To attract talent, more companies send employees to school

As the labor market becomes more competitive, more companies are sending their employees to school.

Fiat Chrysler Automobiles is the latest company to use tuition assistance for employees – which for decades has been a part of many businesses’ benefits packages – as part of a renewed effort to bring in and cultivate talent.

And while the impact of such programs has yet to be fully assessed, many see it as a positive – albeit gradual – movement.

“For workers, it gives them a better opportunity for development," says Colleen Flaherty Manchester, an assistant professor in the work and organizations department at the University of Minnesota’s Carlson School of Management. "For firms, they are able to recruit… the type of employees who value education and are less likely to turn over, and [thus] have a higher level of retention.”

Tuition assistance programs have been part of companies’ benefits offerings at least since the late 1970s, but the number of firms offering such initiatives dipped during the Great Recession, says Professor Manchester. As the economy recovered, some firms began looking at benefits they could offer potential employees in order to not just recruit top talent, but also prevent turnover.

In all, 56 percent of US organizations offer undergraduate educational assistance while 52 percent offer graduate assistance, according to a June SHRM report.

“More companies are going to take a deeper look at their tuition assistance program and decide how to transition it from a benefit that’s in the handbook to a more strategic tool,” says Jay Titus, senior director of academic services for EdAssist, an organization in Watertown, Mass., that advises companies on such programs.

Largely driving the trend are Millennials, who happen to be the fastest-growing cohort in the US workforce today and to whom the idea of educational support from employers is especially appealing, he says. Nearly 60 percent of Millennials surveyed said they would choose a job with strong professional-development potential over one with regular pay raises, according to a recent EdAssist survey.

“Employers are absolutely adapting to Millennials in the workplace,” says Bruce Elliott, manager of compensation and benefits at the Society for Human Resources Management, a global HR firm based in Alexandria, Va. “[Millennials] recognize that they need more experience, more knowledge, more mentoring to be successful. And they’re asking for it.”

In response, a few big-name brands have been beefing up their educational assistance programs over the past year: In June, health-care provider Anthem Blue Cross and Blue Shield began offering its 55,000 employees free tuition toward an associate or bachelor’s degree through Southern New Hampshire University’s College for America. The same month, restaurant chain Chipotle announced it would reimburse up to 90 percent of its workers’ tuition, books, and fees up to $5,250 a year (the Internal Revenue Service’s limit for educational assistance before it becomes taxable).

And Starbucks, which already reimburses tuition for any employees working toward an online degree at Arizona State University, expanded the offer to the spouses and children of workers who are military veterans, the Monitor reported this month.

FCA allowed employees at its dealerships to enroll at the company’s partner institution, Strayer University, at no cost once the dealership opts into the program. The initiative launched in FCA dealerships across the Southeast in May. Sunday’s announcement extended the offer to all 118,000 workers at dealerships nationwide – as well as to employees’ spouses and children.

“The labor market has gotten more competitive, and human capital is a main source of competitive advantage,” Manchester says.

Indeed, these companies “are not doing this to be nice,” Mr. Elliott says. “They’re looking to offer a value-added benefit that gives them an edge in the market.”

It helps that having and promoting tuition assistance programs costs big companies relatively little because only a fraction of employees tend to participate, he says.

Of more than 140,000 Starbucks employees, only about 4,000 have signed up for the company’s College Achievement Plan. And following the initial rollout of FCA’s free tuition plan in May, about 5 to 6 percent of eligible workers in the Southeast enrolled into classes at Strayer, Fortune reports.  

“They get a fair bit of bang for their buck in terms of free press,” Elliott notes. “They’re putting a kinder face on their organizations and demonstrating a commitment to their employees, which further enhances their reputation as an employer of choice.”

What the long-term effects such programs might have for companies’ retention and turnover rates remain unclear, he says. But, Elliott says, “the pluses [of these programs] far outweigh the minuses. We’re going to see a lot more of this in the future.”