Now is the time to be thinking about education, as millions of children return to school from their summer vacations. For employers, this is a great time to focus on how to help employees with their education and career development. In this tight job market, (37% of small businesses couldn’t fill jobs last month), focusing on education may be just the thing to give you an edge in retaining your current employees and hiring new ones.
Training and retraining
Think about investing in training and retraining employees to handle the new skills needed today. An IBM study found that employee training is happening at 84% of the best organizations in the U.S. while only 16% at the worst-performing companies. Today there are many low-cost online self-study programs you can use for your staff. Or you can bring in instructors to do group training, such as explaining a new technology you’re going to implement.
Paying for higher education
You can offer education assistance on a tax-free basis to employees. If you do, you can deduct your cost and there’s no employment taxes on this fringe benefit. Your options:
- Create an education assistance plan to pay up to $5,250 annually per employee (whether or not work-related). The program must be nondiscriminatory and, because of this, may limit access for owners and family members.
- Reimburse employees for work-related education to maintain or improve job skills. There’s no dollar limit, and you can set any reasonable requirements (e.g., no reimbursement unless the employee obtains a B or better).
Helping with child care
As employee’s children go to school, consider helping employees with their child care. The more you can do to ease their financial burden and give them peace of mind, the better off the company will be. Some ideas:
- Offer flexible work schedules. For example, allowing an employee to leave work at the end of the school day eliminates the after-school child care cost (assuming you can work out the hours that you need the employee to work at your location and/or from home).
- Pay for some child care. If the company can afford it, contributions up to $5,000 annually are tax free to an employee (you aren’t required to contribute the maximum). The plan must be nondiscriminatory (i.e., it can’t favor you and family members who work for the company).
- Create a dependent care flexible spending account (FSA). Even if you don’t contribute toward child care, setting up an FSA allows an employee to pay for child care up to this amount on pre-tax basis.
- Set time–off policy. Consider giving paid or unpaid time off to employees so they can attend teacher conferences, see school plays, go on school trips, or otherwise participate in their child’s education. At the least, check your state laws on mandatory leave for school activities. According to Paychex, 9 states and the District of Columbia require unpaid leave ranging from 4 to 40 hours annually (small businesses are exempt in some states).
How to proceed
Talk with your CPA or other financial advisor to see how education assistance can work within your company’s budget. Learn more about the tax and payroll implications of education assistance (including dependent care) from IRS Publication 15-B.
