Two Major Payment Pitfalls to Avoid When Designing Education Benefits
Education benefits programs can be a powerful talent strategy. At their best, they attract top talent, increase retention, and drive meaningful employee development when aligned with career mobility. Plus, they are a chance to do good, empowering employees who want and need that career growth.
That is practically the definition of “win-win.” And yet…
As with many things that sound great on paper, the vision doesn’t always square with reality. From fire prevention initiatives (remember Smokey the Bear?) that ended up fueling raging mega-fires, to highway expansion projects that caused even worse traffic, the history of good intentions is riddled with unintended consequences.
Take tuition reimbursement programs.
In the course of our research, we found an example of a common tuition reimbursement program and the outcomes the company realized. This employer offered the benefit but did not take an intentional approach, and the average employee accrued $5 in debt for every $1 of reimbursement. What’s more, fewer than 20% earned a degree within six years. In the end, 84% of employees ended up having a more negative view of their employer because the existing education benefits program created a poor experience.
Read that again: 84%. This program was a commonly used strategy meant to create a better experience for both employers and employees, and it ended up undermining the empowerment and support they were trying to build.
It’s worth noting that organizations who offer tuition reimbursement are attempting to provide a program that promotes meaningful employee development and education opportunities:
- They’re covering full tuition
- They’re creating opportunities for growth
- They’re encouraging accountability to ensure a good ROI
When these well-intentioned programs lead to lackluster outcomes, it’s worth asking why.
So what is actually going on here? It’s not that employers aren’t trying hard enough to create great education benefits. They’re putting in plenty of thought and care.
The real problem is two blind spots that can undermine even the most promising education initiatives.
Blind Spot #1: Tuition Reimbursement
The first blind spot is tuition reimbursement. Wait—that’s much better than no education benefit at all, right? But remember, one company found that 84% of employees actually held the company in lower regard for it.
Here’s why: When a company offers tuition reimbursement, employees have to pay for everything themselves first and wait to be reimbursed later. This may be doable for higher-salaried employees in corporate roles — but ask a frontline worker to pay thousands of dollars in tuition up front, especially when over a quarter of Americans struggle to pay their monthly bills, and it’s understandable that they’ll pass.
This is where good intentions get tangled up in reality. Instead, consider offering direct tuition payment up front, without asking employees to step into a financial hole just to get the skills they’ll need to dig themselves out. Better yet, explore day one tuition-free programs to drive enrollment, employee engagement, and retention.
Guild research has found that when offered a tuition-free program instead of tuition reimbursement, the increase in enrollment was 3X higher for households with a median income below $30k relative to those in households of $50k+.
That brings us to a larger point: Tuition reimbursement is unintentionally inequitable.
Instead of creating more opportunities, it pushes education further out of reach for many frontline workers. Our research shows that 49% of employees cite the inability to pay a tuition bill upfront as one of the main reasons for low program uptake*.
This represents a huge missed opportunity for everyone. First, employees can’t get the education and skilling they want and need, and second, employers can’t find or develop people for key roles.
The front line remains a largely untapped resource, and employers are competing to attract this critical population in the face of growing talent and skill gaps. Debt-free education and skilling programs offer a more sustainable and fruitful way to approach these challenges.
Blind Spot #2: Voucher-Based Payments
What’s better than tuition reimbursement? A program that’s directly funded by employers so employees never pay out of pocket.
But there’s a catch. Direct payment is one thing, but the most effective programs remove both the financial burden and the administrative burden from employees.
Want to know why — and how? Download the full ebook to learn why you should be wary of voucher-based payment systems. Our Guide to Making Education Your Competitive Advantage covers this and more, spotlighting eight best practices to help you optimize your own employee education program.
Inside, you’ll learn:
- Why 86% of employees engaged in a Guild program are more likely to refer others to their employer*
- Why retention rates are 34% higher for learners in Guild programs **
- Why projected graduation rates are 53% higher than the national average for Guild’s part-time bachelors degree students ***
Most importantly, you’ll learn how to achieve the same kind of success. Ready to move beyond your blind spots? Get our Guide to Making Education Your Competitive Advantage and get started.
* Guild Membership Research Survey conducted in September of 2019
**Guild’s internal data over the last 12 months as of 12.31.2021 from employers who have provided the required data for at least 13 months post launch
***Guild’s internal data over the last 12 months as of 12.31.2021, National Center for Education Statistics for the 2019-2020 academic year