Always More to Learn

Tuition reimbursement programs can boost retention while supporting organizational development.

By Pamela Babcock Sep 1, 2009

August Cover​Jason Caldwell was a miler on his high school track team in Eau Claire, Wis., and he had an after-school job loading trucks for United Parcel Service (UPS). At a meet one afternoon in 1995, he crossed the finish line a winner and realized his next "race" would be getting to work by 5:45 p.m. Still in his tracksuit, he jumped into his car and arrived with a minute to spare. "It was one of the proudest days of my life to go to school, win the mile and get to work on time—not bad for an 18-year-old," he says.

After graduation, Caldwell stayed with UPS and took the fastest route—education—to get ahead. And UPS helped him. With tuition assistance from his employer, Caldwell earned a bachelor’s degree in operations and materials management and, recently, a master’s degree in business administration from the University of Wisconsin at Eau Claire.

"Tuition reimbursement has kept me with UPS and really helped my succession planning and career development with the company," says Caldwell, now a business manager in UPS’ Baldwin, Wis., office. He adds that the tuition reimbursement program not only helped him earn two degrees but also helped him hone his communication, teamwork and technical skills and provided exposure to "diversity that I normally wouldn’t have had."

Increasingly, organizations are using tuition reimbursement benefits to attract and retain employees and for longer-term organizational development.

With the recession causing most employers to look for ways to reduce expenses, tuition reimbursement programs may appear particularly vulnerable. But some say a program’s degree of vulnerability depends on how aligned the employer’s talent management processes are with corporate strategy, and on the willingness of senior leaders to discuss those issues.

At Capital District Physicians’ Health Plan Inc. (CDPHP), a health maintenance organization in Albany, N.Y., "talent management professionals are at the table to discuss how these programs may impact strategic business outcomes," says Stephen Russell, director of corporate learning and development.

During an economic downturn, Russell adds, "it’s important to understand how changes in talent development programs may result in adverse changes in retention, future knowledge loss, and/or depletion of needed skills and development of employees. This can have an unexpected impact on the bottom line and success of the company."

Another employer whose executives see the pluses of education programs even in a recession is Michigan First Credit Union in the Detroit area. Because the institution has had "continued success in this economy," says Monica Horger, PHR, vice president of HR, "we have not discussed cutting back or suspending the tuition reimbursement program." She says it’s "low-cost in comparison to the benefits it brings your organization: team member development, high morale, retention, internal promotions, better member service and more. It is doubtful that we will suspend or cut back this program; in fact, in 2009 we increased our reimbursement amounts for undergraduate and graduate classes."

In a study report scheduled to be released soon, the Corporate Executive Board in Arlington, Va., found that 75 percent of organizations offering tuition reimbursement said they do not plan to reduce or eliminate the benefit because of the downturn. The study was based on interviews with HR executives at 50 Fortune 500 organizations.

An Array of Options

Tuition assistance for employees typically applies to a wide range of pursuits, from certificates to undergraduate and graduate degrees awarded by accredited colleges and universities and, increasingly, completion of online courses offered by accredited institutions.

At Verizon Wireless, based in Basking Ridge, N.J., tuition assistance can be obtained for the costs of an accredited university or the costs of the company’s on-site college program, conducted at call centers and corporate offices. Classes are taught by faculty members of local participating universities, enabling employees to earn degrees by attending classes where they work and at times that don’t interfere with their job requirements.

Like most employers, Verizon Wireless stipulates that the course work relate "to the employee’s current job or an established career path within Verizon Wireless," says Lou Tedrick, senior vice president of workforce development for the company. Employees have earned associate, bachelor’s and master’s degrees and have studied subjects such as computer skills, business and Spanish.

Similarly, Zebra Technologies Corp., a Lincolnshire, Ill., provider of specialty printing and automatic-identification products, reimburses for college-level courses "directly related to the employee’s present position" or those that "have some direct relationship to a possible future position at Zebra," says Joanne Townsend, vice president of HR for the 3,000-employee company.

"If somebody wants to become a nurse or pursue something in the medical field," that wouldn’t be covered, Townsend says. But if an accountant wanted to take courses to make a move into HR, "we would allow those types of things." The program also covers professional certification courses and reimburses employees for correspondence or extension courses from accredited colleges and universities.

Eligible courses at CDPHP include those leading to associate, bachelor’s and graduate degrees in both traditional and distance learning programs as well as programs for licenses and certifications.

Geonerco Management, a 55-employee real estate development company in Seattle, had been reimbursing employees’ costs for undergraduate degrees and "specific certification programs related to the real estate development and new home construction industries," as well as course work that could develop skills in the employee’s primary job area, says Greg Syzmanski, SPHR, the company’s director of human resources. The company suspended its tuition assistance program when the economy’s downturn squeezed the housing sector. Before that, he says, offering one example, an employee in the accounting department studying for an accounting degree would be reimbursed for core courses but not for distribution courses. He says company officials want to reinstate the program when the economy recovers.

Eligibility Requirements Vary

Some employers tie tuition reimbursement to length of service or type of job. Verizon Wireless employees who work at least 20 hours per week "are eligible to use this benefit on their first date of hire with no post-degree commitment to remain with the company," Tedrick says. She adds that caps of up to $8,000 per year for full-time employees and $4,000 for part-time employees are "above the industry average." Most companies limit annual reimbursement to $5,250 for full-time employees, the tax-free maximum under Internal Revenue Service rules. (If the amount is larger, it would be reported as income paid to the employee, and it could be subject to income tax.)

At Michigan First, employees are eligible after six months of employment. Full-time employees are reimbursed up to $800 per undergraduate course and $1,100 per graduate course, with a maximum of $5,000 per calendar year, Horger says. Reimbursements for part-time employees are prorated. For example, an employee who works 20 hours per week on average would receive 50 percent of the full reimbursement amount.

If the courses that a CDPHP employee takes "are a job requirement, we reimburse 100 percent," Russell says. If a program "supports professional development and/or future roles within the company," direct supervisor signoff is required and the company reimburses 75 percent of the costs.

Other companies require longer tenure and other signoffs. Geonerco Management required one year of service, a recommendation from the employee’s manager and approval by company owners because Geonerco is privately held, Syzmanski says.

How the Money Moves

Organizations vary in how they award reimbursements or give assistance. Some make payments directly to the university or college, while others reimburse employees only after the employees have paid the costs.

Michigan First requires that employees pay upfront, pass the class and provide proper documentation, including grades and receipts, before it deposits reimbursement funds directly into the employee’s Michigan First checking or savings account. Grants, scholarships and other funds given to the employee are subtracted from reimbursable expenses, Horger says.

CDPHP employees typically are required to pay tuition in advance. However, the organization has agreements with Excelsior College and Russell Sage College to accept employees for degree programs without requiring that they pay in advance. The agreement is part of "an ongoing process to build mutually advantageous relationships for both the colleges and our employees," Russell says.

Verizon Wireless typically pays the college or university directly or provides the employee funds upfront, a move that requires no initial cash outlay from the student. The company reimburses employees 100 percent of textbook costs upon successful completion of the course.

Employers’ policies vary on whether they cover textbooks and fees. Geonerco, for example, reimbursed employees for tuition, books and education fees for out-of-classroom work such as field projects, but not for noneducational costs such as campus parking, Syzmanski says.

In addition, some employers reimburse according to the final grade received for the course. To be reimbursed, a Michigan First employee must get at least a C or must get a "pass" in a pass/fail course. Verizon Wireless employees must maintain a C average to receive the benefits, Tedrick says.

CDPHP also reimburses employees based on their final grades. An employee who is enrolled in a degree program is reimbursed up to $350 per credit hour, a figure based on the average State University of New York fee structure per credit hour, and receives 95 percent for an A, 85 percent for a B and 75 percent for a C. Nonmatriculated students receive up to 75 percent reimbursement of fees.

Finally, for employees who leave shortly after receiving tuition assistance, it can be payback time. Michigan First employees, for example, have to work at least a year after completing a course to avoid a payback requirement, Horger says. At Zebra Technologies, employees who leave voluntarily within one year must pay back 100 percent of the reimbursement, or 50 percent if they leave within two years, and the amount is due within 60 days after leaving the company, Townsend says. "If there’s a reduction in our workforce, we don’t require that [repayment]," she adds. "But if you’re fired for cause, we might ask for repayment."

The author is a freelance writer based in the New York City area.

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