Kathryn Petralia, Co-founder and President of Keep Financial.
getty
In today’s competitive market, companies across industries are looking for ways to differentiate their offers to attract and retain top talent. This is not an easy feat, especially now that both employee demands and resignation rates are on the rise. Benefits like healthcare and vacation time are table stakes, but to build the best teams, businesses need a way to set their offers apart from the competition.
For some companies, tuition reimbursement programs—in one form or another—have emerged as a way to achieve this. (Full disclosure: My company works with businesses to deliver flexible compensation for recruiting and retention, including tuition reimbursement programs.) Financial assistance for education carries significant appeal and is gaining traction as an attractive perk to help round out a competitive compensation package.
The Cost Of Education
According to U.S. News and World Report, the average student who takes out a loan for a bachelor's degree borrows nearly $30,000, up 25% from 2009. For new graduates shouldering that kind of debt, a job offer that includes payback assistance carries some obvious extra appeal.
In today’s landscape, assistance with student loan payments remains an uncommon perk, but the number of companies offering some type of student loan aid is increasing. A more common benefit is tuition assistance, or financial contributions for employees attending school while working. According to the American Council of Education, approximately 20% of graduate students and 6% of undergraduates (a much larger portion of the workforce) receive at least some financial support toward education from their employers. However, those numbers are still small, which suggests that the majority of U.S. employers are missing out on a powerful opportunity.
Benefits For All Parties
When approached smartly, helping employees pay off student debt or supporting continuing education delivers enormous recruiting and retention benefits for organizations.
Vesting tuition reimbursement programs provide candidates or current employees with a lump cash sum to put toward education bills in exchange for an agreement to stay with the company for a specified period of time. Throughout that time period, there are key vesting milestones, and at each milestone, the portion that vests no longer needs to be paid back should employment end. Additionally, employers can set performance challenges for individual employees that if achieved can lower the vesting time.
For employees, the ability to pay off student debt—or avoid accumulating more—can be truly life-changing. A recent report found that the average student loan balance is nearly $40,000. Alleviating a fiscal burden of that magnitude removes immeasurable financial stress and enables individuals to take real steps toward achieving their goals and building net worth.
When employees are tied to a monthly payment to chip away at their student debt, it stops them from fully participating in other benefits. They might not have enough money for benefits that require them to outlay cash, like contributing to a matching 401(k) program run by their employer. A vesting tuition reimbursement program is a powerful recruitment tool that can go a long way toward setting an offer apart and ensuring a candidate signs on the dotted line. These types of programs can also be strong retention tools, making them an effective way to help guard against poaching and voluntary resignation as a whole.
Recruitment is a pricey and time-consuming process. In fact, Glassdoor estimated in 2019 that on average U.S. employers devoted $4,000 and 24 days to making a new hire. Add to that the disruption that resignations can cause to a team and the time and monetary investment needed to get new hires up to speed, and the value of long-term employee retention is clear. Vesting reimbursement programs can help reduce the need for extra recruiting by extending the tenure of current employees, as well as encouraging them to excel.
Developing Talent
In a similar vein, supporting continued education for existing employees helps improve their overall skills and abilities, which contributes to an organization’s competitive edge. Nurturing this growth can also facilitate internal career advancement and enable companies to promote from within versus searching for external candidates. This delivers a win-win for the employee and employer: Employees derive pride from climbing the ranks and knowing that their companies have invested in their success, and employers benefit from promoting a known entity whose performance they trust and who doesn’t need extensive ramp-up time. They also avoid the costly recruitment process, which is often even more challenging when searching for higher-level roles.
Final Thoughts
Recruiting and retaining high-quality employees is always a top business priority, and there’s no denying that the landscape has become increasingly competitive in recent years. With so much focus on the challenge of student loans and education costs, offering tuition reimbursement programs can be an effective tool for recruitment and retention.
With vesting tuition reimbursement programs, employers offer candidates the ability to pay off a heavy financial burden or build their skills and qualifications without taking one on. They provide the opportunity to advance personal and financial goals and build net worth. They also help attract talented candidates and extend employee tenure, which delivers financial and productivity benefits for the company.
No matter how you slice it, vesting tuition reimbursement programs drive success for both parties and are a powerful component of any compensation package.
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