March 3rd, 2021 · 5 min read
Understanding employee tuition reimbursement
Many people look towards education as an option to develop new skills and advance their careers — but it comes with challenges. Education is an investment that takes time and money, and many are unable to access affordable, high-quality education or the support needed to pursue it.
Historically, companies have used tuition reimbursement programs as a way to make education and learning a viable opportunity for their employees. However, traditional tuition reimbursement has its own set of benefits and drawbacks when it comes to meeting the needs of the modern workforce.
Let’s break down the basics of what exactly employee tuition reimbursement is and what it can (and can’t) do for your business.
What is employee tuition reimbursement?
Put simply, tuition reimbursement is an employer-provided benefit that financially assists employees with education expenses by reimbursing them for a pre-determined amount. Tuition reimbursement programs can take various forms and most companies have specific rules, policies or conditions which have to be met by the employee in order to receive the funds.
Tuition assistance vs tuition reimbursement
Tuition reimbursement is a type of tuition assistance program (TAP), but they are not the same. Tuition assistance is a broad term that accounts for other types of education assistance programs, such as loan debt assistance or employer-sponsored scholarships.
How does employee tuition reimbursement work?
Most often, tuition reimbursement programs are put forward as a benefit to entice potential recruits. This is similar to advertising a 401k, vacation days or healthcare benefits to make your company more attractive to new hires.
If an employee wants to take advantage of this benefit, there are various requirements they may need to meet or abide by. Example program requirements include:
- The company reimburses the employee only up to a certain amount of money per calendar year. This is sometimes based on the grades earned by the employee. For example, if the employee receives an A average, the company will pay 100 percent of the maximum reimbursement amount. If the employee receives a B, the company will pay 80 percent and so on.
- Tuition reimbursement benefits might apply only to specific courses and those courses may need to be completed within a specific timeframe.
- The employee receiving tuition assistance may be required to stay with the company for an allotted period of time before changing positions or leaving the organization altogether.
Can you make employees pay back tuition reimbursement?
If you outline conditions in your tuition reimbursement plan which are not met by the employee, you might have them pay back all or a portion of the funds used to pay their tuition. It is important to note that conditions like these can greatly reduce employee participation in tuition reimbursement programs — the mere possibility of needing to repay costly education expenses is enough to turn anyone away.
The benefits of employee tuition reimbursement
Having an educated workforce benefits your company as much as it does your workers. Here are a few reasons why employers should offer tuition reimbursement for continued education:
- Continuing education helps with career advancement and better overall performance. According to one study from the Pew Research Center, 47 percent of employees who sought out continuing education say that their career advanced after they gained these new skills and 87 percent said that they felt more capable in their current positions.
- Employees with post-secondary degrees tend to feel more secure and valued at their place of work — especially if their company helped them earn that degree. This leads to improved retention, and may turn employees into passionate brand ambassadors for the organization. Additionally, the Bureau of Labor Statistics reports that the unemployment rate for those with a bachelor’s degree in 2020 was 1.8 percent less than that among high school graduates.
- Providing access to learning and education shows prospective job candidates that your organization values its employees and is committed to their long-term professional development. This can be a powerful tool for attracting qualified talent who are eager to learn and grow with your organization.
The challenges of employee tuition reimbursement
While tuition reimbursement programs are meant to provide employees with an opportunity to pursue higher education and garner high interest, they often have low employee awareness and participation rates.
A recent InStride survey of Fortune 500 employees conducted in partnership with Bain & Company found that 80 percent of workers indicated they would like to go back to school, but only 40 percent were aware their employer offered a tuition reimbursement program. Further, the survey showed only 1-2 percent of workers with access to such a program actually participate.
These are some of the factors that may discourage participation:
- Policy restrictions
The employee tuition reimbursement policy might have stipulations that are too difficult for employees to meet and discourage them from taking advantage of the program.
- Financial barriers
A tuition reimbursement program might not actually make education more affordable for the employees – this is especially true if there’s a cap on the amount that the employee is able to have reimbursed. Educational expenses can be so much greater than just tuition and often exclude costs like textbooks, obligatory school fees and loan interest. All of these are still significant financial barriers for many employee learners.
- Only applicable to the current position
Employees pursue continuing education to make meaningful advancements or shifts in their careers. But some reimbursement policies will only fund education specific to the employee’s current position instead of the one they’re looking to grow into. This offers little incentive for the employee to commit to learning when there’s no likelihood of advancement.
Going beyond tuition reimbursement
Many companies view employee tuition reimbursement as somewhat of an afterthought — a program is implemented as a check-the-box benefit with little consideration given to how it actually connects to greater business goals. As a result, these programs are frequently ineffective, underused and don’t make an impact on long-term business objectives.
But there's a huge opportunity to develop a program that removes barriers for employees and is strategically aligned to drive business outcomes — effectively turning an underused benefit into a strategic and impactful initiative that delivers a significant return-on-investment.
At InStride, we’re transforming the traditional tuition reimbursement model through our strategic, comprehensive approach to workforce education. Our solution stands out as the leading choice for forward-thinking business leaders because of these key differentiators:
- Strategic design: An effective workforce education is more than just a benefit. It’s specifically designed around your long-term business objectives and the unique learning and skill-building needs of your workforce.
- Flexible platform: InStride’s flexible technology platform makes maintaining an education program simple for administrators. You can monitor enrollment, streamline billing, and track performance in real-time.
- Academic network: Businesses need to partner with high-quality academic institutions that are flexible, scalable, and provide the right learning and support for adult students.
With InStride, organizations are able to deliver a workforce education program that leads to both employee and business success.
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