On my desk I have a quote from Benjamin Franklin that reads: “An investment in knowledge pays the best interest.” Employers who embrace this philosophy can reap rewards from a better educated — and more satisfied — staff. As the fall semester approaches, there are a number of ways in which to do this.
Underwriting education costs
There are several tax incentives that encourage employer-provided assistance without incurring any tax cost to employees. These education incentives (described in IRS Publication 970) include:
From the company perspective, all employee education costs are tax deductible. To the extent the type of education assistance is a qualified fringe benefit, there are employment tax savings. Instead of increasing employee pay to cover education costs, which would be subject to FICA and FUTA taxes, a fringe benefit is exempt from these taxes. Check IRS Publication 15-B for details on the tax rules for fringe benefits.
There are several tax incentives that encourage employer-provided assistance without incurring any tax cost to employees. These education incentives (described in IRS Publication 970) include:
- Education assistance plans. These allow employees to receive up to $5,250 annually for undergraduate and graduate level classes, whether or not the coursework is job-related.
- Cost reimbursement. There is no dollar limit to the tax-free benefit that employees can receive if courses are job related.
From the company perspective, all employee education costs are tax deductible. To the extent the type of education assistance is a qualified fringe benefit, there are employment tax savings. Instead of increasing employee pay to cover education costs, which would be subject to FICA and FUTA taxes, a fringe benefit is exempt from these taxes. Check IRS Publication 15-B for details on the tax rules for fringe benefits.
Rewards for additional education
A well-established company policy rewarding employees for additional education may inspire employee action. Options:- Monetary awards. A lump-sum payment or an increase in wages to reflect additional education can help employees pay for any education costs they’ve incurred.
- Promotions. A new title may come with or without a pay increase. A promotion reflects how much your organization values education and employees who take advantage of learning opportunities.
- Recognition. Options for acknowledging your employees’ educational successes include a note in the company newsletter, recognition at a quarterly meeting, or a celebratory lunch.
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