Paying for Education

Transcription

1 Paying for Education Why Help Employees Pay for Education? Paying for education or training can be a significant challenge to employees as well as employers. However, research has shown that offering educational assistance has great benefits for both the employer and the employee. In the 2006 the Society for Human Resource Management conducted a U.S. Job Retention Poll in which employees were asked about the effectiveness of employee retention strategies offered by organizations. The employees rated Career development opportunities far above other strategies such as completive salary, and flexible work schedules. 11 Tuition assistance has been successful tool for retaining front-line employees, 12 and is proven as a competitive retention benefit for all levels of employees. A Wharton School of Business study found that employees who use tuition assistance stay longer with an organization. 13 About 79% of companies nationwide have an educational assistance program of some sort, but the findings are that only a small percentage of employees some say as low as 15% - actually access this benefit in companies where it is offered. 14 Our tuition reimbursement program originated from a total growth philosophy, meaning that we believe a person is more likely to achieve when they are energized about their own personal and professional development. At L.L. Bean we view tuition reimbursement as one of the most meaningful ways that we can support a person s development path. The growth of the individual and the growth of our organization are one in the same. Marie McCarthy, LL Bean US Job Retention Poll Findings, SHRM Research, Jessica Frincke, Dec., 2006, p Op.cit. Browning, Ibid. 14 The Case for Employer-sponsored Tuitions Assistance: Invest in Employees or Lose Them, Bill Browning, April, Page 13

2 Linking Employees to Resources is a Valuable Role for Resource Limited Organizations Employer educational assistance comes in a variety of forms that suit an organization s structure and culture. Even for those organization that may not have the resources to subsidize education or training, the employer can play an important role in linking the employee to the resources that are available through workforce development agencies, as well as tools for financing the costs by themselves. In many cases, the workforce development agency may work directly with the employer to provide training and certification. Options for Financing Education Tuition reimbursement The employer reimburses the employee for a fixed amount of costs for courses. Usually the employer repays the employee after completion of the course and a grade is given. Tuition remission The employer pays their portion of the tuition at the time payment is due to the educator. This relieves the employee of paying in advance and then waiting for reimbursement. Typically, the employer requires the employee to earn a certain grade or else return the funding. Tuition forgiveness The total amount for the course, books and other fees are paid by the employer. This usually is often used to attract a hard to find knowledge or skill that is needed in the workforce. Life Long Learning Accounts These are investment accounts recognized by the IRS to help people save for college through a payroll deduction option. The employee saves a minimum amount which is matched by the employer. The employee may also qualify for a matching grant from the Finance Authority of Maine. The money can then be used to finance education. College Savings Plans These are plans similar to the Life Long Learning Accounts listed above, but are set up solely by the employee to be used for their education. Page 14

3 Opportunity Maine Tax Credits - These are tax credits available to either the employee or employer for students who study in Maine and then work in Maine. The tax credit can be applied to the repayment of the loans from an official financial aid package from the institution of learning. If employers chose to pay the students loan obligations, the employer can then file for the tax credit in Maine. Other tax credits - There are tax credits for employer payment of education. See the IRS rules for current opportunities. Other assistance available employers can help employees who are looking for educational assistance by linking them to the many resources available. Consult the MEI Resource Guide for many more resources to support higher education. Maine Competitive Skills Scholarship Program Maine Apprenticeship Program Scholarship Search (sponsored by the Finance Authority of Maine) Other Creative Options for Financing Training and Education Arrange for a college to bill the employer organization directly for courses taken by employees. This step eliminates the employee burden of paying for the course upfront and then seeking reimbursement. The benefits to employers may include reduced paperwork and also provide an opportunity to negotiate tuition costs or fees if several employees enroll in a course(s). The employee can then pay their portion through payroll deduction or other pre-arranged means. Provide resources to a college or school to increase opportunities for your employees. Some organizations have provided instructors for courses at a local college/university to help meet demand for oversubscribed or new classes. Other organizations have allowed the use of their facilities for college courses, giving the schools added space and flexibility as well as bringing the classes closer to the employees. Page 15

4 Implementing Tuition Assistance Formal tuition assistance programs are usually written into human resource policy and include the details what will be covered and what will not be covered, i.e. registration, books, lab fees, other student fees. To create a new policy, it may be is as easy as copying a successful program s policy if it meets an organization s needs. Some key questions need to be answered to design a policy that works for the employer and employee. 15 When and how will assistance be given? The organization should first determine what type of assistance it will offer: reimbursement, remission or other tuition assistance strategies. Who qualifies to receive tuition assistance benefits? Organizations need to consider which classifications of employees will qualify: fulltime, part time or other distinction. Employers may want to reduce or prorate the benefit for their part time employees. Length of service may also be a factor for qualification. If the employer is using the benefit as a recruitment tool, then they may want to have it be available early in the employee s employment experience. Some organizations require 90 days of employment before the benefit goes into effect, while others require up to one year. What costs will be covered? An important aspect of a tuition reimbursement program is the scope of cost coverage, as there can be many different costs associated with enrolling in a class. These may include the costs of tuition, books, lab fees, parking, etc. 15 References to this section include: Will your Employer Pay Your Tuition? Back to College, Tempting with tuition: Reimbursement plans lure workers, David Koenig, Dallas Business Journal, July 30, The value of Tuition Reimbursement: Myth Versus Reality, Michael E. Echois, Ph.D., Link&Learn enewsletter, Linkage Incorporated, Tuition Assistance Programs Law and Legal Definition, U.S. Legal,

5 How much assistance will be provided? A company needs to determine what portion of the education costs it would like to reimburse. Examples include a flat subsidy, a portion of the costs, or all costs. Employees should be made aware of any tax consequences of receiving tuition assistance. Minimum grade criteria? Will the full amount of the benefit be paid for any passing grade? Or will there be a sliding scale for the assistance based on the course grade? Examples include 100% of assistance for an A, 75% for a B, and 50% for a C. A decision needs also to be made if the employee does not pass the course. Course restriction or degree requirement? Many organizations have the stipulation that the course work needs to relate to core organizational functions. It is important also to decide if the benefit will only pay for certain types of classes, or for core courses required by the school in order for the employee to get a full degree. Does the employee need to be enrolled in a degree program or will the policy also support a certificate bearing curriculum, or possibly a few specific courses that the employee wants to take to brush up on specific skills? Other? It may be necessary for an employer to specify a time period by which the degree needs to be completed as well as the consequences if the employee voluntarily leaves the place of employment shortly after completion. Page 17