A company is only as strong as the sum of its parts. Finding and maintaining skilled employees is a huge aspect of forming strong organizational foundation. Many companies must face two employee problems: low employee retention and employee skill gaps.
- Low employee retention. – The ability of a new organization to hold onto their employees is crucial to maintaining the productivity needed to be competitive. Hiring new employees is an expensive endeavor. According to Investopedia, it takes about
There are a variety of ways that companies can utilize education perks to encourage their senior employees to remain with the company for a longer period of time. Education perks like education assistance programs can be the answer to not only retaining employees, but also to decreasing the skill gap within the company.
Education assistance programs like Starbucks College Achievement Plan:
- Makes the American Dream of going to college more affordable.
- Makes the company the place to work.
- Encourages employees to remain with the company through college and potentially beyond.
- Helps employees become more effective at their job.
- Grants employees the knowledge to fill positions that require higher skill.
The Cost?
Before implementing the program, you will be required to determine the maximum amount you will give each employee. Evaluate how much you can give per person. Unlike with a scholarship, you will be unable to set a limit to how many employees the program can benefit each year. The majority of employers with tuition benefit programs don’t contribute more than $5,250 per employee each year. Why? According to the US International Revenue Code (IRC), any money given to an employee to cover tuition over $5,250 each year is taxed.
As a start-up, you might want to keep the amount offered to each employee each year relatively low to begin with and then potentially reevaluate raising or lowering the amount offered each year depending on company growth. Many companies also set in place how much money can be paid to each person over a lifetime.
Beyond the tuition reimbursement amount, companies will need to invest their own, their human resource departments, and their finance departments time into setting up the written guidelines for the program. Companies might also want to hire a lawyer to check that the plan meets all of the IRS’s legal requirements.
You can also limit the cost, by being hyper specific about who and what qualifies to apply for tuition reimbursement.
Determine Who Qualifies
As you set up the program, you can determine which of your employees qualify for the program. According to the IRS, the program can benefit current or retired employees, or employees that have been laid off or left on disability.
Next, determine how long an employee must work for the company to qualify. Many companies try to ensure that only productive and experienced employees receive the funds by placing a service minimum anywhere from six months to one year.
Next, determine if you wish to limit the individuals who qualify by the amount of education already achieved (Starbuck’s plan used to only benefit college juniors and seniors).
As you determine who qualifies, just ensure that the program follows IRS guidelines for education assistance and does not:
- “favor highly compensated employees.”
- “provide more than 5% of its benefits during the year for shareholders or owners.”
Determine What Qualifies
The written plan should also include what educational costs the benefit will pay. According to the IRC, money from the program can be used to pay tuition, fees, books, supplies and equipment. The program cannot pay for sports, games, or hobbies unless they are required by the program or have a relationship with the business.
Companies can narrow down what benefits they will cover further by determining individual subjects, degree programs, and the grade point average needed for each class.
Determine How Employees Apply
The only official IRC rule that governs time for the program is that employers must “give notice of the program to eligible employees in a reasonable time.” In order to fulfill these guidelines you might want to:
- Add the benefit to the employee handbook.
- Inform the employees of the benefit as soon as they are hired or as soon as the benefit is finalized.
- Arrange for management to talk about the benefit in an employee one-on-one a month or two before they become eligible.
A lot of programs demand that all eligible employees who are going to pursue the program work closely with the manager to set-up an educational and professional game plan. That track can ensure that the company utilizes the new skills and knowledge the employee gains through the program.
The last aspect you should determine is when employees must submit the forms required to file for a reimbursement. Due to the fact that the reimbursement is tied to the successful completion of the program, the official request cannot be filed until after the final day of the semester or school year. And most companies require that the individual submit for a reimbursement by a certain date (anywhere from one month to one year after school ends).
Education assistance plans are one way to keep employees around for the long-haul. Education benefits plans are an investment, but with the proper guidelines a stable start-up can eventually afford one. If you don’t have the required funds, you can offer to help current employees by having your HR department supply information on what work related educational expenses can be deducted as a business expense.
Images: “ School books on desk, education concept/ Shutterstock.com“
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