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Jobs + Skills06.18.14

Starbucks Reinvigorates Tuition Assistance

Mid-size companies may find the coffee giant’s tuition assistance program to be a corporate perk worth brewing.

Starbucks is sending its baristas to college with a new perk – tuition reimbursement for an online bachelor’s degree from Arizona State University.

With the cost of attending a four-year college rising 27 percent beyond inflation over the last five years, a bachelors’ degree is less affordable than ever. And since the recession, fewer companies are offering tuition reimbursement as an employee benefit. Just 54% of companies offer it now, compared to 62% in 2010, according to a 2014 survey by the Society for Human Resources Management.

Starbucks Chairman and CEO Howard Schultz wants to reverse that trend. Employees who work at least 20 hours a week will receive deeply reduced tuition for their first two years of college, and full reimbursement for their last two years of school. Nearly 50% of U.S. college students drop out before completing their degree, according to the U.S. Department of Education.

Starbucks workers must meet academic criteria for the program, and don’t have to stay at Starbucks after receiving a degree – a benefit that equates to about $30,000 per employee.

But Schultz is betting the program will encourage many employees to stick around. “I believe it will lower attrition, it’ll increase performance, it’ll attract and retain better people,” he told the New York Times. About 70 percent of Starbucks employees do not have undergraduate degrees.

When Schultz reclaimed the helm at Starbucks in 2008 after stepping down in 2000, he restored the company to success by re-investing in employees, refusing to cut benefits like health care for part-time workers. He also promoted a corporate ethos of doing well by doing good, including advocating for an increased minimum wage and committing to hiring 10,000 veterans by 2019, reports Inc.

But tuition assistance is more than just a feel-good perk – it has tangible benefits for mid-market businesses as well as large corporations.

Mid-size Benchmark Hospitality, for example, has expansion plans that could double its revenues over the next ten years. Knowing that growth will depend on the productivity of over 6,000 employees, the company offers tuition reimbursement to help encourage workers to improve their job proficiency and personal development.

Burrito maker Chipotle also has aggressive growth goals, with plans to open a new restaurant every two days and a corporate goal of hiring nearly all of its leaders from within. To increase its pool of qualified workers, the mid-market company offers both on-the-job training and tuition reimbursement.

In fact, one fifth of all companies report using benefits programs to help retain highly skilled employees, and over half of those businesses use professional and career development perks to keep employees on board, which helps reduce companies’ hiring and training costs.

Reimbursement programs are also gaining popularity among smaller businesses looking for a competitive edge in recruiting new talent, and can help attract more highly skilled workers as well as improve employee morale.

Mid-size companies can also reap tax benefits by compensating employees with tuition money instead of salary: the first $5,250 in qualified tuition benefits are tax exempt. According to a 2002 study by a Wharton School of Business Professor, employees who receive tuition assistance are also more productive than their peers, reports Vox.

Starbucks’ plan to help more workers get a college degree is good for workers and the economy, but good for businesses too. To help create a highly skilled workforce, mid-size companies may find tuition assistance to be a valuable corporate perk.

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