Tuition Reimbursement Overview: A key employee benefit offered by many larger employers is a tuition reimbursement program, which is especially valuable to employees seeking to improve their career prospects by obtaining a new college or graduate degree. The vast majority of employees taking advantage of tuition reimbursement programs are looking to earn an MBA, but this is not the only degree that may be covered, or even desirable from the employer's standpoint. Moreover, if your employer does not have a formal tuition reimbursement program, there are ways to negotiate one for yourself.
Typically, tuition reimbursement programs cover part-time studies, undertaken outside business hours at night and on weekends, or studies that take the employee out of work for only one or two days a week. The usual expectation is that the employee with continue to fulfill his or her full-time job responsibilities.
Less frequently, the employer may allow the employee to earn the degree during an unpaid sabbatical or while on leave.
In either case, depending on the employer's policies, the employee may have to demonstrate how obtaining the degree in question will be of benefit to the firm. A major concern for employers is that the employee will leave the firm and seek employment elsewhere once the degree is obtained. As a result, some employers may have strings attached to their tuition reimbursement programs, seeking full or partial refunds from the employee if the employee leaves the firm within a stated time period after earning the degree. It is generally agreed that remaining with your employer for between two and five years after receiving the degree is a reasonable and customary period for you to discharge your implicit debt.
Additionally, many employers have reimbursement rates that vary based upon the grades that the employee receives. The higher the grade, the larger the percentage of the tuition or fees that are reimbursed. The downside of this policy is that it may steer employees towards easier schools and courses, and away from more rigorous programs of study. You should understand whether, if such a scheme is in place, there are any adjustments that attempt to account for variations in program difficulty and/or grading strictness at different educational institutions.
All these factors should be understood before entering a degree program with your employer's financial support. The Graduate Management Admission Council, meanwhile, claims that tuition reimbursement plans actually the loyalty of employees who take advantage of them.
Negotiating Tuition Reimbursement: In cases where your employer does not offer a formal tuition reimbursement plan, you may attempt to negotiate one. Key negotiating points may include:
- Demonstrating clearly how the degree will be of benefit to the firm and your manager
- Offering to share your knowledge in a structured manner with fellow employees
- Proposing to have the tuition reimbursement structured as a loan from your employer, forgiven in increments over time if you remain with the firm, like a signing bonus
- Offering to sign an employment contract that commits you to repay all or part of the tuition reimbursement if you leave the firm before a stated period expires
Note that, in most tuition reimbursement plans, the employer pays the educational institution directly, which helps to ensure that the employee does not incur taxable compensation. If you must resort to negotiating your plan, especially if you attempt to adopt either of the last two strategies listed immediately above, consult qualified tax and legal advisors.
Primary Source: "It's a two-way deal between you and your company," in the "The careerist" column, Financial Times, 8/2/2010.
