As voluntary benefits become 'must haves,' employers focus on education
Correction: A previous version of this story incorrectly described 529 plans.
As voluntary benefits become "must haves" in the war to attract and retain talent, employers are increasingly offering perks that focus on education. From professional development to student loan repayment, companies are positioning themselves as partners when it comes to the education of employees and their families.
As employers start to rethink various approaches to talent in light of the skills gap, they're increasingly focusing on developing current employees. And for good reason: In a recent study, almost half of managers (45%) report having no formal training at all.
Experts are seeing “an increasing trend where employers are investing more time and resources in professional development for their employees," says Jeff Fallick, Managing Principal at OneDigital. That’s smart business, he says. Employee development is also an opportunity for employers to forward their brand and unify the company, in some respects.
“When employers say their employees are their number one asset, then you have to invest in that asset,” Fallick says. Investing in employees also usually prompts them to remain with the company longer — meaning an employer is creating value for the long term.
GEDs, ESL, etc.
Other companies are seeing the benefit of directly facilitating employee education. Some, for example, are offering high school equivalency training to employees, and even to their dependents. Hilton employees and Walmart staffers and their family members can get their high school diplomas and other certifications. McDonald’s offers education advisory services, English as a Second Language, high school diplomas and more.
Others offer other certifications, like Google's offer of 10,000 scholarships for a training and credential program for IT professionals. Similarly, Taco Bell offers access to online coursework for bachelor and master’s degrees from day one of employment. The company says it saw retention rates for learners jump 34% in six months after the rollout of the programming.
Tuition reimbursement isn't new, but new twists on tuition payments for staff and dependents are rising in popularity.
Some employers are offering staff the option to invest in 529 college savings plans for their children, similar to enrolling in a 401k. There are two kinds of plans: College savings plans that allow students to use their funds anywhere in the U.S. (and some non-U.S. institutions) and prepaid plans that fund participating colleges or universities. These allow parents and even grandparents to set aside pre-tax dollars that will go directly to pay for schooling for a relative before a gift tax is levied. In some states, like Illinois and Nevada, employers can receive a tax credit for funds they match in employee plans.
Some other offerings take a more creative approach, like SAGE Scholars Tuition Rewards, notes Nicholas Park, account manager at Corporate Synergies. When employers offer that type of reward, employees can earn college scholarship credits for members of their immediate family – including children, grandchildren, nephews and nieces – by buying insurance or participating in a retirement plan. This can be a significant enticement when recruiting employees, Park told HR Dive; "An employer is ostensibly saying — you save for retirement, we’ll help put your kids through college."
The weight of student loan debt is a burden carried by about 44 million Americans. On average, students owe over $25,000 by the time they graduate. With more than $1.4 trillion dollars in loans outstanding, the default rate is over 10% and the delinquency rate over 5% according to The Student Loan Report.
A handful of large companies are beginning to offer student loan debt payments to employees either independently or through new student loan repayment vendors. Currently, no tax advantage exists for employers; in fact any contributions they make are taxable to the employee as income and can add to payroll tax costs. But companies like PWC, Fidelity, Estee Lauder and Staples “still see the benefit of directly relieving the financial stress of their employees,” says Peter Marcia, CEO of YouDecide.
Through vendors, employers are offering a myriad of solutions that range from education to refinancing options to administering employer contributions, Marcia says. Employers, he advises, should vet vendors to understand the tools they offer, as well as interest and approval rates. Some protections of federal loans that aren’t financially underwritten can be eliminated if employees refinance. So seek a vendor “well versed in explaining the implications of refinancing a student loan – especially if the original loan was a federal loan (about 80% fall into this category).”
Park notes that these types of benefits can be attractive to various generations of candidates and employees. “For younger employees looking for immediate relief of college debt and older employees strategically planning for their dependents’ futures,” Park says, ”intelligently leveraging the most beneficial ways to finance and reap tax savings for education is smart business.”
A benefit like this can be a serious competitive advantage, according to David Aronson, CEO of Peanut Butter Student Loan Assistance. "With unemployment approaching its lowest point since the 1960s, it's never been more competitive for companies to compete for talent,” he said, “and it's never been more important for employers to differentiate.”
To attract, engage and retain staff, Aronson says, “offering student loan assistance demonstrates that employers understand the plight of today's workforce and are committed to building long-term partnerships with their team members.” And employers reap rewards. In their Millennial Benefits Preferences study, Peanut Butter found:
- 85% of respondents who received two similar job offers (salary, benefits and perks) would accept the offer that included contributions to student loan payments;
- Respondents indicated they’d stay with their employer up to 36% longer if receiving loan assistance; and
- Millennials with a college degree prefer loan repay benefits two to 12 times more than any other perk (including retirement funds and health coverage).
As employers seek to distinguish themselves from the competition with voluntary benefits, the available offerings continue to evolve. So what's next?
Park said he believes that financial wellness and education benefits are next on the horizon. He said sees them as an important component for productivity and retention. In addition to reducing employee misunderstandings and stress, he said, "they really do contribute to a sense of employee loyalty."