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Why You Should Offer Tuition Reimbursement for Your Employees

April 16, 2019

Knowledge is power – what are you doing to educate your employees?

You don’t need to go back to school to learn why tuition reimbursement is the hottest new HR trend. The rising importance of professional development for employees means that companies need to do more than ever to accommodate their workforce. One of the benefits employees are actively seeking out when looking for new employment is whether or not your company provides adequate training and development opportunities.

You don’t have to be a Fortune 500 company to offer tuition reimbursement – and in fact, there are plenty of benefits for employers that send their employees back to school.

Why should you offer tuition reimbursement to your employees?

The recent spike in popularity for tuition reimbursement might make some more tenured HR professionals wonder what all the fuss is about. Is offering tuition reimbursement really that important to your employees?

The answer is – unsurprisingly – yes.

Research from EdAssist found that 60% of respondents would take a job with professional development opportunities over one with regular pay raises. A similar study from AARP found that tuition reimbursement and training opportunities are important to older employees looking to keep up with the changing digital landscape.

Company Benefits Statistics

If that’s not compelling enough, consider this: an Accenture study found that investing in employees pays off big. For every $1 a company spends on educational assistance programs, they save $1.29 in recruiting costs.

It makes a lot of sense when you think about it. Employees are looking for companies that will invest in them and are willing to find new jobs in order to get what they want. By offering your employees access to tuition reimbursement, you’re compelling them to stay with the company and cutting costs on replacing those who might leave otherwise. This is a great way to reduce employee turnover rates.

Offering tuition reimbursement may cost you in one area of your business, but it can actually help save you money overall.

How to create a tuition reimbursement program

There are a lot of logistics that go into creating a tuition reimbursement program. Depending on the size of your company, the length of time it will take to implement a tuition reimbursement program will vary.

1. Research, research, research

The first step you’ll want to take is to do as much research as possible into companies that already offer tuition reimbursement. What trends can you find? What mistakes are they making?

You’ll also want to spend a significant amount of time budgeting. Not every employee is going to take advantage of tuition reimbursement, but you should budget as though each one of them will. This process will take a lot of time and will likely involve your finance department.

2. Create the roadmap for your plan

Next, you’ll need to create guidelines for your tuition reimbursement program. This will include things such as who is eligible, how much money each employee will be allocated per year for tuition expenses, the requirements for successful reimbursement, and any rules or regulations you plan to implement, such as time/length of completion from start to finish.

You’ll want this to be a formal document included for your employees to review and sign with their employee handbook or job offer. It protects your company from any miscommunication while outlining the exact requirements for employees to follow.

Tip: Include any information about your tuition reimbursement program under the employee benefits section of your employee handbook

3. Get your employees involved

Finally, you’ll want to survey your employees to figure out what they’re looking to get out of a tuition reimbursement program. Creating a program without consulting your employees first could lead to a half-baked program and lost time. Always ask for your employees’ opinions when creating a new program.

Employee eligibility and requirements

It’s important to remember that tuition reimbursement is an investment in your employees, which means that not every employee will be a perfect fit. The majority of tuition reimbursement programs contain certain requirements in order for employees to be eligible.

You should be transparent and up front about which employees qualify, and more importantly, what courses and tuition expenses your company will pay for. For instance, what if one of your employees wants to take language or acting classes? You have to consider if you’ll have restrictions on the type of continuing education your tuition reimbursement will cover.

Tip: Most employers require employees to pay for continuing education out-of-pocket initially, with an agreement to reimburse the employee given they meet the coursework requirements and provide the proper documentation.

Below are a few examples of requirements you may want to include in your tuition reimbursement program. Remember to tailor the employee eligibility requirements to your best fit your company.

What program requirements should you include in your tuition reimbursement plan?

  • An annual reimbursement limit may be assigned to an employee based either on a flat rate for all employees or on a sliding scale based on things such as job title, tenure, etc.
  • Reimbursement may be limited to four-year degree programs, certification programs, or to a specific list of cooperating or accredited institutions

In addition to creating program requirements, you should also create coursework requirements. This will outline what types of courses your company will reimburse. It will also outline the requirements your employees must meet in order to be reimbursed.

What coursework requirements should you include in your tuition reimbursement plan?

  • Eligible coursework is often limited to subjects related to an employee's current job title, though this can be discussed with a manager
  • Employers may require that an employee earn a certain percentage or letter grade in the course in order to qualify for tuition reimbursement
  • Employers may require an official transcript from the institution to prove the validity of grades in order to qualify for tuition reimbursement

One last thing you should consider for tuition reimbursement are the time requirements you'll have. This includes everything from how long an employee must be employed to qualify,  to how long they have to complete their coursework. 

What time requirements should you include in your tuition reimbursement plan?

  • Employers may require that employees have been employed by the company for a certain period of time in order to qualify for tuition reimbursement
  • Employers may require that employees complete their required coursework within a certain period of time in order to qualify for tuition reimbursement
  • Employers may require that employees file the necessary paperwork within a certain period of time after the course is completed in order to qualify for tuition reimbursement

These requirements should serve as a framework to build your tuition reimbursement strategy. It would be wise to research what other companies of comparable size to your own are utilizing in their tuition reimbursement as a guide for best practices.

How much should you offer in tuition reimbursement?

The biggest question employers have about tuition reimbursement is: how much should I offer my employees each year?

It’s a tricky question because every company is different. An easy place to begin when first offering tuition reimbursement is to follow the standard most companies follow. The IRS allows employers to deduct up to $5,250 yearly per employee and as such, $5,250 is a popular cap on tuition assistance for continued education.

tuition reimbursement per employee

Some companies offer more money to employees that have been with the company for a longer period of time. Another popular way of deciding funds is to have a sliding scale based on seniority or job title. The longer you’ve been with the company determines the size of your tuition reimbursement allowance.

Tip: Employer tuition reimbursement will often not cover the full cost of a degree program, but alongside scholarships and grants can significantly reduce cost for employees

You can always retroactively change the amount available to employees as you get more comfortable with the process. Keep an eye on how much employees are actually spending during the first couple of years and adjust accordingly.

Things to consider when offering tuition reimbursement

This article only begins to scratch the surface of tuition reimbursement. As you begin the process of creating your own tuition reimbursement program, there are several things you should keep in mind.

What should you consider when creating a tuition reimbursement plan?

  • What formal documentation will you need to create to explain your tuition reimbursement to employees?
  • How will you roll out your tuition reimbursement program?
  • What does the paperwork and process for reimbursing employees look like? What documentation or proof will you require employees to provide in order to receive their reimbursement?
  • How many courses can an employee be enrolled in at once and still maintain eligibility for tuition reimbursement?
  • What degree programs will be eligible for tuition reimbursement?
  • What happens if employees leave the company in the middle of a course?
  • What happens if the desired outcome is not reached? For example, what if they drop a course without completing it or fail the course altogether?

How should you be tracking your tuition reimbursement program?

The most important thing to keep in mind when creating your tuition reimbursement program is how you’re going to track everything. With countless documents, budgets, and individual employees to keep track of you want to make sure you have the correct software on your side.

Investing in the correct benefits administration software can help avoid stressors and common mistakes associated with launching a brand new tuition reimbursement program. If you don’t already have a benefits administration software, you may consider exploring your options.

HR Professionals, looking to make a tuition reimbursement program from scratch?

Find the best Benefits Administration Software on the market. Explore Now, Free  →

Show me the money

Offering your employees tuition reimbursement may seem daunting at first, but you’re not alone. Collaborating with your employees, upper-management, and finance department will allow you to bounce ideas off other people and iron out the kinks before an official launch.

You’ve already taken the first step by showing an interest in learning more about tuition reimbursement – now you can take what you’ve learned to create something incredible for your team.

HR professionals, learn more about how you can promote professional development for your employees and check out more articles like this on our HR hub.

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