A company’s people and its culture are the only things that cannot be replicated or duplicated by competition. If a company cannot retain its most valuable employees, it loses its competitive edge.
What keeps a work force motivated? What helps keep them sharp and able to offer the most innovative ideas and skills? Continuing education certainly is at the forefront of a highly skilled and energized work force. Companies have long recognized this through tuition reimbursement programs, one of the most popular employee benefits available today. Depending on the source, some 80-90 percent of companies today offer some type of tuition reimbursement support.
“It’s always incredibly important to the growth of any company to invest in training and education,” says Gina Cuffari, vice president and director of University of Phoenix’s Ohio Campuses. “It’s not only a key driver of employee retention, but it’s vital for maintaining a competitive advantage in the market.”
Smart Business spoke with Cuffari about how tuition reimbursement programs help retain your “A” players and are smart financial moves, even during a slow economy.
Why should tuition reimbursement be a cornerstone of an employee benefit policy?
There are typically three key business objectives that an organization is trying to impact through their benefit programs: improve retention of staff, attract high-performing new employees into the organization and boost productivity and profitability.
Tuition reimbursement has been proven to achieve those three objectives. At times executives questioning the value of tuition reimbursement often wonder whether they’re educating an employee who will merely leave for greener pastures after earning a degree. Yet a variety of independent studies shows that exactly the opposite occurs.
How do tuition reimbursement programs benefit employers and employees?
I hear firsthand from employers who use tuition assistance that employees who are engaged in the program are more committed and more likely to be considered for an internal promotion. Continuing education helps with the development of critical thinking skills. These skills are especially important today because companies across the board are faced with figuring out how to do more with less, or how to create an innovation that will leapfrog other companies. Those are key messages in business today, so the development of critical thinking skills has an immediate return on investment for an employer.
How prevalent is the risk of employees using their new training to find another job?
That is the major myth employers believe about tuition reimbursement programs. However, there are several studies that show turnover is lower among employees who participate in tuition reimbursement programs.
An Academy of Management Journal study, aptly titled ‘You Paid for the Skills Now Keep Them,’ showed that taking courses and receiving a bachelor’s degree reduced turnover by nearly 50 percent. Career Systems International cited professional ‘growth, learning and development’ as the No. 2 reason employees remain with their companies. The staffing services firm Spherion reported that 62 percent of surveyed employees who had received training or mentoring were likely to stay in their current positions.
The real question is ‘What is loyalty worth to you as an employer?’ It costs at least 1.5 times an employee’s salary to replace that person, even up to 200 percent if they are in a key leadership position. It could be three to six months before you’ve recruited and trained to replace that person. It’s vital to keep your key staff rather than spend unnecessary dollars recruiting and retraining to replace good people you’ve lost.
Should companies try to save money by reducing tuition assistance programs?
The key aspect to think about is that the economy moves in cycles. What we do in a down economy really helps determine which companies recover more quickly than others. Education is a key to driving the economy out of its current state. So, this is the time when education is more important than ever.
The real question for employers is: Are you keeping your best people now because the economy is preventing them from leaving, or are you keeping them because they’re loyal, invested in your organization and they see the opportunity for skill advancement? If they are only staying because they have nowhere else to go, what’s going to happen when the economy recovers?
It’s a legitimate issue facing people who have to make cuts right now, but consider what you are doing to build for tomorrow’s success by investing in your leaders today. A company is going to turn around faster with smarter people, with a better-educated work force. Whether the economy is in a down cycle or an up cycle, you’ll always beat the competition with a better-educated work force.
Are there best practices to consider when building a tuition reimbursement program?
There are no rigid requirements when designing tuition assistance programs, so employers have flexibility in determining how their programs can function. Some firms offer the same support to all; others target only certain levels within the company.
Also, the level of benefit varies. Some employers cover the entire tuition amount, while others cover a portion. Some tie the level of tuition reimbursement to a student’s performance in the classroom. There is also a tax benefit for the employer. They can provide employees up to $5,250 in education assistance tax-free every year.