Tuition Reimbursement: A Win-Win for Employees and Businesses
Our current economy is thriving. With a swelling circulation of capital, we see enterprises booming, revenue marching upward, and new opportunities for new companies to emerge and fill gaps in the market. Along with the floating feeling that comes with growth, however, come some challenges for businesses looking to stay sharp in a competitive field. In particular, acquiring and retaining top talent in a time when unemployment has hit an impressive low can be difficult.
Now more than ever, the work force has leverage to move to new jobs securely in search of greener pastures. The hunt for better pay, better culture fit, and expansive benefits is what can uproot even the longest tenured employees. How can businesses work to not only retain their talent, but develop it in such an environment? The answer is easier than you would imagine – tuition reimbursement programs.
Businesses paying for professional development is by no means a new idea. Robust on-the-job vocation training to develop talent have been an aspect of the American workplace since the industrial revolution. With the rise of the modern university system, companies have seen the benefits of sending their workers back to school. In cases where there’s a need for a specialized work force, creating a pipeline from the office to the classroom has been a clear and effective way to get just the right set of skills on the job.
Whey then don’t we hear about these types of fringe benefits more often? And especially in a world where only 11% of employers report that graduating students are equipped with the skills that are needed in their particular workplace. The need for supplemental or alternative education is clear, but on whom does the owners fall to generate this opportunity? And, more importantly, who does it benefit?
Tuition Assistance is a Win-Win
Several arguments can be made on each side of the coin for why tuition assistance is a great and almost necessary benefit in our current economy.
As an employee, it helps to feel invested in. In a recent study on the effects of investing in employee development it was revealed that those participating in assistance programs were 8% more likely to be retained, 7.5% more likely to be transferred, and 10% more likely to receive a promotion. On the concrete factors, this looks like investment from the employee’s point of view. Promotions mean more money. Taking advantage of benefits programs feels like money in the pocket.
Outside of the direct benefit to employees is the ancillary effect of morale boosting. While not all workers will take advantage of these tuition reimbursement programs, those who choose to forgo the opportunity will interface with employees who did. The net effect is positive, all employees will have a perceived increase in opportunity at a company even when they aren’t participating in certain benefit programs.
A last point should be made on the shifting demographics of the workforce. A Gallup survey has found that 45% of Millenials say they would change jobs if it means finding opportunities for tuition reimbursement elsewhere. This is up 21% from Generation X respondents. What’s to be gleaned is that as more and more young people enter the workplace, retention will become more of an issue with fringe benefits being a powerful means to incentivize retention.
The outcome for employers is more nuanced. There is an upfront cost associated with investing in their workers’ education and training. However, with costs associated with what was once time away from the job for classes being replaced by the convenience of online learning, the drawbacks have been minimized. But then there’s the question of just plain old cost.
Tuition assistance means having hard cash to fork over when an employee takes advantage of a benefit. Having the liquid capital to use for these benefits is crucial and being able to document these expenditures is important to claiming tax benefits. Two major tax credits exist that allow employers to deduct up to $5250 dollars per calendar year for any employee taking advantage of an assistance program. That credit extends to the course itself as well as the materials and other qualified educational expenses. Helping an employee submit proper documentation for these expenses is paramount to money back in the business’s pocket.
Most importantly, there’s a bottom line for a business investing in a benefit. How much does the upfront cost of a tuition assistance program actually pay off? According to the same Lumina study cited earlier, the test case was able to earn back every dollar they had spent on tuition as well as save $1.29 in recruitment costs. This valuable savings on expenditure is a crucial point for businesses feeling the pinch of scarce skilled labor in a low-unemployment market.
Structuring a Tuition Assistance Program
When moving forward with developing a tuition assistance program, it’s crucial to remember that all factors can be tailored to a business’ needs and limitations. Certain limitations and requirements can be set to ensure that the business is getting the best quality labor from their investment. Some reimbursement strictures companies can set include:
• Setting reimbursement caps. These can approach or exceed the $5250 tax credit that can be claimed and largely depend on the business’s budgetary limitations.
• Tenure requirements. Certain benefits come available to employees who have invested a set amount of time at the company.
• Requiring that an employee exhaust any available state or federal funding or financial aid before utilizing the employer’s benefits program.
• Requiring a specific field of study that serves the business’s interests.
• Creating a list of approved institutions or courses that will better define the nature of the training a business hopes for the employee to receive.
• Grade thresholds could be set to help incentivize performance in the course and—ideally—better retention and implementation of the information learned.
• Requiring specific documentation of expenditures for ease of tax itemization.
The list goes on but gives a sense of how such investments as a tuition assistance program can be protected through systems and limitations.
Our world is one where developing and retaining employees is hard. But recruiting and retaining is harder. Through careful assembling of a tuition reimbursement program, a company can put themselves in a position to develop talent internally, save costs on recruitment and hiring, and create long-lasting loyalty and morale with their work force.
The job market is only going to grow increasingly complex. Without proper systems in place to ensure that top talent is not only coming into a workplace but being developed from within, a company can easy begin to fall behind. Investing in tuition reimbursement programs is a surefire way to win over a changing workforce and position a business for optimal long-term success.
ClearDegree is an education concierge partner that works with companies and their employees to tailor tuition assistance (TA) programs that benefit both the organization and the individual. We represent a smarter way to invest in education benefits by bringing degree programs to professionals and creating a short list of ideal opportunities that are cost-effective and relative to corporate goals. Contact us for more information about our services that lead to higher completion rates of higher education degrees.