COLUMN: Tuition Reimbursement—Can You Call It A Benefit If No One Uses It?

By Norman Fraley Jr., distance learning manager for Kelly Scientific Resources

In today's tight labor market, employee benefits are an increasingly important part of the compensation package–in some cases even more important than salary itself. Benefits can run from the mundane, such as health insurance, to the sublime, like bowls of jellybeans placed around the office.

Tuition reimbursement is a relatively common employee benefit at knowledge-based companies, although it comes in many forms. Packages range from paying a modest percentage of tuition at accredited schools to paying full tuition for virtually any kind of course, whether it has any bearing on future job performance or not.

Human Resources directors are often enthusiastic supporters of tuition reimbursement programs. Many are convinced that the education benefits help with employee retention and ultimately benefit the sponsoring company by improving the quality of the workforce. This is particularly true for knowledge-based companies, where employees are the single most important resource.

That's the theory. The reality is somewhat different.

For every study that demonstrates that tuition reimbursement improves employee retention, there are other studies that demonstrate the opposite. When employees take advantage of the programs to earn degrees or finish their studies, they are very likely to move on. Moreover, the programs are not employee magnets--few employees seek employment with a company based on their tuition refund programs. At most Fortune 1000 firms, the programs are pretty much identical.

One telling statistic that puts the issue of tuition reimbursement in its proper perspective is the fact that as much as 80% of funds that are set aside regularly go unclaimed. Indeed, many companies don't even bother funding tuition reimbursement programs, even though they offer them in their benefits packages. Should the need arise for tuition reimbursement, an unallocated expense is charged to the employee's department.

Many employers and employees are now wondering: Is tuition reimbursement really a benefit if no one uses it? Which begs the follow-up question: Why do so few employees participate in these programs?

Question number one could perhaps make for an interesting panel discussion at a HR convention. However, question number two is much more straightforward.

I believe there are three reasons that employees do not use tuition reimbursement programs: Time, location, and/or an inadequate program. Employees do not have the time to attend the courses. Or, if they do have the time, the classes conflict with their busy schedules, both at work and at home.

Second, even if they have the time and schedules permit, the students need to go somewhere else to take the classes–a college, vocational school, or other venue. The mere act of getting where they need to go compounds the time-requirement problem. In many cases, getting to where they need to go can take longer than the classes themselves!

And third, even if they have the time and can get to the location, the guidelines for the company's program may be so old that they no longer cover the costs of advanced studies. In some cases, tuition limits and education cost ceilings can prevent employees from completing their degrees because programs compensate only one class per semester, and institutions will not award degrees if there is too great a time lapse between the student's first and last class.

Recent government rulings on tuition reimbursement have made it even less likely that these benefits will be used. Now, tuition reimbursement is no longer considered "expense reimbursement" but rather an "additional income." This means that the employer must withhold full taxes from each reimbursement check. So, if an employee can arrange for the time and travel for the class, prepay the tuition books and fees, and pass the class with an "A" (thus earning 100% reimbursement), the employee would receive a check for at least 40% less than the prepaid court fee.

In short, taking advantage of a tuition reimbursement program can be a pain in the neck. Only highly motivated employees have the discipline to make it work. Unfortunately, the highest motivation is often higher pay, which in turn can generally only be obtained by switching employers.

So, must employers simply live with this problem? Or are there alternatives?

The volatile job market shows no signs of slackening. Even with a downturn in the economy, companies with better-educated, more knowledgeable workforces will be at an advantage in the market. Therefore, employee education has a definite role.

To trim expenses, many companies are now questioning the types of education programs that they should reimburse, as classes in political science or theater may have limited value to employers in the laboratory setting.

However, in the scientific setting, not a day passes without the announcement of a new technological process or tool. Training employees to use these new technologies is almost always money well spent. Indeed, classes that directly improve employee performance probably demonstrate a more direct and stronger correlation to employee retention and job performance.

But what of the two other deterrents to continuing education–time and location?

Just as technology has created the need, it has also provided a solution. In recent years, the development of computer-based distance learning has overcome these problems by enabling students to study when they want, where they want, and at their own pace. Moreover, many of these programs–not necessarily part of regimented academic degree programs–tend to be more practical to both students and employers.

Courses run the full gamut from non-credit personal and management development courses to master's or Ph.D. programs from the likes of UCLA, the University of Texas, and George Mason University. These courses employ technology-enhanced learning with sound, video, and interaction. Some classes even include live classroom lectures and person-to-person tutorials. Meanwhile, employers experience limited down time or lost productivity.

Indeed, many would say that distance learning has already changed the post-secondary learning paradigm. Instead of jumping though a series of regimented hoops, students can learn just what they need. Therefore, students' chances of success are dramatically improved because learning is made easy.

Until recently, students needed the will, the time, and the ability to get themselves to class. Now all they need is the will. Once, some employer education costs could never be recouped. Now, they can be recouped in a matter of weeks or months.

In the coming years, thanks to the ease and convenience of distance learning, employers may see the popularity of tuition reimbursement rise dramatically. Employers would do well to re-examine their programs, re-engineer them for the 21st century, and encourage their employees to take advantage of them. It is an investment that pays big dividends.

Please send comments or questions to columnist Norman Fraley by e-mailing managing editor Laura Vandendorpe at lvandendorpe@vertical.net.