Providing childcare for employees has a positive impact on Vietnamese businesses, improving recruitment, retention, and worker productivity, according to a report released today by IFC, a member of the World Bank Group.

The export-oriented manufacturing sector has been a key driver of economic growth and job creation in Vietnam, particularly for women who make up over 80% of the sector’s labor force.

The business benefits of employer-supported care in Vietnam. Source: IFC.

While the global Covid-19 pandemic has impacted demand, the manufacturing industry is well-positioned for the recovery and further growth. With a projected contraction of the nation’s labor force by 5% by 2040 due to an aging population, the challenge for manufacturers will be to attract and retain quality workers.

Offering childcare support to working parents can be part of the solution to attracting and retaining workers in Vietnam’s tightening labor market, according to a new IFC report Tackling Childcare: The Business Case for Employer-Supported Childcare in Vietnam. Many employees interviewed in this study consider employer-supported childcare — especially on-site facilities — among the decisive factors in choosing a job.

“IFC research reveals a gap between the need for and the supply of childcare in Vietnam. Employers can play a role in addressing this gap, not just by directly providing care, but by creating family-friendly workplaces that help employees combine productive work with parenting,” said Kyle Kelhofer, IFC Country Manager for Vietnam, Cambodia, and Lao PDR.

“When schools and daycares closed during the Covid-19 pandemic, it became clear how closely linked productivity is to childcare. We cannot forget that as we head into recovery from the Covid-19 crisis. There is an opportunity for businesses in Vietnam to gain a competitive edge and differentiate themselves by introducing childcare support for employees,” he added.

The report draws on six case studies of companies in the garment and footwear sector offering various childcare options — from on-site childcare to monthly childcare allowances. Employing about 94,000 workers, the six companies — Evervan, Feng Tay, Greenland, Now Vina, Pou Chen Vietnam and Taekwang Vina—benefited from a reduction in employee turnover, improved recruitment and increased productivity. The report presents various care options that range from less resource-intensive strategies (information and referral services, and back-up care benefits) to more resource-intensive strategies (on-site childcare).

“An average unplanned absenteeism rate of 0.6% across the 33,000-people workforce costs the company close to US$1 million a year. Opening a kindergarten has helped our factories cut unplanned absenteeism by 20%. We have also seen a significant decrease in monthly worker turnover compared to our other factory without a kindergarten,” said Eric Lee, Human Resources Manager of Taekwang Vina, a foreign-invested footwear company with four factories. “The benefits certainly outweigh the challenges and we believe childcare is an important part of the company’s growth strategy.”

The private sector, which accounts for about 90% of jobs in developing countries, is a critical engine for creating more and better jobs. Tackling Childcare is part of IFC’s broader effort to address gender gaps in employment and identify how the public and private sectors can better collaborate to create markets for childcare support.