Education and Retention: Two Sides of the Same Coin?
For most U.S. businesses, employee churn creates a costly challenge. Employers can spend 16-20% of an individual’s yearly salary to hire and train entry-level employees, and as much as 50% or more in specialized sectors. Yet a quarter of employees quit their job every year, and the federal quits rate increased by over 70% from June 2009 to December 2015. The challenge is especially acute in service industries that rely on entry-level workers and face turnover rates that are double or triple that of other sectors.
But the cost of turnover and a tightening labor market is also forcing companies to innovate. And a growing number have discovered that educational benefits offer a cost-effective way to attract – and retain – talent.
For decades, corporate tuition assistance was a benefit largely reserved for aspiring executives on the path to an MBA and upper management. But the ROI on tuition reimbursement for frontline employees is changing corporate behavior. An analysis done by the Lumina Foundation with Discover Financial found $1.44 in savings for every dollar spent on education reimbursement, with game-changing $2.73 in savings for call center employees. A similar analysis at Cigna found that every dollar Cigna spent on education reimbursement generated a 129% ROI across their employee base.
In the fast-casual sector, our analysis of 90-day retention rates found that 98% of frontline employees who pursued education benefits stayed with the company, compared to 73% of their peers. This new approach to education as a strategic benefit has CHROs, CLOs, and CFOs exploring overhauls of their tuition reimbursement plans.
Here are a few promising practices each company can consider as they revisit their education benefit offerings: Employers like Chipotle are going a step further, designing programs that transform tuition assistance into a strategic benefit. Their program, launched in partnership with Guild Education, provides employees with access to degree programs and classes – along with opportunities to earn credit for prior corporate training. Even more appealing, investments in educational benefit programs receive a “double” tax benefit – deductible for employers, and untaxed for employees, up to $5,250 per year.
Employers like Chipotle recognize the value in offering multiple, curated educational opportunities – providing flexibility for employees to find the higher education institution or program that works best for them. Our partnership offers access to a cross-section of nonprofit institutions, including Bellevue University, CSU-Global, and Brandman University, as well as management, college prep, ESL, and GED programs. And no matter which program or school students choose, they are paired with a success coach to support them weekly with a goal of retaining them in work and school.
Credit for Prior Learning
Chipotle’s program recognizes the learning and experience that employees already have by connecting employer-led training to college credit. Kitchen managers who complete their corporate management training, for example, can earn up to 17 college credits. There’s a dual retention win here: college credit can be a powerful motivational force at work, and students who receive credit for prior learning are also 2.5 times more likely to graduate than those without.
Removing Financial Barriers
To improve uptake of education benefits, companies like Chipotle and Cigna are eliminating policies that require employees to pay tuition up front and then wait for reimbursement. Sixty-two percent of Americans have less than $1,000 in savings, but the average yearly cost of a two-year college is $3,440, and is $9,410 at a four-year college. This means that it is nearly impossible for most entry-level employees to cover the upfront costs necessary to take advantage of education benefits. A tuition deferment plan fixes that and makes using tuition assistance benefits a possibility for low- and middle-income employees.
Different from the MBA tuition assistance beneficiaries of the past, lower wage employees have a wide range of non-academic needs as they pursue undergraduate degrees. Chipotle’s partnership with Guild provides personal coaches for each student to help them navigate their educational experience, balance work and school, and stay on track to graduation. These additional supports are important for a population – often first-generation college students – that has been poorly served by traditional higher education options.
Higher education can be a powerful force for economic mobility; more so when working adults have the opportunity to graduate debt-free by learning – and earning – at the same time. College retention – and employee retention – are two sides of the same coin, keeping employees in school is often the key to retaining them at work. By offering education assistance to those who need it most, savvy employers have the opportunity to do well, by doing good.
ABOUT THE AUTHOR
Rachel Carlson is the Co-Founder and CEO of Guild Education.