You may or may not be asking as a manager or leader within your organization: what’s my company’s ROI for paying for my employees MBA, if they leave to a higher paying job? Great question! Cigna performed a study to calculate the ROI of tuition reimbursement and found:
- “For every dollar invested in Educational Reimbursement Program (ERP), Cigna got back its $1 and avoided an additional $1.29 in talent management costs.”For every $1 that Cigna invested in their Educational Reimbursement Program (ERP), they got back their $1 and avoided an additional $1.29 in talent management costs.
- “ERP Participants achieve more promotions than non-participants [10 percent more likely to be promoted], resulting in lower cost to fill.”
- “ERP Participants achieve more internal transfers than non-participants [7.5 percent more likely to receive a transfer], resulting in a lower cost to fill.”
- “ERP participants are retained more than non-participants [8 percent more likely to be retained], resulting in reduced turnover costs”
In addition, Cigna “Launched advisory services to support ERP participants and help them navigate career pathways,” and “Eliminated the burden of up-front payment by working with its education partners to accept payment after each semester when employees can access the reimbursement funds.”
Due to these groundbreaking results, Cigna realigned their ERP strategy and increased their tuition reimbursement amount to $10,000 for undergraduate degrees and $12,000 for graduate degrees in strategic fields of study, created advisory services to help workers navigate their educational and career objectives, and eliminated the burden of having to pay for the tuition upfront by working with education partners to take payment after the semester when funds are available to students. If you need an additional incentive, turn to Uncle Sam. According to SHRM, “Section 127 of the Internal Revenue Code provides an exclusion of up to $5,250 per calendar year from an employee’s gross income for amounts received by the employee, provided that certain requirements are met.” (See the IRS code for more details.)
Gallup found that “Millennials are more likely than both Gen X‑ers and Baby Boomers to say a job that accelerates their professional or career development is ‘very important’ to them (45 percent of Millennials vs. 31 percent of Gen X‑ers and 18 percent of Baby Boomers).” Our study found that the majority of Gen Z‑ers have strong preferences to learn a job outside of the job they were hired for, so tuition reimbursement and job rotation programs are great perks in recruiting efforts.
Student Loan Repayment (Say What?)
As I receive my monthly emails that my auto-payment to my student loan was just processed (yes, a doctorate from a top school is expensive), I dream of the day when this “luxury car payment (or mortgage, depending on where you live)” will go away. I am very grateful that I had the opportunity to be accepted into Pepperdine’s top-ranked organizational leadership doctoral program and complete it in less than three years (yes, tuition is expensive—no time to waste on getting that ROI!), but student loan debt is a serious problem in this country and some economists are saying that this is the next bubble that is about to pop.
Did you know that enrollments in income-based repayment plans have more than tripled from 2014 to 2019? A whopping 44.7 million Americans have student loan debt worth $1.47 trillion—the second highest debt, next to mortgages (yes, it surpassed credit card and auto loans!) Even parents and grandparents are now taking out loans for their kids and grandkids.
With student debt soaring to record numbers, companies and their employees are starting to enter into a marriage-like agreement: I come with student loan debts that I’d like you to pay! That’s right! Some employers (currently, only 4 percent!) are sensitive to the amount of debt that college graduates have accumulated and are offering to help pay for their employees’ student loans or help them consolidate them by working with local financial institutions to obtain more favorable interest rates. As of writing this book (2019), this payment is not tax-free like tuition reimbursement (up to $5250/calendar year), but was introduced as a bipartisan bill in Congress, known as the H.R.795 – Employer Participation in Student Loan Assistance Act, in February of 2017 to be considered tax-free income. Hopefully, by the time this book is published, Congress will put bipartisan differences aside and pass this bill into law (HAHAHA!).
Even though tuition loan repayment is currently considered as taxable income, empathetic companies, such as LiveNation, will match student loan repayments for employees of up to $1,200 a year, with a cap of $6,000, while Fidelity will match up to $2,000 per year, with a cap of $10,000. Even if a company paid $50 a month, I think that most young people would appreciate the effort and thoughtfulness and could allocate it towards their principal loan balance.
Question: How much can you allocate in your budget for next year for tuition repayment? If you think this is a ridiculous question, what’s your current cost of turnover?