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One thing job seekers search for when looking for a job is the chance for employee education benefits to add to their in-process degrees or just for higher learning purposes. This can be a great benefit to the employee and also a useful recruiting tool, but there are advantages and disadvantages to offering employee education benefits.
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The Pros of Education Benefits
- Skills Needed – If you have an employee who just needs a little skill help, offering an educational benefit can give that employee the skills they require for the job while they earn or continue to earn their degree.
- Seminar Training – Some seminar training also offers continuing education credits (CECs) that can also help the employee as far as sales techniques, customer service practices, and even supervisory seminars. All of these can turn a supervisory or sales employee into a better employee and often at less cost than normal college or university credits.
- Tax Breaks – According to the Internal Revenue Service (IRS), employers who have an employee education assistance program in place, can offer up to $5,250 per year, per employee and deduct that as a business expense.
- Employee Responsibility – On the other side of that coin, if you do provide employee education benefits and spend over $5,250 on any employee, they are required to pay the tax on this benefit; not you as the employer, however, you will have to include the non-taxed benefit on their W-2 wage statement.
- Governing Rules – Most employers who set up an employee education assistance program stipulate the employee must maintain a certain grade point average (GPA) in order to continue with employer paid tuition. If they fall below the required GPA, you can cease assistance.
Along with the advantage of offering employee education benefits, there are also some disadvantages.
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The Cons of Education Benefits
Beyond your own requirements, the IRS also sets limits on what can and can’t be included as an educational benefit. Here are some of the disadvantages to offering employee continuing education benefits.
- IRS Rules – The IRS Publication 15-B, the Employer’s Tax Guide to Fringe Benefits, has definite rules on how and what is considered an “educational fringe benefit." Seminar training may not qualify and items such as tools, meals, room or board are not eligible under the tax guideline. In addition, employers who set up employee educational benefit programs must offer them to all employees, not just supervisory employees.
- Lost Employees – Some employees may reap the rewards of your generosity and then move on to another company. One ideas is to state in your education benefit program how long the employee must remain with your company if they enroll in the program. Stating the employee remains, however, can also be a con as you are now entering the world of the employee contract that often throws the at will clause of out of the equation, making it hard for you to terminate the employee without good cause.
- Employee Expenses – Due to the IRS rules, if an employee does incur meal or traveling expenses (that are not covered under an employee education assistance program), that means the employee must pay for those items out of pocket. This can also include tools or lab fees and as an employer, you are not allowed to offer cash to the employee for these expenses. Some employees may feel since they can’t afford the add-ons to skip the program.
- Employee Tax Obligations – If you decide to offer more than the IRS allowed $5,250, which you can, then the employee is responsible for paying taxes on that anything above that amount. There is really no way around this tax either as all amounts over the limit must be reported on the employee’s W-2 wage statement.
- Plan Monitoring – Because there are rules that come from the IRS, if you decide to set up an employee education benefit program, you will most likely have to put someone in charge to monitor the plan to ensure equality and regulation requirements.
Offering employee education benefit programs can be rewarding for both the employer and employee. If you decide to begin this type of assistance, check with your tax professional on how to set up the plan to ensure you are following all the rules or regulations required by the IRS.
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