If you’re a business or HR leader, you’re likely facing a huge talent management challenge. Employers around the world are struggling to retain and upskill existing employees while at the same time striving to hire skilled people prepared to meet future needs. In today’s competitive job market, things are going uphill and the situation is becoming more difficult every day.
Research from the World Economic Forum estimates that 44% of workforce jobs will be disrupted over the next five years. As a result, 60% of people will need training before 2027 to continue to perform 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 required skills change. Unfortunately, according to that same survey, more than half of executives believe existing L&D programs are a waste of time.
But what if employers could combine high-impact professional development with the flexibility of meaningful, self-focused benefits? This is where Lifestyle Spending Accounts (LSAs) can be particularly valuable. If you want to know why and how this innovative concept works, read on…
Workers are reluctant to pay for more education
Why don’t individuals just 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, which amounts to an average of nearly $30,000 in tuition, housing and other education-related costs.
Many households pay hundreds of dollars per month for the education they have already received. Asking people to take on more after they have already invested is not an attractive or sustainable approach.
What employees want is help – and not just with money for 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 leadership to make sensible development decisions, and enough fuel to avoid additional unwanted debt.
Many organizations are in a great position to help. They actively evaluate staff skills and identify future needs. They know which skills are in short supply now, and they can see how retirement trends are likely to shape their talent needs over time.
Tuition reimbursement is not enough
Tuition reimbursement is a popular offer among employers because education costs can be tax-free for each employee up to $5,250 while remaining a business deduction. Well-known companies such as Starbucks, UPS and Cigna have been using these types of benefits for years.
For example, the case of Cigna 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 won too. Participants were 10% more likely to be promoted and received an average pay increase of 43% over three years.
However, a degree or qualified certificate program is not ideal for everyone. Some workers simply want to gain skills through alternative channels that are not typically covered by tuition reimbursement. Others want to pursue personal growth opportunities that can 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 $5,000 in tuition assistance, why can’t they offer the same level of investment for other development options?
LSAs support flexible development strategies
Of course, it is one thing if organizations offer attractive learning and development programs. But it’s another thing when employees embrace these programs and get value from them.
That’s where LSAs come into play. An LSA is an employer-sponsored account that allows employees to spend after- or pre-tax money on the benefits they love most, including learning and development.
Tuition reimbursement programs often come with a long list of qualifications and rules. LSAs, on the other hand, give employers and employees more flexibility – and flexibility is the best way to ensure that employees will take advantage of the benefits they sign up for. Our research shows that when programs are highly flexible, 96% of resources are used, compared to 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. Additionally, the employer could define the types of opportunities eligible for LSA funds so that employees can focus on learning experiences that are best for their careers.
These benefits do not only apply to employees. 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 and an easier experience for employees.
Beyond L&D: a holistic approach to benefits
LSAs can help organizations deliver employee-centric benefits that work across all talent management silos to improve the overall employee experience. Specifically, our benchmark research shows that companies choose to offer LSAs for three main reasons:
- To attract and retain talent and reduce turnover,
- To improve employee experience and increase engagement,
- To achieve more equitable, inclusive benefit programs.
Rather than increasing complexity and costs for employers, LSAs can partner with L&D departments to optimize spend and simplify management of popular programs such as tuition reimbursement and other remote learning opportunities.
However, now is the time to act. Employees need support and employers cannot afford to lose valuable talent. Creating a more flexible, personalized employee development program is a powerful way to ensure you can close critical skills gaps, build a stronger learning culture, and provide a more positive, meaningful experience for everyone.
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