Thanks to escalating competition to attract top talent the business case for companies to offer their employees tuition benefits has gained momentum over the past decade. At the same time, there’s been an increased push to use the practice to drive social good, given the growing need for workers with 21st century knowledge and skills.
Now there’s a new piece of evidence that could propel corporate support for employees’ higher education to a new level: investing in employee tuition benefits also creates a powerful financial return for employers.
An April study from the Lumina Foundation analyzed health insurance provider Cigna Corp.’s Education Reimbursement Program. The study compared behaviors and outcomes for 2,200 employees who used ERP benefits with those for the rest of Cigna’s 31,000 employees over a three year period. [Editor’s note: One of the authors works for Cigna.]
The study showed that employees who participate in Cigna’s program are more likely to be promoted, retained or transferred within the company, which reduces talent management costs and drives bottom-line return. For every dollar Cigna invests in tuition assistance, it earns the invested dollar back and generates an additional $1.29 in savings — a return on investment of 129 percent. As a result of these findings, Cigna increased its maximum tuition reimbursement for employees in high-demand fields.
These data points offer a rare look at the return on investment for corporate tuition reimbursement programs and have the potential to make employers’ embrace of tuition assistance even more widespread. And this comes at a critical time in our national debate over how to meet talent needs.
The U.S.’ shift to a knowledge-based economy has produced greater-than-ever demand for workers with education beyond high school, with nearly two-thirds of U.S. jobs projected to require postsecondary education by 2020 according to “Recovery: Job Growth and Education Requirements through 2020,” a study released in November 2014 by the Georgetown University Center on Education and the Workforce. At the same time, escalating higher education costs and rising student loan debt have made paying for education beyond high school challenging, which can discourage employees from pursuing further education.
That is why this study is so important. By offering a rare look at the bottom-line value of employee tuition assistance, it could propel a shift in the way employers view investments in their employees’ education — and thereby empower companies to help address the talent gap.
Today only 2 to 5 percent of companies that offer tuition assistance actually measure the return on their investments. Yet, the Cigna program study — conducted by global consulting services provider Accenture — offers compelling proof that such investments pay off in a significant way.
In response to its positive results, Cigna increased the annual cap on tuition assistance from $5,250 for undergraduate courses or certificates and $8,000 for graduate courses to annual maximums of $10,000 and $12,000, respectively for full-time employees in high-demand fields. The company anticipates a future growth in return based on this increased investment and plans to conduct another study to test this hypothesis.
Cigna’s action exemplifies what could occur as evidence of tuition assistance’s financial impact becomes clear. Hopefully, more companies will make tuition benefits available and will increase the strategic focus of their offerings, and other firms will follow suit to remain competitive. The push could accelerate as the workforce’s generational makeup changes from predominantly baby boomers to millennials, who will constitute three-fourths of workers by 2025. Multiple data sources indicate this cohort favors job opportunities that offer educational growth, training and similar benefits.
Growing the scope and impact of employer-funded postsecondary education would build from the powerful momentum started by Starbucks and Chrysler, employers that have made large-scale investments in workers’ education in recent years. According to SHRM data, nearly 60 percent of organizations offer some amount of tuition assistance, which marks progress, but it’s not enough, given the need for talent. We need a broader movement to make employer-provided assistance standard business practice. With that change, employers, employees and society as a whole will benefit.
Changes to public policy and education practice ultimately will be needed to address the dramatic need to grow our nation’s talent pool, but companies can have a powerful impact even in the absence of sweeping governmental solutions. The latest data on the financial return of talent investments offers some of the most compelling incentives to date for companies to do so.
Jamie Merisotis is president and CEO of Lumina Foundation, a national foundation dedicated to increasing Americans’ college attainment. Karen Kocher is chief learning officer for Cigna Corp., a global health insurance provider.Filed under: StrategyTagged with: higher education, investment