While tuition reimbursement for employees is not new, many companies are exploring strategies to expand and reinvigorate participation in these opportunities, especially among frontline workers. These efforts are increasingly common as companies aim to attract and retain talent in what some experts call a post-pandemic hiring race.
According to the American Community Survey, an ongoing government survey of our nation’s communities, frontline workers constitute 64% of essential workers and 52% of all workers. When looking at race, a higher share of frontline workers identifies as part of a minority group. These demographics are also the least likely to participate in tuition assistance programs.
Identifying a program that works for your company and then promoting it equitably across the organization will contribute to ongoing retention and recruitment efforts and DEIB initiatives.
How Tuition Assistance Programs Work – And Don’t Work
In one scenario, a company that offers partial reimbursement for an accredited university degree or certificate program may feel that an employee needs to invest both mental and financial capital. With this approach, there’s a chance that universities on the company’s approved list are still too expensive for the frontline worker, even with partial reimbursement.
Another common scenario is a tuition assistance program only offered to employees who have been with a company for three to five years. The logic here is that these employees have proven their loyalty to the company and are, therefore, perceived as eligible recipients of company investment. From a recruitment perspective, this reasoning may be flawed.
In 2018, EdAssist surveyed over 22,000 employees to determine how the provision of tuition assistance programs would impact their decision to join a new company or stay with their current employer:
- 84% said access to a tuition assistance program was important in their decision to join the company
- 71% of respondents rate tuition assistance as the best or among the best benefits offered by their employer (excluding health care benefits)
- Upon completion, nearly 6 in 10 say they were offered a promotion, new opportunities within the organization, or other professional benefits within two years of completing their program.
When asked about their perception of the tuition reimbursement program:
- 93% of respondents said that using their employer’s tuition assistance program helped them develop the skills they needed to grow within their company
- 85% say the program has made them a more effective employee
- 56% of respondents would not have pursued additional education without this support from their employer
When asked why they pursued further education:
- 76% of respondents participated in a tuition assistance program for advancement or growth opportunities within their company
- Two-thirds participated to learn new skills or pursue a new job within their company
In addition to enhanced skills and growth within the company, employees who use tuition assistance programs tend to feel more loyal to their employers and more satisfied in their jobs. These programs should not be designed to exclude junior employees or frontline workers who typically display the highest company attrition rates.
The annual ‘The State of the American Workforce’ survey from Gallup found that 45% of Millennials would leave their current company for an employer that offered a tuition reimbursement program.
Success Stories: How Enterprise Companies Make Tuition Reimbursement Work
Most employers offer education benefits that are tax-exempt under IRS Code 127. This means an employer can deduct up to $5,250 per year per employee participant. Companies that claim these deductions are typically obligated to make tuition assistance programs available to all employees on a nondiscriminatory basis. The most forward-thinking employers offer education benefits to new hires and part-time employees.
Is there any measurable ROI from tuition reimbursement programs?
Cigna, a leading insurance company, partnered with the Lumina Foundation to analyze how their long-running tuition reimbursement program made a difference for participants and the company. The study focused on 2012 to 2014, when Cigna’s program supported over 2,200 employee participants.
It was found that Cigna’s tuition assistance program generated an ROI of 129%. In other words, for every dollar invested in tuition assistance, Cigna got back and avoided an additional $1.29 in talent management, recruitment, and onboarding costs. Employees believed that the program led to increased confidence, motivation, knowledge, skills, and recognition from managers and colleagues.
The Lumina Foundation uncovered similar findings at Discover Financial Services, which reported a 144% return on investment under similar metrics. On average, employees who participated in the program received annual wage increases at least 41% greater than non-participating employees. This same demographic when on to save Discover an estimated $10.9 million.
Amazon hires 100k frontline workers each holiday season. To successfully compete in a tight talent market, they partnered with Pathstream to provide workers with new career pathways, thereby attracting and retaining top frontline talent. Amazon leveraged our career mobility platform to achieve its goals.
The program increased the tenure of workers staying at Amazon by 208% compared to non-participating Amazon warehouse employees. Participating employees reported countless ways in which they were able to apply the concepts they learned immediately in their current roles throughout the program.
Removing the financial burdens of continuing or completing education, especially among frontline workers, will foster the sense that a company truly values its employees.
As the competition for talent remains tight, companies that offer meaningful employee benefits are better positioned to succeed.
According to LinkedIn’s 2019 Workforce Learning Report, 94 percent of employees say they would choose to stay at a company longer if it invested in helping them learn. This was particularly true among Gen Z and Millennial respondents who said they preferred companies that offered upskilling programs, tuition reimbursement, or formalized career pathing programs. An improved sense of value is also likely to inspire greater motivation, productivity, and loyalty among a company’s frontline staff.
Pathstream can help your company design and deploy a tuition assistance program tailored to work for your organization. Contact our experts today to learn more about modernizing your tuition assistance program.
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