Posted by Kate Jelly

The business case for employer-supported childcare in Vietnam

The COVID-19 pandemic has shone new light on the importance of employer support for the care responsibilities of their workforce. In Vietnam, companies have had to deal with significant business disruptions, scaling back their operations or even closing temporarily. And for many employees, childcare needs have intensified due to school closures. In this context, organisations that offered childcare support or flexible work arrangements before the pandemic have been best placed to adapt.

Some of those organisations are profiled in IFC’s latest report under the Tackling Childcare banner: The Business Case for Employer-Supported Childcare in Vietnam, which was launched at the end of August and which was developed with Ergon’s support.

The research draws on the practical experiences of employers in Vietnam and shows that companies that invest in care supports for their employees can reap significant benefits, from reduced staff turnover to improved productivity and enhanced relations with international buyers and clients.

The context for care in Vietnam

Vietnam’s economy has grown rapidly over the last few decades, and the manufacturing sector has been a critical driver of this growth. But future economic prosperity is threatened by a labour market that is shrinking as Vietnam’s population rapidly ages. In this context, supporting women into (and within) the labour force is critically important. Vietnam has high levels of female labour force participation by global standards, with around 72 percent of women in the labour force, but it is still around 10 percentage points lower than men’s.

Research indicates that accessible childcare services are key to enhancing women’s participation in waged employment and reducing gender gaps in Vietnam. Lack of childcare services has a much greater impact on women’s labour force participation than men’s due to strong cultural expectations about the role of women as primary caregivers.

But there is a shortage of quality and affordable options for childcare, especially for the rapidly growing urban workforce, which comprises significant numbers of internal migrant workers who often leave behind the family support structures traditionally relied upon in Vietnam. Public provision of childcare is scant, meeting approximately 20% of demand nationwide (mostly for children over the age of three) while in the industrial zones around Ho Chi Minh City, this figure is as low as 2%. The cost of private kindergartens is often out of reach for migrant workers. This leaves many with little choice but to place their children in home-based care facilities – usually one untrained carer looking after several children from home. However, many of the parents interviewed during our research voiced concerns about leaving their children in these facilities.

What can companies do?

The IFC report sets out how employers can help to plug the childcare gap in Vietnam, bringing benefits not just to their workforce, but also to business and even the economy as a whole. To illustrate this, the report includes six company case studies from the manufacturing sector and examples from other sectors, showing how companies can support employees’ childcare needs, and why it makes business sense to do so.

The research found that the most successful approaches to employer-supported care take into account the specific needs of the workforce as well as the company’s strategy, operational circumstances, and resources. There is no “one-size-fits-all” approach: companies can support employees’ care responsibilities in a number of ways – and these do not have to be resource-intensive.

 From: IFC, The Business Case for Employer-Supported Childcare in Vietnam report, 2020 (p.33)

What are the business benefits for Vietnamese employers?

Forward-looking employers in Vietnam find that offering childcare support helps to:

  • Attract top talent: Employers face a very real “struggle for talent” in Vietnam, and leading employers know that targeting women—and supporting care responsibilities—is an important part of the solution.
  • Reduce staff turnover: Building on-site kindergartens for the children of their workers is credited by several of the case study companies – such as leading footwear manufacturers Evervan, Taekwang Vina and Feng Tay – as a key contributor to significant reductions in staff turnover, bringing estimated cost savings of up to $1.5 million per year.
  • Reduce unplanned absenteeism: One of the most common reasons for staff taking time off at short notice is caring for children. This can be disruptive to productivity, with significant cost implications, especially for manufacturing companies with tight production schedules.
  • Achieve productivity gains: Nearly all of the companies we spoke to said that when parents know their children are being looked after, they are more engaged at work. Schneider Electric, a leading global energy company, highlighted the benefits of flexible working for productivity, as it can contribute to increased employee satisfaction,.
  • Improve compliance and risk management: Companies with investments in childcare are better positioned to demonstrate compliance with national legislation – which encourages employers to support childcare for their workers – as well as the requirements of international brands. Evervan, Feng Tay, and Taekwang Vina reported that demonstrating investment in childcare helped to foster employee loyalty and improve industrial relations.
  • Strengthen relationships with brands: Investments in childcare can help manufacturing firms strengthen their performance on key sustainability metrics used by their customers. Taekwang Vina’s management believes that providing care support to workers contributes to its Silver rating, which is awarded to only a handful of Nike suppliers worldwide.
  • Enhance corporate reputation: Women represent an important source of consumer spending in Vietnam. Their perception of how companies treat their workers – including working parents – can impact their spending patterns. Companies we spoke to also reported that their support for care had helped to strengthen relations with local government and communities.
  • Increased business resilience in the face of COVID-19: Companies that already provided childcare support for their employees were best placed to adapt to the challenges posed by COVID-19. HSBC Vietnam believes that disruption to its operations was minimised as the company was already set up for remote and flexible working.

Although childcare services require government intervention and support, there is clearly an important role for the private sector to play in addressing childcare gaps. With greater flexibility and creativity from employers being a defining feature of the response to COVID-19, companies already convinced of the business benefits of childcare are leading the way.