The Problem

The Bureau of Labor Statistics reports that the average 32-year-old worker will change jobs every 2.6 years.   Anything you can do for your company to reduce employee turnover will increase efficiency and reduce costs.   Doing so will also save you time and focus that can be redirected toward other, innovative ways to make your organization run more effectively and efficiently.

With the U.S. unemployment rate expected to continue to hover around the 4% level through 2001, the demand for well-educated employees continues to be a major concern for companies worldwide.   Though college recruiters continue to address this issue by increasing their efforts to hire the best and brightest from our nation´s leading educational institutions, a better, long-term solution is to train and promote from within your company´s ranks. Training and promoting your employees also builds morale and reduces turnover, saving your company valuable time and money in both the short and long term.   Reducing employee turnover also increases the efficiency of your whole organization.

Knowledge is Power-Education is Opportunity

Your company´s tuition reimbursement program can be one of its most powerful tools for increasing employee retention and reducing recruitment costs.   Promoting from within your company´s ranks saves money and helps build a more loyal and reliable workforce.   Employees who continue to learn are more dedicated and successful-they become the biggest contributors to your bottom line.  

"Knowledge driven" companies are not the only ones that can benefit from a well-utilized, state-of-the-art tuition reimbursement program.   An education program that is popular with employees effectively helps your company retain the best and brightest.   The best employees are those that constantly strive for advancement.   Ask any one of them and they´ll tell you that education is one of the best ways to get ahead.   More training and degrees mean more opportunities.   A company that values education fosters a culture that strives to constantly improve itself and grow.

Don´t overlook the power of an effective tuition reimbursement program to recruit the best new employees.   The same principal applies: the best employees will strive to improve themselves through education.   Financial assistance is a win-win-win: employees get the help and encouragement they need while you attract the best people and reward them for their desire to improve.

Make Sure Your Program Hits the Mark

A little "soul-searching" is in order before launching into a study on the how´s and wherefore´s of establishing a tuition reimbursement.   Clarifying your reasons for establishing or refining your program will help you to make effective use of your time and energy.   Will your program focus primarily on recruitment or retention?   Are there certain areas of your company or types of employees where the program is either most needed or may have the greatest effect?   Will certain employees be excluded from or limited in the plan?   If so, which employees and why?   What restraints, budgetary and otherwise, are you faced with?   Once your goals are clear, you´re ready to begin building the program that will most successfully achieve those goals.

Simply having a tuition reimbursement program is not enough.   It should be well utilized by your employees and competitive with what other companies in your industry offer.   A third party administrator or consultant will provide you with benchmarking surveys and a thorough needs assessment so that you can see how your current program rates with the competition.   With the right information and assistance, you can build a new program or redesign your current one so that it works for you.  

Centralize

No strategy, however well designed, will work unless it is effectively and consistently administered.   Centralizing program administration not only increases efficiency and cost-savings, it improves the consistently with which policy guidelines are interpreted and administered throughout your company.   Even, consistent administration means fewer problems and happier employees.

Save by Relying on the Experts

Developing and administering a state-of-the-art tuition reimbursement program is surprisingly simple and cost-effective.   The best place to start is with a third party administrator whose business it is to design and administer tuition reimbursement programs.   Their breadth of experience ensures that your program will be competitive within your industry while remaining cost-effective.   Remember, being cost-effective means two things: that the program is in line with your budget restraints and that the program produces tangible returns in excess of the costs of the program.   An added bonus: a third party administrator who wants your business, may be willing to design an effective program for little or no fee in hopes that you will use its services once the program is developed.      

Focus your energy and time on the things you do best-outsource the rest.   An experienced third-party administrator can reduce your company´s costs while ensuring the best educational benefit programs, run in the most effective manner possible.  

 "Taxing" Issues

Among the decisions you will need to consider in designing a program is the breadth of benefits you will offer.   Should and can you legitimately reimburse for graduate as well as undergraduate education?   Part of this answer should be based on budget constraints and how competitive you want your program to be within your industry.   Part of your answer is based on legal and tax considerations.  

According to Internal Revenue Code section 127 of the Taxpayer Relief Act of 1997, up to $5,250 per year of employer provided education assistance for undergraduate studies would be excluded from an employee´s taxable wages.   Code section 162 outlines education assistance for graduate studies, which may also be excluded from taxable wages.

Job-related education assistance for undergraduate programs in excess of $5,250 or for graduate programs is treated as a nontaxable working condition fringe benefit.   Job-related education is that which:

·               maintains or improves skills that an employee is required to have for employment, or

·               is expressly required by the employer, or is legally required in order to retain an established employment relationship, or rate of compensation.

If education assistance is not job-related, then the value of the assistance above $5,250 for undergraduate programs and any amount disbursed for graduate programs is treated as employee wages subject to federal income tax, social security, and Medicare withholding.

The following types of education do not qualify as job related:

·               minimum education requirements necessary to qualify for employment, or

·               education that will qualify an employee for a new trade or business.

It is your company´s responsibility to determine the taxable portion of education assistance payments made.   Any reimbursement amount that is considered taxable income should be reported and recorded on the employee´s W-2 statement.   Your legal or tax department should always answer questions regarding tax or any other legal matters, for that matter.

Getting Management Buy-In

Before you can launch your program, your first goal may be to establish management buy-in.   Though the reasons for establishing a plan may be noble, the plan must fit budget constraints and add sufficient value to justify its existence.   A professional consultant or third party administrator may be able to provide you with benchmarking and other statistical data that you need.   Such information should be able to show trends for your industry and company size as well as examples of success achieved by other companies in achieving goals similar to yours.   Implementing your plan as a "pilot study" will permit you the time you need to gather the necessary statistical data to show the value of your plan without committing your organization to a plan that may be difficult to terminate or modify in the future.  

Value Your Employees

To be successful in today´s volatile marketplace, your employees must be highly valued- they can make or break the best business strategy and be either the driver or the brake in adopting new technologies.   People are not an implementation issue, nor just an operational or strategic asset--they are the raw essential for business success.   Retaining them can make your company more competitive and successful in today´s uncertain and ever-changing business environment.