Organizations offer tuition reimbursement benefits to attract and retain new and existing talent and to increase worker productivity, loyalty and satisfaction. However, employer cost is a top barrier to offering these benefits. This is coupled with an expected increase in tuition reimbursement utilization. To ensure a positive return on investment, organizations must deploy a series of standards and limitations, which are explored in a new International Foundation report Education Benefits: 2019 Survey Results.
Here are ten ways employers can ensure their tuition reimbursement benefits don’t break the bank!
1. Consider a fixed annual dollar amount for reimbursement. This is the most commonly used financial limitation, adopted by more than three in five (62.0%) organizations. Those that use limits most often reimburse between $5,000 and $5,999 per year (commonly $5,250, the indexed limit for tax-free treatment for educational assistance plans under IRC Section 127).
2. Ensure that workers are attending classes that will directly improve their performance! More than one-half (51.5%) of organizations require that expenses for reimbursed education must be limited to job-, work- or business-related courses.
3. Use length-of-service requirements to determine eligibility for tuition reimbursement. Currently, just under half (45.4%) of organizations do this.
5. Make sure you are dedicating your dollars to high-performing employees by requiring the fulfillment of employee performance standards before course approval. One-third (33.3%) of organizations require this.
5. Require reimbursement to be limited to accredited academic institutions. More than three in ten organizations currently do this (30.8%).
6. Limit reimbursement to courses that lead to a degree—something one in five (19.7%) organizations require.
7. Limit the number of courses/credits reimbursed per academic period (12.7%), set fixed dollar amounts per academic period (10.9%) or use a fixed percentage of expenses (8.2%).
8. Use academic requirements for tuition reimbursement benefits. About seven in ten (69.2%) organizations have a minimum grade required for reimbursement (e.g., C or better). One in nine (11.1%) respondents use a sliding scale of reimbursement payments. In these arrangements, students receive full reimbursement for earning an A, and the percentage of reimbursement decreases with each lower grade earned.
9. Implement payback provisions for workers who leave before their reimbursement requirements have been met (a concern cited as the largest barrier to offering a program by employers). More than one-half (57.4%) of organizations have payback provisions in place .The most common tenures required to avoid payback is 12 months (53.6%), followed by 24 months (21.3%) after course completion. Only 8.3% of organizations require payback following three or more years after course completion.
10. Control the timing of tuition reimbursement payments to reduce fraud and standardize budgeting. The large majority of organizations (86.5%) reimburse covered expenses after the end of study, upon evidence of meeting certain requirements. This typically entails employees providing employers with a proof of payment, attendance or the attainment of academic requirements.
Related Reading:
Justin Held, CEBS
Senior Research Analyst at the International Foundation
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