Employees are the backbone of your company. Their skills, knowledge, and expertise are crucial for keeping your customers happy and boosting your profits. One way to show your employees that you’re invested in their future is by offering a tuition reimbursement program.
So, what’s a tuition reimbursement program? It’s a benefit where the company pays back employees for their education expenses. The specifics can vary from company to company, but most will cover tuition, textbooks, and other necessary course materials. Employees pay for their courses upfront, but they can get some or all of their money back once the course is finished. Some places even let students with financial difficulties defer payment until they’ve completed their coursework.
Why should your company consider a tuition reimbursement program? Well, the Society for Human Resource Management’s 2019 Employee Benefits survey found that over half of employers (56%) offer some form of tuition or student loan repayment assistance. So, it’s clear that education is a priority for many businesses.
Here are some benefits of a tuition reimbursement program:
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More Skilled Employees: The International Labour Organization points out that skills need to be constantly updated as today’s skills might not match tomorrow’s jobs. By investing in your employees’ education, you can help them develop the skills you need to grow your business now and in the future.
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Higher Retention Rates: Employees who use tuition reimbursement programs tend to stick around longer. For example, when Fiat Chrysler Automobiles teamed up with Strayer University to offer dealership employees and their families free degrees, the dealerships saw a nearly 40% increase in employee retention.
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Lower Recruiting Costs: Promoting educated employees to higher positions can save your company time and money compared to hiring from outside. The average cost of hiring a new employee is $4,425, or $14,936 for an executive. This includes advertising, training, interviews, and orientation. Plus, it can take months for a new hire to fully adjust to the company culture. Promoting from within can avoid these costs.
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Tax Breaks: The IRS lets employers write off up to $5,250 of tuition reimbursements per employee each year. These reimbursements are tax-free fringe benefits, so they’re not included in the employees’ wages, and the employer doesn’t have to pay Social Security, Medicare, federal or state unemployment taxes on the reimbursement. To qualify, the tuition reimbursement plan has to be in writing and meet other requirements.
Employers can set their own conditions for tuition reimbursement. These might include how long the employee has been with the company, their performance, whether the course of study is relevant to the company, the cost of the course, and the grades the employee achieves.
In conclusion, a tuition reimbursement program is a great way to attract, develop, and retain skilled employees. The design of your program will depend on your business and employees’ needs. If you’re considering it, you might start by reimbursing employees for one work-related course per year, subject to manager approval. This will give you an idea of how popular the program will be, and you can decide whether to expand it in the future.
