In this paper we highlight how problems of recruitment and retention in front-line services create a particular challenge to traditional HRM models and solutions. The price-sensitive nature of front-line service work means that the scope for improving terms and conditions, that may ameliorate recruitment and retention difficulties, is often limited. The case of day nurseries make an interesting example of the challenges facing managers in the services sector as the combination of a feminised workforce, a price-sensitive service, public-private competition and state regulation all combine to create particular difficulties. We report on a study of 33 day nurseries which included interviews with both managers and employees over an eight-month period. Our findings show that childcare providers, particularly those in the private sector, are grappling with recruitment and retention problems associated with high-end interactive service provision that are compounded by gender segregation and small businesses characteristics. Our analysis of employer and employee perspectives highlight the importance of employee disillusionment/unsuitability, low pay, poor career prospects and difficulties of balancing work and family life. The growth in demand for childcare services means that these problems are unlikely to disappear.