The impact of regulations governing tuition reimbursement on staff turnover and retention rates

Posted: June 6th, 2021

The impact of regulations governing tuition reimbursement on staff turnover and retention rates

Tuition reimbursement is a benefit that many employers offer to their employees to help them pay for their education. Tuition reimbursement can have positive effects on staff turnover and retention rates, as it can increase employee satisfaction, loyalty, motivation, and productivity. However, tuition reimbursement also comes with some challenges and costs for employers, such as complying with tax laws, setting eligibility criteria, monitoring academic performance, and preventing employee turnover after receiving the benefit. In this blog post, we will discuss how regulations governing tuition reimbursement affect staff turnover and retention rates, and provide some best practices for employers who want to offer this benefit.

Regulations governing tuition reimbursement

Federal tax law allows employees to get up to $5,250 in tuition reimbursement tax free from their employer every year. This means that up to that $5,250 cap, employees do not have to declare the tuition reimbursement on their federal income taxes, as long as the company has a written policy and the policy meets all federal tax guidelines. Employers can offer more than $5,250 per year in assistance, but they may have to pay payroll taxes on anything over $5,250.

Employers also have to comply with state and local tax laws, which may vary depending on the location of the employer and the employee. Some states may have different caps or exemptions for tuition reimbursement, or may require employers to withhold taxes from the benefit. Employers should consult with their tax advisors or attorneys to ensure that they are following the applicable tax laws in their jurisdictions.

Employers also have the discretion to set their own eligibility criteria and requirements for tuition reimbursement, as long as they do not discriminate against any protected groups of employees. For example, employers may require employees to work for a certain period of time before applying for tuition reimbursement, to maintain a certain grade point average or academic standing, to take courses or obtain degrees that relate to their field or career goals, or to stay with the company for a certain period of time after receiving the benefit . Employers should communicate these criteria and requirements clearly and consistently to their employees, and document them in their written policies.

Effects of tuition reimbursement on staff turnover and retention rates

Tuition reimbursement can have positive effects on staff turnover and retention rates, as it can enhance employee satisfaction, loyalty, motivation, and productivity. According to a study by EdAssist, a provider of tuition assistance management services, 71% of employees who received tuition assistance from their employers reported feeling more satisfied with their jobs. Additionally, 61% of employees who received tuition assistance said they were more likely to stay with their employers for at least five years. Furthermore, 58% of employees who received tuition assistance said they were more likely to pursue leadership roles within their organizations.

Tuition reimbursement can also increase employee motivation and productivity by providing them with opportunities to learn new skills, acquire new knowledge, advance their careers, and earn higher degrees. According to a survey by Bright Horizons, another provider of tuition assistance management services, 81% of employees who participated in tuition assistance programs reported improved performance at work. Moreover, 87% of employees who participated in tuition assistance programs said they applied what they learned in school to their jobs.

However, tuition reimbursement also comes with some challenges and costs for employers, such as complying with tax laws,
setting eligibility criteria,
monitoring academic performance,
and preventing employee turnover after receiving the benefit.
Employers should weigh the benefits and costs of offering tuition reimbursement,
and design their policies and programs carefully
to maximize the return on investment
and minimize the risks.

Best practices for employers who want to offer tuition reimbursement

Here are some best practices for employers who want to offer tuition reimbursement:

– Align the tuition reimbursement program with the company’s strategic goals and objectives. For example,
if the company wants to develop its workforce in a certain area or industry,
it can offer tuition reimbursement for courses or degrees that are relevant and beneficial
to that area or industry.
– Establish clear and consistent eligibility criteria and requirements for tuition reimbursement,
and communicate them effectively
to employees.
For example,
the company can specify
the minimum length of service,
the minimum grade point average,
the type of courses or degrees that are eligible,
and the duration of commitment
that employees have to agree
to receive tuition reimbursement.
– Monitor and evaluate the academic performance
and progress of employees who receive tuition reimbursement,
and provide feedback
and support
to help them succeed.
For example,
the company can require employees
to submit transcripts,
reports,
or certificates
to verify their completion
and grades
of courses or degrees.
The company can also offer mentoring,
coaching,
or tutoring
to employees
who need additional guidance
or assistance.
– Measure and track the outcomes and impacts of tuition reimbursement
on staff turnover and retention rates,
as well as other indicators
such as employee satisfaction,
loyalty,
motivation,
and productivity.
For example,
the company can conduct surveys,
interviews,
or focus groups
to collect feedback
and testimonials
from employees
who receive tuition reimbursement.
The company can also analyze data
such as turnover rates,
retention rates,
promotion rates,
and performance ratings
to assess the effectiveness
and return on investment
of tuition reimbursement.
– Review and update the tuition reimbursement policy and program regularly
to ensure that they are aligned with the changing needs and expectations of the company and the employees.
For example,
the company can adjust the amount,
frequency,
or scope
of tuition reimbursement
based on the availability of funds,
the demand for skills,
or the feedback from employees.

Conclusion

Tuition reimbursement is a benefit that many employers offer to their employees to help them pay for their education. Tuition reimbursement can have positive effects on staff turnover and retention rates, as it can increase employee satisfaction, loyalty, motivation, and productivity. However, tuition reimbursement also comes with some challenges and costs for employers, such as complying with tax laws, setting eligibility criteria, monitoring academic performance, and preventing employee turnover after receiving the benefit. Employers should weigh the benefits and costs of offering tuition reimbursement, and design their policies and programs carefully to maximize the return on investment and minimize the risks.

References

: Bright Horizons. (2022). The Lasting Impact of Employer-Sponsored Education: Employee Loyalty, Skills Development, and the Pursuit of Higher Education. Retrieved from https://www.brighthorizons.com/-/media/BH-New/Newsroom/PDFs/Lasting-Impact-of-Employer-Sponsored-Education.pdf

: Morgan Cautero, R. (2022). What You Need to Know About Tuition Reimbursement. Retrieved from https://www.thebalancemoney.com/what-you-need-to-know-about-tuition-reimbursement-4177310

: Harvard Extension School. (2020). How to Use — and Ask For — Employer Tuition Reimbursement Benefits. Retrieved from https://extension.harvard.edu/blog/how-to-use-and-ask-for-employer-tuition-reimbursement-benefits/

: Workforce.com. (2000). Sample Tuition Reimbursement Policy. Retrieved from https://workforce.com/news/sample-tuition-reimbursement-policy/