If you’re a business or HR leader, you’re probably facing an enormous talent management challenge. Employers everywhere are struggling to retain and upskill existing employees, while simultaneously striving to hire skilled people who are prepared to meet future needs. In today’s competitive labor market, it’s an uphill climb, and the situation grows tougher every day.
Research from The World Economic Forum estimates that 44% of workforce jobs will be disrupted within the next five years. As a result, 60% of individuals will require training before 2027 to continue performing well in the rapidly changing world of work.
That’s what organizations need. But what do employees need from their employers?
Research shows that 84% of employees expect their employer to provide training and education to help them stay up-to-date as in-demand skills change. Unfortunately, according to that same study, more than half of executives feel existing L&D programs are a waste of time.
But what if employers could blend high-impact professional development with the flexibility of meaningful, self-directed benefits? This is where Lifestyle Spending Accounts (LSAs) can be particularly valuable. To find out why and how this innovative concept works, read on…
Employees Hesitate to Pay for More Education
Why don’t individuals simply try to close this skills gap themselves? According to The Institute for College Access & Success, 62% of the class of 2019 graduated with student debt, averaging almost $30K each in tuition, housing, and other education-related costs.
Many households are paying hundreds of dollars a month for the education they already have. Asking people to take on more after they’ve already invested isn’t an attractive or sustainable approach.
What employees want is assistance — not just with funds to cover formal education or professional development. They also want guidance to understand which growth paths are likely to enhance their careers now and in the future. In short, they need direction to make wise development decisions, and sufficient fuel to avoid additional unwanted debt.
Many organizations are in an excellent position to assist. They’re actively evaluating workforce skills and mapping future needs. They know which skills are in short supply now, and they can see how retirement trends are likely to shape their talent requirements over time.
Tuition Reimbursement Isn’t Enough
Tuition reimbursement is a popular offering among employers because educational costs for each employee can be tax-free for up to $5,250, while remaining a business deduction. Well-known companies like Starbucks, UPS, and Cigna have leveraged this kind of benefit for many years.
For instance, Cigna’s case illustrates how effective tuition reimbursement can be. An analysis of Cigna’s program found that every dollar spent generated a return of $2.29, thanks to lower turnover and recruitment costs. Employees also won. Participants were 10% more likely to be promoted and received an average 43% increase in wages over a three-year timeframe.
However, a degree or qualified certificate program isn’t ideal for everyone. Some employees just want to build skills through alternative channels that typically aren’t covered by tuition reimbursement. Others want to pursue personal growth opportunities that may also enhance their careers.
It’s worth noting that MetLife says 75% of employees want more choice and control over how they use their benefits. So, if employers can offer $5k in tuition support, why can’t they offer the same level of investment for other development options?
LSAs Support Flexible Development Strategies
Of course, it’s one thing for organizations to provide attractive learning and development programs. But it’s another for employees to embrace these programs and gain value from them.
That’s where LSAs come in. An LSA is an employer-funded account that enables employees to apply post- or pre-tax dollars toward the benefits they love most — including learning and development.
Tuition reimbursement programs often come with a long list of qualifiers and rules. In contrast, LSAs give employers and employees more flexibility — and flexibility is the best way to be sure employees will use the benefits they sign up for. As our research shows, when programs are highly flexible, 96% of the funds are used, versus only 63% among programs with less flexibility.
For example, in addition to offering a standard tuition reimbursement program, an employer could offer an LSA L&D wallet, so employees can choose other more self-directed development courses. Plus, the employer could define the type of opportunities that qualify for LSA funds, to help employees focus on learning experiences that are best for their career.
These advantages aren’t just for employees, either. LSA technology solutions can consolidate tuition reimbursement management to simplify and improve the experience for program administrators, as well. This simplicity means more time for your benefits team as well as a more convenient experience for employees.
Beyond L&D: A Holistic Approach to Benefits
LSAs can help organizations provide employee-focused benefits that work across talent management silos to improve the overall employee experience. Specifically, our benchmarking research shows that companies choose to offer LSAs for three primary reasons:
- To attract and retain talent, and reduce attrition,
- To improve employee experience and increase engagement,
- To deliver more equitable, inclusive benefit programs.
Rather than increasing complexity and costs for employers, LSAs can work together with L&D departments to optimize spend and simplify the administration of popular programs like tuition reimbursement and other outside learning opportunities.
However, the time to act is now. Employees need support and employers can’t afford to lose valuable talent. Establishing a more flexible, personalized employee development program is a powerful way to ensure you can close critical skills gaps, build a stronger culture of learning and offer a more positive, meaningful experience for everyone.