Education Benefits Present a Learning Opportunity

Introduction

As learning continues to evolve, so must education benefits. Tuition assistance remains common, but changes in higher education—and its rapidly rising costs—are prompting companies to re-examine this benefit. Micro-credentials and bite-sized learning are becoming more popular, particularly in technology fields, as employers adapt their education and training offerings to fit broader societal trends.

Meanwhile, student-loan debt has become a major employee concern, crowding out saving for retirement. It’s difficult for employers to provide cost-effective assistance with student debt, but recent IRS approval of a plan that combines student-loan payments and retirement savings can help.

Some HR practitioners say tuition benefits help them recruit and retain top employees. “It’s a competitive market, and so, from a recruitment standpoint, employers want to offer the best total rewards package they can,” says Catherine Olivieri, SHRM-SCP, vice president of human resources for Susan G. Komen in Dallas. “To me, that includes tuition reimbursement and development of employees. Depending on the organization, you may be trying to attract people, lower turnover, close a skills gap or develop more leaders.”

The Granite Group, a wholesale plumbing business based in Concord, N.H., offers tuition assistance for full-time employees, who must stay for at least one year after completing their education or repay the assistance. Because the company has begun requiring college degrees for certain roles, more employees are taking advantage of the benefit. “We hear from our people who go through tuition reimbursement, ‘My employer pays me to go to school,’ ” says Tracie Sponenberg, SHRM-SCP, senior vice president of human resources. “It’s benefiting us, and it’s supporting the individual, too.”

Overall, relatively few employees take advantage of tuition aid. Fewer than 10 percent of workers at companies that offer tuition reimbursement use the benefit annually, according to a recent estimate by Willis Towers Watson. 

Given the low usage rate, why do companies continue to offer this benefit? Tuition-assistance programs reduce employee turnover and help businesses identify their most productive workers, according to Peter Cappelli, director of the Center for Human Resources at the University of Pennsylvania’s Wharton School. Those who work and attend school are a self-selecting, motivated group, and learning more about these employees may help businesses with their talent management efforts.

One of the biggest shifts in employees’ financial priorities has been away from saving for retirement and toward paying off student loans.

A study of Cigna’s tuition-reimbursement program, conducted by Lumina Foundation, found that employees who used the benefit received more promotions and were less likely to leave than those who did not. About 5.8 percent of Cigna’s employees, or 2,200 people, received tuition reimbursement between 2012 and 2014. Those workers had, on average, a 43 percent incremental wage increase over a three-year period. Cigna’s return on investment was 129 percent, based on lower turnover and cost savings from internal promotions.

A key issue with tuition reimbursement is that employees typically must pay upfront and then wait to be reimbursed, which can mean that only more-affluent workers can participate. That’s especially true given the growing gap between the assistance employers provide and the rising cost of higher education. Companies can offer $5,250 of educational assistance tax-free each year. According to the College Board, average tuition and fees for in-state students at a four-year public university for the 2018-19 school year ranged from $5,400 in Wyoming to $16,610 in Vermont. For private universities, the average cost for 2018-19 was $35,830, up more than $7,000 in the past decade.

One way companies are closing this gap, while holding down their costs, is by directly paying employee tuition for courses in specific programs at designated schools. Workers often must first apply for federal financial aid, with companies making up the remaining costs.

In low-wage industries that are struggling to attract and keep workers, companies such as Walmart, Yum Brands’ Taco Bell, Kroger and McDonald’s either have launched programs to help employees with tuition or have expanded employee eligibility. McDonald’s allows employees to attend any accredited school; managers qualify for $3,000 in assistance per year, and nonmanagers can receive up to $2,500. Walmart will pay only for degrees in business or supply-chain management, through one of three online university programs.

Online courses provide flexibility for employees who are trying to work full time, take classes and care for families. Nearly one-third of U.S. undergraduate students took long-distance courses, which include online learning, in the fall of 2016. In November, Uber announced a partnership launching in eight cities that will allow drivers who have completed more than 3,000 rides and have high customer ratings to take free classes through Arizona State University’s (ASU’s) online programs. The ride-hailing company asks drivers to fill out financial aid forms and apply for federal grants, and ASU will provide scholarships. Uber covers the remaining costs. Drivers—who are considered contractors rather than employees—are responsible for taxes on the benefit. The program extends to drivers’ family members, such as spouses and siblings. Starbucks has had a similar partnership with ASU since 2014, through which about 2,000 employees have received degrees.

Other employers are striking narrow deals with online, for-profit universities that have seen drastic enrollment declines amid scrutiny of their graduation rates and marketing tactics. (Enrollment at private, for-profit institutions dropped 47 percent from 2010 to 2016, according to the National Center for Education Statistics.) Bright Horizons, for example, announced in July that it will pay for an associate or bachelor’s degree for its employees, many of whom are low-paid child care workers and teachers. But three of the four schools that workers may choose from are for-profit businesses, some with troubled histories.

Lifelong Learning

​Today’s employees are less likely to complete their education before they enter the job market, and their jobs’ skill requirements may change dramatically over the course of their careers. Automation is poised to eliminate many jobs and create new ones. The World Economic Forum reported that “in many industries and countries, the most in-demand occupations or specialties did not exist 10 or even five years ago, and the pace of change is set to accelerate.”

As a result, education, particularly in the fast-changing tech industry, is moving toward bite-sized offerings. Workers will see the lines blur between education benefits and corporate training.

Despite this shift, tuition reimbursement remains a valuable offering, according to Danna Hewick, SHRM-SCP, vice president of human resources at USSI, a cleaning-contracting company based in Bethesda, Md. But the current landscape favors supplementing that benefit with other education assistance, such as certification methods, nondegree online learning and learner-driven programs that give employees a budget they can spend on a variety of approved educational opportunities. “With colleges and universities becoming so expensive, and not always accessible to everyone, I think that from a learning perspective and a recruiting perspective, there are some trends to step back from that,” Hewick says. 

A number of states have set a goal of 60 percent of adults having a two-year or four-year degree by 2025, but the U.S. is lagging overall in reaching this objective. In 2017, nearly 48 percent of 25-to-34-year-olds in the U.S. had an associate degree or higher, up from 38 percent in 2000. Schools and employers are experimenting with educational alternatives that are less expensive, take less time to complete and focus on job-related skills. IBM recently called nanodegrees “the future of education.” Offered by providers such as Coursera and Udacity in partnership with corporations, these online programs, which typically last six months to a year, often focus on technology skills such as data science. 

Students in these programs often work on real-world projects that help the company that underwrote the course. In 2018, Google began offering scholarships to the IT management program it developed with Coursera, hoping to find potential employees. Those not selected for financial aid pay $49 a month for a part-time program that lasts about eight months.

Companies that offer education and training outside of typical employment arrangements aren’t required by law to provide those programs during work hours or to pay employees their usual wages while they learn. But some employers still incorporate education and training during the workweek, particularly where many employees are unfamiliar with a traditional college or online learning setting. In a 2018 Gallup poll, 59 percent of blue-collar workers said they would look to an employer for retraining if they lost their jobs due to technology, compared with 41 percent of white-collar workers, who were more comfortable relying on college courses.

At USSI, Hewick delivers education and training through infographics and five-minute micro-learning sessions, sometimes while employees are signing in to the company’s time system. “I have a very blue-collar population and a high population of people for whom English isn’t their first language,” she says. Infographics on mixing chemicals help to bridge language barriers. Employees also have short, standing meetings in which supervisors review safety requirements. 

Some of the five-minute lessons cover English vocabulary, such as common phrases employees may need if they encounter an office tenant. USSI also offers to help workers learn English more thoroughly, bringing in trainers, providing Rosetta Stone courses, and partnering with local schools. 

In addition, USSI gives supervisors quick lessons in soft skills, such as handling difficult behavior. The No. 1 area where employees are currently lacking is in interpersonal skills such as effective communication, says Jeff Weiner, CEO of LinkedIn. Chipotle uses savings from corporate tax cuts to provide employees with an accelerated training program, “Cultivate U.,” at its headquarters in Denver and in restaurant support centers in Newport Beach, Calif., and Columbus, Ohio. The program trains employees on situational leadership, behavioral assessments and organizational culture.

The first round of Cultivate U. was designed for field leaders, team directors and executive team directors. The program is expanding to include development for support center staff, as well as “high-performing and high-potential leaders throughout the organization,” according to the company.

Student-Loan Repayment

But student-loan assistance is a difficult benefit to administer. From the IRS’s perspective, employer contributions toward an employee’s student loans are treated like a bonus, so there’s no tax advantage for the offering, as there would be for 401(k) contributions and tuition assistance. Employers are responsible for payroll taxes on student-loan payments made on their employees’ behalf, and employees must pay income taxes. Legislation that would change the tax treatment of employer student-loan payments has stalled in Congress. 

​Some companies—including Fidelity, Hewlett-Packard, Enterprise, Staples, Aetna and Estée Lauder—offer programs to help employees with their loans. Overall, though, only 4 percent of respondents to SHRM’s 2018 Employee Benefits Survey said their companies offer student-loan payments as an employee benefit, barely changed from 3 percent in 2015.

Providing such a benefit may be especially effective for companies with many younger employees and workers with advanced degrees. But it won’t fit every company. “It’s less likely to be seen with employers who have significant numbers of hourly workers or manual laborers,” Holdvogt says. The tax code requires employers to show that benefits such as student-loan contributions don’t disproportionately favor highly compensated employees.

Facing an increasingly diverse workforce, HR practitioners know they can’t offer a one-size-fits-all approach to education. “Total rewards is the best term I can think of,” says Olivieri of Susan G. Komen, whose employees range from entry-level staff to Ph.D. researchers. “Where do we add the most value not just for the employer but for the employee as well?”

For Komen, with fewer than 300 employees, administering such a complex benefit has been cost-prohibitive, but the company recently made a push to educate employees and job candidates about federal loan-forgiveness programs available to nonprofit employees. The organization also has increased its focus on internal leadership development for midlevel employees and high-profile individuals. “I think it’s really important, not just to build our bench strength and help with succession planning but to help our people overall,” Olivieri says.

In a strong economy with rapidly changing skills requirements, companies that listen to their employees’ needs, tailor their education benefits accordingly and evolve their programs over time will better compete for in-demand workers—and keep those workers with them as they develop.  

Amy Merrick writes about business issues and teaches journalism at DePaul University in Chicago.

Illustration by Chris Gash.