How Education Benefits Help Reduce Turnover

Currently, millennials are the largest generation in the U.S. workforce. They also happen to be a demographic of debt. According to a recent Gallup poll, 35 percent of millennials have a college loan to pay off, which is why employer-sponsored education benefits are a fast-growing trend.

Millennials have a passionate interest in work-life balance – even to the point of taking extended sabbaticals from work. Therefore, they have a vested interest in getting out of debt quickly (albeit not at the expense of their personal life). This leaves little room for company loyalty. In fact, a recent survey found that nearly half of millennials said they would switch employers to get student-loan assistance or tuition reimbursement.

Now that millennials are out of the entry-level job stage and moving into higher-level contributor and management positions, companies are struggling for ways to retain them. And let's face it, for the good of the country's economic growth, it's time for millennials to get out from under student loan debt. Otherwise, they'll soon be faced with it again with their own children in lieu of buying, investing and raising the GDP.

Types of Education Benefits
A college tuition assistance program is one of the most successful tactics for retaining workers. Other education benefits include helping workers achieve GEDs, ESLs, management certificates and master's degrees, as well as student-loan assistance to help pay off debt.

Among all benefits, surveys reveal that student-loan and tuition assistance rank higher than even paid parental leave or free daycare for children. While health care benefits are capped by federal rules, employers can compensate with education benefits that are quickly becoming a high-value, if not expected benefit.

There is some demarcation of education benefits among both industries and the level of workers within specific companies. For example, a white-collar employer like PricewaterhouseCoopers gets higher participation numbers with student loan debt assistance benefits. On the other end of the spectrum, Walmart workers are more interested in college reimbursement benefits.

Retention
Traditionally, the restaurant industry suffers from high turnover and poor retention rates. This has been particularly evident as the unemployment rate has dropped and more college graduates have quit food and beverage jobs for "real" ones. According to the Bureau of Labor Statistics, in 2017 alone more than 72 percent of workers left food service or hospitality positions.

To help convince highly motivated workers to stay, a growing number of restaurants such as Starbucks, McDonald's, Chipotle Mexican Grill and Taco Bell have begun to offer tuition benefits. Some employers have even worked with local colleges to grant college credits for student on-the-job training.

As more high school graduates realize their earning potential will likely be capped without a college degree, they are drawn to companies that offer tuition reimbursement. The owner of one Chick-fil-A franchise recognized the need to meet this demand when he lost a strong worker to Best Buy – solely due to the store's tuition reimbursement benefit that would help her get a college degree.

Businesses that offer tuition reimbursement also benefit from a better-educated workforce. When hard-working frontline workers attain a degree, they have better opportunities to rise through the ranks into management positions. In many cases, the best managers are those who started out doing the job and understanding the challenges of their direct reports.

It's not just about productivity and performance though. If companies do not offer benefits on par with competitors, they're bound to incur costly turnover outlays. In 2017, Taco Bell reported a 10 percent increase in retention between the second and third quarter. Starbucks found that baristas enrolled in its college program were 1.5 times more likely to stay with the brand and more than two times likely to be promoted over those not enrolled.

The latest research found a 20 to 40 percent increase in the retention rate of workers enrolled in an education benefit program versus the rest of the staff, indicating that these benefits more than pay for themselves through lower turnover.

The restaurant industry experiences an average 50 percent turnover each year. While these companies don't expect workers to stay with them throughout their careers, they benefit greatly from retention, even if they can keep a worker on just a year longer. Convincing veteran workers to continue working, even as they pursue a new career, can generate measurable results in both productivity and overhead savings.

For-Profit Colleges
One issue with tuition-reimbursement programs is that some limit the schools to which the worker can enroll. In many cases, the employer has negotiated a lower tuition rate with a specific for-profit school for its benefit program. For example:

• Wal-Mart – American Public University System
• Manpower Services – Western International University
• Fiat Chrysler Dealers – Strayer University
• JetBlue – Thomas Edison State University
• Starbucks – the online division of Arizona State University

Unfortunately, many for-profit colleges have come under fire in recent years for not providing an adequate university-level education. In many cases, students who want to transfer to another school for a specific field of study find that some or even most of their credits are not accepted at a traditional college. For-profit and online universities also tend to have poor graduation rates.

The U.S. Government Accountability Office (GAO) estimates that students who transferred colleges from 2004 to 2009 lost an average of 43 percent of their credits. Those transitioning from private for-profit colleges to public universities lost an average of 94 percent of their credits.

One reason for this is because some for-profit schools focus more on practical workforce training, which may or may not be what a worker is seeking. It's a good idea for employers setting up a tuition assistance program with for-profit schools to inform workers about the curriculum and likelihood of transferring credits. In fact, they also may want to work with local four-year colleges to see what types of credits would be transferable.

After all, it would be unfortunate to invest in education benefits only to have angry workers blame their employer for not being able to further their schooling (or repeat courses and incur additional, unreimbursed expenses). The PR on education benefits, like most things, can swing both ways.

Return on Investment
To determine the ROI on education benefits, a business must analyze its annual turnover cost in relation to the tuition reimbursement allowance for each employee. Many employers require enrollees to apply for federal financial aid (typically $5,900 /year) before their education benefits kick in, which helps reduce the amount for which the employer is responsible.

One education benefits management executive estimated that each worker retained for at least six months longer than others can yield savings of up to $3,000. Also note that tax regulations permit employers to write-off 35 percent of all tuition dollars used to reimburse workers.

Cigna has reported an ROI of $1.29 in savings due to reduced turnover and recruiting costs for every $1 it has spent on tuition reimbursement.

More Than ROI
Another reason for the rise in education benefits is growing dissatisfaction among employers with college graduates who lack the knowledge and skills to match their jobs. A recent Gallup survey found that only 11 percent of business leaders strongly agreed that graduates were qualified to take on the position offered.

In other words, tuition benefits are not just a competitive benefit for recruitment. They offer the chance to combine education with on-the-job training to cultivate high-performing workers who can help drive a company into the future.

Just as millennials are willing to change employers for the right set of benefits, they are seeking
the training necessary to help them progress in their careers. Companies willing to make the investment to help pay off student loans and advance their workers' education and lifestyle balance are more likely to restore that lost company loyalty of yesteryear.

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