How to Handle Holding Fees
How would you handle these situations?
* A pregnant parent calls and wants to enroll her infant in your family child care program four months from now.
* A current parent will be staying home with her child during the summer and wants to bring her child back to your program in the fall.
I have heard from child care providers who held an opening for several months for free, only to find out days before the care was to begin that the parent was not bringing her child. During this time they had turned down the opportunity to care for other children and were very upset about the money they had lost.
To avoid this problem, most child care providers charge a small fee in exchange for their promise to hold the opening. Others charge a percentage of their regular rate during this time. I strongly recommend that if you promise to hold a space for a parent, you ask them to pay for this promise. If the parent doesn't want to pay holding fees, tell the parent that you will be happy to care for their child if you have an opening when they want to return. But don't promise to hold the space. It's that simple.
What if you can't easily fill your opening?
Let’s say parent Patricia Lessard wants to enroll her child in your program in September but can’t afford your holding fee. If you anticipate having a difficult time filling your space, you may want to make Patricia this offer: You will continue to advertise to fill your space. If no other parent contacts you before September, Patricia can enroll her child and won’t have to pay a holding fee. If another parent wants to enroll their child before September, you will agree to call Patricia first to see if she will be willing to pay a fee to hold her spot. This gives Patricia hope that she will be able to enroll her child.
How much should a provider charge to hold an opening?
Before you decide to charge a holding fee, consider what you are giving up. Let’s say your normal rate is $150 a week. By holding a space for a child for three months (12 weeks), you are giving up $1,800 in income unless you charge a holding fee. If you can easily fill the opening during the holding period, then perhaps you should charge close to your full rate. If the opening will be more difficult to fill, perhaps you should charge less. But if it is hard for you to predict how easily it will be to fill your openings, consider charging 20-50% of your normal rate.
Should you apply the holding fee to the first weeks of care?
Not in my opinion. The holding fee is to compensate you for giving up the right to fill your space. You are losing a lot of income during this holding period. If you apply the holding fee to the weeks after you begin care, the parents are really getting your promise in exchange for nothing. This is not fair.
Require the parent to pay the holding fee upfront, or have them pay you a set amount each week. If they fail to make their weekly payment you should notify them that you will no longer hold the opening.
Don’t call the holding fee a “deposit” because you don’t want to imply that somehow the parent can get the money back. Call it a “non-refundable holding fee.”
What do you charge as a holding fee?
Tom Copeland - www.tomcopelandblog.com
A modified version of this article was first produced by Think Small.
For additional family child care business publications, contact Think Small’s publishing division, Redleaf Press, at 800-423-8309 or visit www.redleafpress.org.
Image credit: https://pixabay.com/photos/baby-newborn-child-parenting-4100420/
For more about holding fees, see my book Family Child Care Contracts & Policies.
