At a time when finding and keeping talent is getting harder for employers, workplace benefits are key to getting and keeping those employees that make companies go.
Perks like unlimited snacks, in-office games and gym membership reimbursement have been added to the traditional retirement saving plans and insurance policies to attract workers.
Such benefits can boost morale and help with recruiting. However, more and more companies are opting for perks that provide the same, if not more, value to employees, but with notably more value for the employer.
Tuition reimbursement is a perk that has mutual value.
Offering reimbursement for education, training and certifications can get expensive quick, and it’s not a perfect fit for every business. But, in the right situation, it can be a difference maker.
It’s important to determine if your business should have a reimbursement policy for education, and, if so, what and how much should you offer.
Should Your Businesses Offer Tuition Reimbursement?
A 2016 poll revealed that a majority of small business owners believe lack of education, experience and training is one of the biggest challenges they face when it comes to hiring and employment.
Twenty-nine percent of small business owners said their employees have insufficient credentials, and 34 percent said finding candidates with the right qualifications is difficult.
Education and training are clear roadblocks for both hiring and retention.
Finding employees with the proper skills is key to growing any business. But in a more competitive job market, many have no choice but to halt the growth of their business or hire workers with little or mismatched experience and education.
These underskilled workers are not promoted as often, which can lead them to lose interest in their jobs and seek employment elsewhere.
This is where having a reimbursement policy for training, certification and tuition can put a business ahead of the pack.
Not only does offering tuition reimbursement attract more talent in the first place, it offers a clear opportunity for advancement to the worker while providing additional value to the employer.
Eighty-one percent of business owners who offer educational reimbursement to employees said it was good for their bottom line.
This improvement can come in the form of reduced costs, greater efficiency and increased revenue brought in by workers using their new skills.
Employees with new skills can benefit a business, but they may also be more open opportunities to leave.
A common question for businesses considering a tuition reimbursement policy is: “If we pay for our employee’s education, won’t they be more likely to leave once they have new skills?”
This is a valid concern, but, if done right, employers have little to worry about.
People value when companies that invest in them. And helping to pay tuition is a great way show that an employee is valued.
Things to consider to prevent employee turnover when paying for employee tuition include:
- Ensuring the education or training is in a field relevant to your business.
- Making sure employees get opportunities to use their new skills.
- Passing down a portion of any increased revenue to those who contributed to it.
- Creating a supportive environment where employees feel valued and respected for the work they put in.
Companies will both reduce costly employee turnover and increase revenue if they effectively implement a plan to utilize and benefit from better-educated employees.
What, and How Much Should You Offer?
It comes down to money. If a business has more capital to invest in employees now, it will likely see more benefits down the road.
However, going all in right away can be risky, and even larger companies seem to be testing the waters before fully committing to a tuition reimbursement policy.
Health giant Cigna was reimbursing employee tuition expenses of up to $8,000 for graduate
courses and $5,250 for undergraduate courses or certificates each year, when a study revealed that for every dollar spent, the company was saving $1.29 in talent management costs.
They promptly increased their reimbursement program to $10,000 for undergraduate degrees and $12,000 for graduate degrees in strategic fields of study and lowered reimbursement to $4,000 for undergraduate degrees and $6,500 for graduate degrees in non-strategic fields.
Chick-fil-A and Best Buy respectively offer $2,500 and $3,500 maximum educational reimbursement per year.
Data for smaller companies is harder to come by, but it is clear they won’t have the same resources to invest right away. However, there are potential tax benefits to offering education reimbursement, and they can turn this perk into a viable option for many small businesses.
According to IRS publication 15-B section 2, educational expenses are deductible as employee wages, and up to $5,250 can be excluded from the employee’s taxable income if certain conditions are met.
This deduction can help offset tuition costs and opens up this perk as an option to businesses large and small.
Planning a system to track return on investment for these programs is key, and, like Cigna discovered, can help inform decisions down the road.
Unfortunately, this is a lot easier said than done. Larger companies have the resources and scale to have an outside entity track how their programs benefit them, but small businesses often just don’t have time.
Finding out what employees want out of a program is a great starting point, according to Dr. Ruby Rouse, Ph.D., who co-authored a study on tuition assistance programs.
Rouse told SHRM Online that employers should “ask employees what they’re looking for in a tuition assistance program. Then determine what the organization’s strategic purposes of the benefit program are.”
Following up with employees, later on, to see if their goals were met and comparing the results to the company’s goals can shed light on if a reimbursement policy is working.
Tuition reimbursement can be a difference maker for many companies, but make sure to do your homework before jumping in.
These three questions can help you evaluate before implementing your policy:
- How much can my company afford to invest in a policy knowing that returns may be years down the road?
- Does our policy meet the IRS conditions to exclude up to $5,250 from wages?
- Do we have an effective system to track if our company benefits from the policy?
As always, make sure to consult a tax professional before implementing a program to ensure there are no surprises come tax time.
Tuition reimbursement policies may not work for every company, but they offer the potential for huge improvement in hiring, retention and overall employee satisfaction. They can also provide employees with the skills to take a business to the next level.