Table of contents
Tuition reimbursement is an agreement through which an employer covers education costs on behalf of an employee. Reimbursement programs help businesses invest in their employees. This investment can encourage employee engagement and aid talent acquisition efforts.
Tuition reimbursement is often offered to current employees. It is also used as a recruitment aid for new employees. Eligibility criteria establish who can take part in the program and what they should expect to receive. It is common for employers to require employees to sign a contract committing to the program’s guidelines.
Employer Benefits from Offering Tuition Reimbursement
While tuition reimbursement benefits employees directly, employers also benefit indirectly. For instance, employers benefit from the employee’s improved skills and knowledge. Many employers find offering this benefit to employees also aids their business. Employers can benefit in the following ways:
Improve leadership development
Employees who receive job-related training and education become more capable in their jobs. They also become better equipped to meet the needs of jobs further up the career ladder. Helping employees develop managerial skills improves the roster of internal recruitment candidates within your business. In turn, you lower the amount you would otherwise spend on external recruitment.
Increase employee engagement
Employees tend to reward investment in them with renewed dedication to their role. Offering tuition reimbursement provides a connection between the employee and your organization. Their new skills and education can also help them find purpose and develop new ideas in their day-to-day work. It may also encourage them to stay with your business longer, improving employee retention.
Provide a recruitment perk
When a job candidate knows that they can continue their personal growth with you, it is a huge perk. Over 50% of organizations offer tuition reimbursement programs. Those who do not are operating at a disadvantage when it comes to attracting top talent.
How to Build a Tuition Reimbursement Program
Before you jump into offering tuition reimbursement, take these steps.
Analyze costs and assess benefits
You first need to determine whether your business can afford to offer tuition reimbursement. Establish a budget first. This will ensure that you can afford the training and education program reimbursements.
Keep in mind that up to $5,250 per employee is tax deductible under IRS code section 127. Many employers cap annual tuition reimbursement at this amount.
Don’t forget to assess the benefits reviewed above. This will help you to decide whether tuition reimbursement is worth the cost. It can also help to survey your employees to gauge interest in the program before you kick it off.
Decide on tuition reimbursement versus tuition assistance
Tuition reimbursement and tuition assistance are sometimes treated as the same. They are actually different things. Tuition reimbursement means that you will reimburse your employee.
This is usually after they complete an educational program or once per year over the course of a multi-year program. Tuition assistance means that you will pay an education provider directly for your employee’s course.
It is possible to offer both tuition reimbursement and tuition assistance. For example, you could offer a capped amount of reimbursement for a university course that takes a few years to complete. You could also offer tuition assistance for employees taking a short training course that you’ve preapproved.
It is important that you set up clear rules for what your tuition reimbursement program covers and who is eligible to participate. Sample policies could include some of the following guidelines:
- Employees are only eligible for tuition reimbursement after 12 months of employment
- Employees may receive up to $5,250 per year in tuition reimbursement
- Tuition reimbursement is only available for pre-approved education programs
- Tuition assistance is available only for courses through partner colleges and universities
- Tuition reimbursement does not cover book costs or non-tuition fees
- Employees must agree to a one-year employment commitment or repay the tuition costs if they leave employment in less than one year.
- Only 50 grants of tuition reimbursement are available per year
Once you decide on the policy guidelines, set up processes to aid employees applying for your program. These should include application forms, informational pages, and response templates. You may also need to set up selection criteria if your budget does not allow for all tuition reimbursement applications to be accepted. Common selection criteria include favoring employees with more tenure with the company, or those who have not had disciplinary action in the past year.
Partner with colleges and universities
Employers benefit from tuition reimbursement when employees improve skills related to their job. By partnering with certain colleges and universities, you can be sure that the offered programs meet that purpose. Partnerships can also lead to benefits such as discounted tuition for your employees.
You will need to consider what type of learning environment best benefits your employees when you choose your partners. As online learning has grown, companies increasingly choose this option. However, community colleges and technical colleges still offer local convenience. Your partnerships should reflect the needs of your business and your employees.
Communicate the program to employees and job candidates
Setting up a tuition reimbursement program is only beneficial if your employees actually use it. Create an internal communication strategy when you’re ready to get the word out. You should also include it on your careers website and in your recruitment marketing materials.
Companies Offering Tuition Reimbursement
According to the Society for Human Resource Management, nearly half of employers offer some form of tuition reimbursement. Below are examples of companies offering tuition reimbursement or assistance to their employees:
- Allstate. Up to $5,250 tuition reimbursement annually. Employees must pursue pre-approved degree or certification programs. Covers tuition, books, and academic fees.
- Disney. Full tuition coverage for qualifying education courses at schools within the company’s Aspire network.
- Publix. Offers tuition reimbursement for courses related to the employee’s job. Employees must have worked for the company for six months and work an average of 10 hours or more per week to be eligible.
Providing tuition reimbursement is an increasingly popular way to invest in your employees. Employees who have access to tuition reimbursement are more likely to engage with your business and stay employed with you for longer.
Tuition reimbursement can also help you attract talented job applicants. Setting up a tuition reimbursement program takes significant analysis and planning. However, it can reap great rewards.