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Childcare Centers & Preschools: Payroll Mistakes to Avoid (2026)
The costliest payroll mistakes in childcare centers are misclassifying lead teachers and assistant teachers, leaving licensing-tied payroll records out of the overtime regular rate, and missing the childcare center tax rule cited here. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Mistake 1: classification
DOL lists classifying staff who do not meet all the exemption tests as exempt teachers and then not paying them overtime as a typical problem in daycare centers. Other listed problems are taking an employee off the clock for lunch while they must still supervise children and paying a flat fee for early or late time instead of overtime.
Mistake 2: hours and the regular rate
Time spent attending training that the state requires for daycare center licensing is working time that must be paid. Short rest breaks of about 20 minutes or less are paid, and a meal period is unpaid only if the employee is completely relieved of duty; an employee who must watch children while eating is still working.
Since the 1972 FLSA amendments, preschools and daycare centers are covered enterprises regardless of annual dollar volume and whether public, private, for profit or nonprofit. Every nonexempt employee must be paid at least $7.25 per hour for all hours worked and overtime after 40 hours in each workweek, not after 80 hours in two weeks.
Mistake 3: the childcare center tax item
Parents who claim the child and dependent care credit or receive benefits under an employer dependent care plan use Form W-10 to obtain the care provider's correct name, address and taxpayer identification number, so a center must be able to furnish its TIN to families.
What catches them
A pay code review at setup, an exemption file per employee, a regular-rate flag on every pay component, and a deposit calendar that does not depend on one person remembering. Failure-to-deposit penalties run 2 to 15 percent; back overtime runs at time and one half plus an equal amount in liquidated damages.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- DOL lists classifying staff who do not meet all the exemption tests as exempt teachers and then not paying them overtime as a typical problem in daycare centers. Other listed problems are taking an employee off the clock for lunch while they must still supervise children and paying a flat fee for early or late time instead of overtime. [DOL Fact Sheet #46]
- Time spent attending training that the state requires for daycare center licensing is working time that must be paid. Short rest breaks of about 20 minutes or less are paid, and a meal period is unpaid only if the employee is completely relieved of duty; an employee who must watch children while eating is still working. [DOL Fact Sheet #46]
- Since the 1972 FLSA amendments, preschools and daycare centers are covered enterprises regardless of annual dollar volume and whether public, private, for profit or nonprofit. Every nonexempt employee must be paid at least $7.25 per hour for all hours worked and overtime after 40 hours in each workweek, not after 80 hours in two weeks. [DOL Fact Sheet #46]
- Parents who claim the child and dependent care credit or receive benefits under an employer dependent care plan use Form W-10 to obtain the care provider's correct name, address and taxpayer identification number, so a center must be able to furnish its TIN to families. [IRS About Form W-10]
Read the full guide to how to correct a payroll error, and the rest of the childcare center payroll library.
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Frequently Asked Questions
What is the most common classification mistake in childcare centers?
DOL lists classifying staff who do not meet all the exemption tests as exempt teachers and then not paying them overtime as a typical problem in daycare centers. Other listed problems are taking an employee off the clock for lunch while they must still supervise children and paying a flat fee for early or late time instead of overtime.
What wage and hour mistakes does DOL see in childcare centers?
Time spent attending training that the state requires for daycare center licensing is working time that must be paid. Short rest breaks of about 20 minutes or less are paid, and a meal period is unpaid only if the employee is completely relieved of duty; an employee who must watch children while eating is still working.
Which childcare center tax rule is most often missed?
Parents who claim the child and dependent care credit or receive benefits under an employer dependent care plan use Form W-10 to obtain the care provider's correct name, address and taxpayer identification number, so a center must be able to furnish its TIN to families.
What does managed payroll cost for a childcare center?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Licensing-tied payroll records, subsidy payment coordination and part-time variable-hour staff are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Childcare Centers & Preschools. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: U.S. Department of Labor: Wage and Hour Division
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