Most Tuition Aid Programs Hold Steady in Recession

Copyright 2009 Institute of Management & AdministrationAll Rights Reserved Managing Benefits <span id="x_hitDiv1">Plans <br> <br> <span id="x_hitDiv2">July 2009 <br> <br> HUMAN RESOURCES Vol. 2009 No. 7 <br> <br> 1779 words <br> <br> <br> Most Tuition Aid Programs Hold Steady in Recession<br> <br> <p></p> The economic downturn is forcing many U.S. companies to reduce, cut, or temporarily suspend their tuition reimbursement programs. Other organizations, however, plan to leave their tuition reimbursement programs intact. A little over 79 percent of the 493 employers surveyed in 2008 by the Seattle-based Institute for Corporate Productivity (i4cp), for example, said they have no plans to change their tuition assistance programs (see table). <p></p> However, not all companies are feeling that way. When Sprint Nextel Corp. announced that it would cut 8,000 jobs in the first quarter of 2009, the telecommunications giant also said it has suspended its 401(k) match for 2009, extended a 2008 suspension of annual salary increases through 2009, and suspended its tuition reimbursement program for 2009. <p></p> In November 2008, General Motors Corp. announced its effort to achieve savings through job cuts and by suspending payments to its white collar workers' 401(k) plans and to its tuition reimbursement benefits. <p></p> But Northrop Grumman Corp. disagrees. "Cutting back on the tuition reimbursement programs is not something on the table at this time," notes Kathy Thomas, Northrop Grumman's vice president of learning and development. "From Northrop Grumman's perspective, we view tuition reimbursement as a great advantage in today's marketplace, in terms of being able to attract and retain the caliber of employees we want to have." <p></p> Nonetheless, the economic downturn led leaders at the H. Lee Moffitt Cancer Center & Research Institute in Tampa, Fla., to create a 15-member task force to consider revisions to its 23-year-old employee education assistance program. <p></p> "The task force will be looking at how we are using the dollars and can we funnel them into critical career needs so individuals can have a place to go when they are finished participating in the educational assistance program," Dineen Paris, the center's director of organizational development, told MBP. "Stewardship is one of our values, and that is very much a reason why we're revisiting the program--to be good stewards of our resources." <p></p> Prevalence of Tuition Programs <p></p> According to Watson Wyatt Worldwide's COMPARISON database of nearly 1,100 large and midsize employers, 90 percent of companies offered tuition assistance programs to their employees in 2008. <p></p> "Most companies will pay for you to get your undergraduate degree, and it doesn't necessarily have to be job-related," said Lenny Sanicola, practice leader in professional development at HR consultant firm WorldatWork in Scottsdale, Ariz. <p></p> "At the graduate level, most private companies state that whatever courses you take need to be related to what you're doing at that organization," Sanicola said. "Graduate-level programs are more expensive, and companies want to make sure they are being used to help you in the role you have been assigned to at that particular company. That's fairly standard. What varies is the amount of coverage an employer will provide." <p></p> While some companies provide $3,000 a year to reimburse employees for tuition and related costs, others pay much more, Sanicola said, noting that some employers provide 100 percent tuition reimbursement. <p></p> Jennifer Calhoun, a principal in Mercer's health and benefits office in Philadelphia, said the most recent data from employers that the HR consultant is tracking show more than 89 percent of 1,200 employer respondents saying they have an educational assistance program. <p></p> "When we looked at 2007 and 2006, the percent of employers surveyed continues to increase in terms of percentage offering tuition reimbursement or educational assistance," Calhoun said. "In 2006, it was 85 percent; in 2007, it was 87 percent." <p></p> "The question of 2009 is will that continue or will we see a decrease?" Calhoun said. "I think it's too early to tell." <p></p> "Many employers are exploring all their possible programs--including retirement, health care, and tuition reimbursement--to identify areas for cost relief," Calhoun added. "But anecdotally they're telling us that tuition reimbursement, based on the dollar amount spent and number of employees who use it, is fairly small." <p></p> Recession's Impact on Programs <p></p> Sanicola at WorldatWork said companies are looking for a variety of cost-cutting initiatives, and in many cases layoffs are not necessarily the answer. <p></p> "What's different about this recession, compared to others, is that people in many ways are trying to avoid layoffs," Sanicola said. "Compared to previous recessions, what we've learned is: ‘If I do mass layoffs, I will be at a disadvantage when it's time to hire again.'" <p></p> Employers are suspending 401(k) matching contributions, using furloughs, and increasing employee contributions to a variety of benefit programs, including tuition reimbursement, Sanicola said, noting that it is not the first item they look at on the list to cut "unless it's an extremely large company." <p></p> The extent to which tuition reimbursement programs are being slashed depends on how much money an employer is trying to save. <p></p> "If no one has been taking advantage of tuition reimbursement, eliminating it is not going to save money," Sanicola said. <p></p> Because of the economic downturn, a growing number of employers are lowering the amount of tuition assistance they are willing to provide or eliminating or suspending programs, altogether, various sources told MBP. <p></p> "Many companies distribute the cost for tuition to different business units, and managers are more closely monitoring their costs," according to Jeff Creighton, chairman and chief executive officer of EdAssist in Olivenhain, Calif. <p></p> "In the current economy, every single training expenditure, including tuition reimbursement, is under a microscope," said Pat Galagan, executive editor of publications at the American Society for Training & Development in Alexandria, Va. "What we find companies are looking for is efficiency. They are looking at every single line item and asking whether the content of these courses is relevant to the company's goals and business objectives. <p></p> "There is quite a bit of concern to make sure the company is getting a return on investment for their training dollars," Galagan concluded. <p></p> Companies are not asking employees who are attending school and receiving tuition reimbursement to not take classes, according to Sandy Womack, owner and director at EduPlan, an educational consulting company in Flagstaff, Ariz. <p></p> "What I am seeing is, maybe, managers asking employees to wait, perhaps a quarter or two, before starting," Womack said, noting that these students are not being allowed to sign up online with the company for academic advising. <p></p> At the same time, Womack said, "in most recessions, my company does better than normal because when a recession happens people start looking at going back to school." <p></p> "This year, with budgets being cut, managers are not paying for the advising as much," she said. "But I'm not seeing companies dropping my services or dropping tuition reimbursement services completely." <p></p> Watson Wyatt Worldwide is tracking monthly the extent to which large U.S. employers are changing their HR policies to respond to the economic downturn. Its February 2009 update titled Effect of the Economic Crisis on HR Programs highlights the experiences of 245 large employers. <p></p> Rick Beal, a managing consultant in northern California for Watson Wyatt, noted that in October 2008, only 8 percent of employers polled reported that they had scaled back on tuition reimbursement and similar employee programs. <p></p> "When asked the same question in February 2009, 23 percent had cut back," he said. <p></p> In addition, Beal said, while 11 percent of survey respondents reported in October that they were planning to scale back their tuition reimbursement programs, "now 18 percent said they are looking at it and planning on doing something in the near future." <p></p> Like Womack, Creighton said there are more cases now than a year or two ago of management not approving an employee's request to take part in the company's tuition reimbursement program. "The approvals have decreased, but the policy itself has not changed," he said. <p></p> With tuition reimbursement programs, employers might tend to be more "targeted" about how they reduce expenditures," Beal said. <p></p> "Rather than say they will provide tuition reimbursement for every person out there or for every program," he said. "They may say, ‘We will provide tuition reimbursement for certain groups or programs.'" <p></p> On a more ominous note, Galagan at ASTD recalled that after the 2001 recession, in about 25 percent of the cases companies that had dashed their budget did not restore them. <p></p> "That's an important lesson," she said. "When companies learn how to be more efficient, there's very little incentive to go back to old ways of spending. Companies should not expect their budgets to be restored." <p></p> Calhoun at Mercer said one option during the economic downturn might be to allow employees to focus more on their need for training and education. <p></p> "When budgets are tight and you can't give money, allowing people to foster their career development is a wonderful and lower-cost way to ensure employee commitment," she said. <p></p> Beal at Watson Wyatt echoed Calhoun. "Like anything else, it's a good time to make smart investments. One could certainly argue that investing in people that you have left is a smart investment," he said. "If you've already done major layoffs and you have a core group of people, you're placing your bets on the future of those people, so it's certainly a good time to make an investment in them." <p></p> Sanicola at WorldatWork said that to boost morale, companies might say tuition reimbursement is a benefit they do not want to touch. <p></p> "Often times, when there's no money to pay in salary, or in other things, companies look toward learning and career development," he said. "You might be able to continue tuition reimbursement on the assumption that it's not costing you a lot and it gives people an opportunity to develop and enhance their skills while they are not getting increases in pay." <p></p> Like leaders at the Moffitt Cancer Center, Galagan said employers today could decide to review the content of the courses for which workers traditionally have been reimbursed and consider how relevant the courses are to the employees' work duties. <p></p> Companies are also looking more closely at whether using tuition reimbursement as a recruiting or retention tool is really working, Galagan said. <table width="100%"> <col width="46%" align="LEFT"><col width="12%" align="LEFT"><col width="10%" align="LEFT"><col width="11%" align="LEFT"><col width="11%" align="LEFT"><col width="9%" align="LEFT"><col width="0%" align="LEFT">Does your organization have any plans to change your tuition assistance program? By size of workforce<br> <br> Fewer Than<br> 1,000 to<br> 5,000 to<br> More Than<br> <br> <br> Response<br> 1,000<br> 4,999<br> 10,000<br> 10,000<br> Overall<br> <br> Yes<br> 22.1%<br> 21.8%<br> 0.0%<br> 23.8%<br> 20.7%<br> <br> No<br> 77.9<br> 78.2<br> 100.0<br> 76.2<br> 79.3<br> <br> (Source: Institute for Corporate Productivity)<br> <br> <br> <br> <br> <br> <br> June 11, 2009 <br> <br> <div> <div class="x_nshr"> <center></center> <center><a href="http://www.lexis-nexis.com/lncc/about/copyrt.html" target="_new" class="x_pagelinks">Copyright © 2009 LexisNexis, a division of Reed Elsevier Inc. All Rights Reserved. </a><br> <a href="http://www.lexis-nexis.com/terms/general" target="_new" class="x_pagelinks">Terms and Conditions</a> <a href="http://www.lexis-nexis.com/terms/privacy" target="_new" class="x_pagelinks"> Privacy Policy</a> <br> </center> </div> </div> </table> </span></span>