So, your hardworking employee wants to further their knowledge by going through a training program?
Maybe you’re excited for them. Maybe you think it’s a waste of time.
Or just maybe, you’re one of the 83% of organizations that pay for education-related programs.
If you’re feeling generous—and looking to boost your company’s bottom line—create an employee training reimbursement policy.
What is training reimbursement?
Training reimbursement is when a company covers the cost of a training program an employee elects to do. Typically, training should relate to the employee’s position. Training reimbursement policies generally fall under the category of tuition or education assistance.
Choosing to offer training reimbursement can do a lot for your business. Establishing a policy can improve retention, boost workplace productivity and engagement, add skills and knowledge to your company, and improve cash flow.
When it comes to providing training reimbursement, you may:
- Pay for a training program an employee voluntarily signs up for
- Pay for a required continual training where employees can choose the program
Voluntary employee training
Many businesses that let employees voluntarily further their skills and knowledge include training reimbursement in an education assistance policy. Education assistance reimburses employees who pursue training, certification, or a degree.
Education assistance is considered non-taxable income up to $5,250. This means you can give employees up to $5,250 and exclude it from their income (and from the W-2 form). Although you can provide more than $5,250, the excess is taxed.
Required continual training
Most businesses that require employees to get training, but give them the freedom to choose the program, cover the cost. As more employers shift toward providing online training versus in-house training, employees have more options.
If you decide to let employees choose their training program, make sure to review their selection. That way, you can verify it meets your business’s training requirements.
Letting employees choose where to attend required continual training is also prominent in businesses with remote teams. Employees who want to attend in-person training can opt for a program near their residence.
Creating your employee training reimbursement policy
If you decide to cover the costs of an employee’s training, you need to create a policy and distribute it to your staff.
Add your training reimbursement policy to your employee handbook. Make sure your employees have access to either a digital or physical copy of the handbook.
Here is some of the information your training reimbursement policy should include:
1. Process for getting a program approved
Giving employees the option to further their education or choose their required training program shouldn’t be a free for all. One of the first things your policy should address is how employees can get their training program approved.
Employees should get their programs approved prior to signing up for the training. That way, they know whether or not your business covers the cost.
The information you may want employees to provide may differ from what another business requires. Generally, the approval process should include the program’s:
- Title
- Description
- Date and time
- Location
- Cost
- Relation to the employee’s position
You may ask employees to provide a copy of this information. Or, you might require the employee to fill out an official form.
Be sure to keep the information in the employee’s folder, as well as whether you approved or denied their request.
2. Maximum reimbursement amounts
Your employee training reimbursement policy should also discuss how much you are willing to pay. Again, keep the IRS’s education assistance limits in mind.
For example, you might agree to pay:
- 100% of the employee’s training costs, up to the IRS non-taxable limit of $5,250
- 80% of the employee’s training costs, up to the IRS non-taxable limit of $5,250
You may also set different maximums depending on the employee’s score and whether they finish the program in its entirety or not.
For example, you might pay for 100% of the employee’s training if they receive an “A” or “B” and 50% if they receive a “C.”
3. Vesting schedule, if applicable
Some businesses set a vesting schedule when creating their training reimbursement policy.
When something is vesting, an individual does not yet have full ownership of it. Once the item has gone through a vesting period (e.g., months or years), the individual has full ownership.
You may subject training reimbursements to a vesting schedule. This means that the employee must pay back all or part of their reimbursement if they separate before it fully vests.
Let’s say you require an employee to work for you for two years before you provide a training reimbursement of $384. This means it takes two years before the training reimbursement fully vests. If the employee leaves after one year, they must pay half of the total training reimbursement.
4. When the employee receives reimbursement
Another piece of information to include in your policy is when the employee can expect to receive the reimbursement.
You might decide to provide reimbursements:
- Before the employee starts training
- After the employee’s training program ends
- Some upfront, some after the class
Once you decide when to give employees reimbursement, make sure to be clear about it in your policy. If you do partial payments before and after, notify your employee of the amounts.
5. Employee training reimbursement agreement
No employer policy is complete without employees’ acknowledgment. Your policy should include an employee training agreement.
Before covering the cost of a program, gather the training reimbursement agreement from your employee.
The agreement should include things like:
- Verification that the information is accurate
- Confirmation that the employee will pay back whatever hasn’t vested
- The employee’s signature
- The date
Employee agreements for repayment of training costs are essential to negate legal issues if the employee is terminated before their reimbursement vests.
Make your training reimbursement policy accessible to your employees by storing it in Patriot’s online HR software add-on! Interested? Try it for free today!
This article has been updated from its original publication date of August 26, 2019.
This is not intended as legal advice; for more information, please click here.