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September 12, 2013
Should You Offer Your Workers Educational Classes?
Offering your employees continuing education can be a great way to improve productivity, morale, and employee loyalty. Just as with any benefit you offer to your workers, there are pros and cons, and rules you'll have to follow.
Here's some information to get you started:
Benefits to Employer
There are several benefits you can enjoy by offering educational help to your employees.
They include:
  • The amount you reimburse to employees for education is a deductible business expense, giving you a tax advantage for providing this benefit;
  • Well-trained employees will be more confident and productive in their jobs, giving your business an added boost;
  • Employees who receive tuition reimbursement or other educational benefits will feel more fulfilled and valued, which can lead to less employee turnover and improved morale;
  • A study by Spherion Atlantic Enterprises LLC found that 61% of respondents who received employer-funded education or training said they were very likely to stay with their current employers for the next five years or more. This translates to money saved for you, since you'll have to do less hiring and training. 
Possible Downsides
There are a few issues you'll have to consider before starting an employee education program at your company.
First, you'll have to carefully follow IRS rules for educational fringe benefits (IRS Publication 15-B lays everything out for you). Seminar training may not be eligible as a tax-free benefit, and tools, meals, and room and board are generally not accepted.
You may occasionally lose an employee to a competing company once that employee's education makes him or her more attractive to recruiters.
However, as the Spherion study showed, this shouldn't be a common occurrence, and your employees will likely be more loyal after receiving education benefits.
Keep in mind that if you offer more than the $5,250 the IRS allows as a non-taxable educational fringe benefit, your employee will be responsible for paying taxes on anything you pay over that amount.
Setting Up a Successful Program
Creating a successful employee education program requires planning. Here are a few questions you'll need to answer while coming up with your policy:
  • Which types of classes will you reimburse your employees for?
  • Does the course have to be directly related to the employee's current job or career path? This is a common requirement, but bear in mind the worker's increased loyalty and sense of fulfillment may be worth allowing the non-related course.
  • Will you only pay for your worker's tuition, or will you also cover supplies, books, and fees (such as lab fees)? Remember that if you cover these extras, the employee may be on the hook for taxes on them, since the IRS doesn't count them as non-taxable.
Continuing education programs for your employees offer a range of benefits for both you and your workforce.
There are some rules to follow, but if you construct your program carefully and consult a tax professional to make sure you're within IRS guidelines, you can create a successful education benefit that improves your productivity and bottom line.

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Freelance blogger Angie Mansfield covers a variety of subjects for small business owners. From business growth to marketing to how to make a budget, her work will give you tips to keep your business running smoothly.
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