Offering financial assistance for student loan debt can attract new employees and help retain existing staff.
Have you considered offering educational assistance to your employees? According to the Society for Human Resource Management's 2015 Employee Benefits Survey Report, just 3 percent of companies offer company-provided student loan repayment. Adopting an educational assistance program now could help differentiate your business and engage your workforce.
Why Offer Educational Assistance Benefits?
Providing educational assistance helps your staff pay for an education and encourages employees to keep learning. According to a 2016 Pew Research Center survey, 82 percent of respondents believe it's "extremely" or "very important" to take part in ongoing professional development opportunities to stay up to date in their careers. It also indicates that your business is invested in its employees and their contributions to your organization.
Offering these benefits can help your business stand out. Everyone knows about offering 401(k) matching plans, free food and flextime, but few businesses offer educational benefits to their staff.
In addition, it could help improve employee retention, thereby reducing the costs and headaches associated with employee turnover. Helping your staff with their educational costs doesn't have to be difficult or expensive. Here are four ways to offer educational assistance benefits that show them you support their educational endeavors.
Create a Scholarship or Grant
Company scholarships or grants that benefit your employees (or their children) can be a great incentive. However, it's important to know the tax implications. According to the IRS, because they're considered additional compensation, company scholarship programs are taxable expenditures unless they meet the qualifications for an individual grant and receive advance approval by the IRS.
According to the IRS, company scholarship programs can meet the requirements by ensuring that the scholarships awarded are for the main purpose of furthering the recipients' education rather than compensating company employees. The IRS sets forth three facts that must be satisfied to help establish a program that can meet these requirements.
Create an Educational Assistance Plan
If your employees are paying for their own education, you can create an educational assistance plan to reimburse them for their educational costs — even if their studies aren't job-related. Businesses can offer most employees up to $5,250 tax-free per employee per year, according to the U.S. Small Business Administration (SBA). The payments can be used for books, equipment, supplies and tuition and fees.
Pay For Employees' Work-Related Educational Courses
Support your staff's educational efforts by paying for their work-related courses. Because the IRS considers this a working condition fringe benefit, it's tax-deductible for businesses and tax-free for employees. While paying for degree and certificate programs is a huge motivator, it can also be a huge expense. Look to see if your employee can learn their desired skills through online training courses or other low-cost options if paying for a degree is outside your business's budget.
Help Employees Pay Back Their Student Loans
Hefty student loan payments are tough on today's young workers, so help your staff pay off their student loan debt. According to the SBA, although you'll pay employment taxes on the amount you contribute and it's taxable to your employee, too, they'll qualify to deduct student loan interest up to $2,500.
Offering financial assistance to help your employees pay off their student loan debt and continue learning makes good sense. It can help attract new employees and retain existing staff. Employees will be grateful for this good faith gesture that shows you value them and their families.
Get more insights to help with the challenges of employee recruiting and retention. Download the ADP Research Insitute's "Evolution of Work 2.0: The Me vs. We Mindset" report today.
This article provides general information, and should not be construed as specific legal, HR, financial, insurance, tax or accounting advice. As with all matters of a legal or human resources nature, you should consult with your own legal counsel and human resources professionals. ADP shall not be liable for any direct, indirect, special, consequential, incidental, punitive or exemplary damages in connection with the use by you or anyone of the information provided herein.