest Hamilton County's childcare ROI method. The method and its sources are described on this page. The detailed internal values (for example, the turnover reduction assumed for each strategy) are Invest Hamilton County intellectual property, available to partner organizations under license. If you need them for research or replication, contact [email protected].