Tuition Reimbursement: How It Can Save Your Company Time (and Money)

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Monday, July 5, 2021

Tuition reimbursement is a good way to show your commitment to your workforce and also achieve measurable benefits for the business.

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Tuition Reimbursement: How It Can Save Your Company Time (and Money)
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To retain the most valuable and productive members of your workforce, you must be willing to invest in their learning and development (L&D).

One of the most compelling ways to show your commitment to your people and their professional growth is through tuition reimbursement. With research showing that L&D and opportunities for career progression are among the most important factors in employee satisfaction and retention, there are clear advantages to be gained from helping your workers cover the costs of their education.

How tuition reimbursement works

Tuition reimbursement schemes vary from business to business, but generally involve the employer refunding some (or possibly all) of the amount an employee spends on their college, graduate or professional education.

The compensation is paid upon successful completion of a pre-determined amount of education credits or coursework.

These programs are often subject to certain eligibility requirements and criteria, such as:

  • An annual reimbursement limit (which might be based on factors such as the employee's job title, length of service or seniority level)
  • Coursework being related to the participant's current role
  • Achievement of a particular grade to qualify for reimbursement
  • Limitations to certain schools or accredited institutions

A tuition reimbursement program is a big financial commitment for any business to make, so it's fair to ask what you stand to gain from this investment. What benefits can you expect to achieve, not only for your staff, but the organization as a whole?

The business case for tuition reimbursement

There are various commercial benefits associated with tuition reimbursement programs, some of which could prove critical to your future performance and results.

Staff retention

As a business, you can't succeed if you’re unable to keep hold of your most talented, knowledgeable and experienced staff. These people will be instrumental in helping you overcome your biggest challenges and take full advantage of every opportunity.

Offering to help your employees cover the costs of their ongoing L&D shows that you're dedicated to your workforce and willing to support their career development.

Constantly learning new things and expanding their skill sets also keeps people engaged and interested in their work, which reduces the risk of them looking elsewhere for opportunities.

More effective recruitment

Retaining your most valuable staff is crucial, but there are also times when you'll have to turn to the labor market to increase capacity in your workforce and acquire particular skills.

Job candidates will always want to know what benefits are available before applying for a role, and tuition reimbursement would be a compelling addition to your list of perks.

Offering an attractive benefits package can help you reduce the time and financial investment required to hire new staff. Past research has indicated that it costs an average of $4,129 and typically takes 42 days for an employer to fill an open position. 

Developing skills from within

You can eliminate the time and costs associated with hiring by focusing on internal development of the knowledge and capabilities you're likely to need in the future.

Employees will be more interested in pursuing training and professional development if they know they can claim back some of the costs involved. Individual participants boost their career prospects and earning potential, while the business saves itself the time and expense of a recruitment drive.

Research from Accenture suggests the typical employer will save $1.29 in recruiting costs for every $1 it spends on educational assistance schemes.

Focusing on nurturing talent from within will prove particularly important for businesses in industries that are facing the most severe skills shortages.

Tax benefits

From a purely financial perspective, one of the biggest perks of tuition reimbursement programs for US employers is found under section 127 of the Internal Revenue Code. This states that employers can offer up to $5,250 for each employee, per year in tax-deductible tuition costs, providing certain requirements are met. Participating workers are also exempt from paying tax on the same amount.

Going beyond the tangible financial incentives associated with tuition reimbursement, some of the most powerful benefits are likely to become evident in the long term. Showing that you're dedicated to your people and their professional growth will help you build an engaged, productive workforce and a stronger employer brand, enabling you to attract and retain essential talent.

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