Employer-provided educational assistance—such as tuition-reimbursement programs—can be vital to retaining employees and helping them advance within their organization. Moreover, student loan repayment benefits can attract new talent. Increasingly, employers are recognizing the value of these benefits and using them to help meet their organization's talent needs.
Strategic Workforce Development
For the YMCA of Greater Rochester, N.Y., tuition reimbursement is a way to develop needed skills among its 3,000 employees. About 5 percent of its employees will, at some point, take advantage of the program, which subsidizes courses at area colleges that promote skills relevant to the employee's current job—or to a future job for which management views the employee as a potential candidate—said Fernan Cepero, SHRM-CP, the organization's chief HR officer and chief diversity officer.
The program is available to the Rochester YMCA's full-time employees and part-time employees who work at least 20 hours per week and have been with the organization for at least six months, he explained. Tuition reimbursement is denied if an employee fails to complete the course (unless the failure to finish is due to a work schedule change) or earns a final grade below a "C."
A quarter of the part-time workers who have earned a degree through the program have been hired for full-time positions at the Rochester YMCA.
"This is about developing our 'bench strength,' " Cepero said. Reimbursing tuition is "a necessity if we are to fill positions in areas that require a specific degree, such as child care programs."
However, simply offering a tuition-reimbursement program is not enough, he pointed out. A tuition program should be structured to support both the organization's strategic plan for professional development and its financial strategy. HR should also gauge the financial impact of these programs.
Cepero is careful to measure the program's return on investment (ROI) in retention levels and avoided turnover. Annual retention at the organization is 85 percent, "but it is 92 percent among those who have participated in the tuition-reimbursement program," he said. Tracking whether the organization is filling higher-level openings with employees who have used the program to earn a necessary degree is another way he measures the ROI.
Working closely with the CFO, Cepero ensures that the program is budgeted appropriately based on metrics such as:
- The number of employees using the tuition-reimbursement benefits.
- Employees' progress toward a degree.
- How employees' positions change once they have completed their studies.
The amount reimbursed is benchmarked every two or three years against average costs of area colleges and adjusted as needed.
Having a payback provision is an essential element of the program's success, Cepero noted. At the Rochester YMCA, employees must make an 18-month service commitment following completion of each course. If they leave before then, they have three months to pay back the assistance they received (unless they are let go due to a reduction in force, in which case the service commitment is waived).
Earlier in his career, Cepero worked for an employer with no such service requirement and saw people depart the organization as soon as they earned a degree, leaving the employer with no ROI for those expenditures. "We [at the Rochester YMCA] haven't had anyone leave and have to pay back tuition assistance," he said. Approving courses with a clear tie-in to employees' career-advancement prospects and ensuring that aid recipients understand the financial costs of leaving too soon helps keep them on board, he noted.
[SHRM members-only toolkit: Designing and Managing Educational Assistance Programs]
Instead of leaving the decision about whether to pursue a degree solely up to the employee, Larry Bourgerie, senior lecturer at the University of Minnesota, suggested that employers identify tuition-reimbursement opportunities when they fill positions, based on the degree and experience required to do that job. "Then, once employees get a degree, managers need to ensure that they have opportunities to use it," he said.
Front-line managers can help employees identify these opportunities. "Smart employees who are taking classes on, say, financial analysis should be looking for opportunities to showcase talents and ask for things to do related to that area of study, but managers must also be on the lookout," Bourgerie said.
Cepero encourages managers, when deciding whether to cover tuition, to be open and sincere with employees about whether the degree they're seeking will help meet the objectives of the organization, while also nurturing employee career growth.
If managers don't include tuition benefits in conversations about employee development, "chances are good that the program will just sit on the shelf," he said.
Given the enormous amount of time and effort employees must commit to complete a degree while working, they deserve guidance on where they can use that education to grow in the organization, Cepero said.
SHRM Backs Bill on Loan Repayment Programs
Pursuing an advanced degree and meeting certain life milestones, such as purchasing a home, is difficult for employees if they're carrying significant student loan debt. However, employers looking to ease the burden of their workers' student loans have been discouraged by the fact that, unlike many employer-sponsored benefits, loan repayment funds are considered taxable income for employees.
To address this issue, the Society for Human Resource Management (SHRM) supports the Employer Participation in Repayment Act (H.R. 1043), which is co-sponsored by a bipartisan group of 100 House members. A companion bill (S. 460) is before the Senate and has 18 co-sponsors. The legislation would expand the tax exclusion for employer-provided educational assistance to include up to $5,250 in annual, tax-free student loan repayment aid. That's the same amount that Section 127 of the tax code treats as tax-exempt for employer-provided tuition assistance to subsidize courses and training taken by those presently employed.
"The appetite is right in the current Congress," said Chatrane Birbal, SHRM's director of policy engagement. "Unlike previous generations, the Millennial generation will struggle to purchase a home, save for retirement and pay for health care" because of burdensome student loans.
Employers that want to support the Employer Participation in Repayment Act can encourage their lawmakers to co-sponsor the proposal or thank them if they're already doing so, Birbal said. SHRM has a suggested message and talking points on its Policy Action Center webpage.
Joanne Sammer is a New Jersey-based business and financial writer.
Related SHRM Articles:
Education Benefits Present a Learning Opportunity, HR Magazine, February 2019
SHRM-Backed Bill Would Give a Tax Break for Student Loan Repayment Aid, SHRM Online, February 2019