Wow, what an interesting debate over the years.
I came here trying to find out if this is a general/accepted practice for daycare providers. My only experience was with a daycare center until we chose home daycare for our second child. After reading through some of the explanations (and some are a bit too much on either side) it makes sense. If there are paid vacation/holiday days in the contract, then that's what it is. I have the option to not sign. If I want my child to go to a specific provider, I will have to agree with their rules. It cannot possibly be illegal for any provider to have paid time off.
Hourly workers who do not have "benefits" or "paid time off" are paid wages accordingly. It is normal for hourly workers without benefits to be paid higher than full-time benefited employees.
I hope my child's daycare provider doesn't add medical benefit payments
Its all really simple. Those who put in their time and effort and provide great service for children in their daycare are always full and usually have no open spots with people on wait-list. They deserve to get paid higher. Those who don't really care, offer financially cheaper service but hardly ever get children to care for.
Also, its the same difference if you pay more per week or pay for paid time off.