In a Starbucks-esque move, the auto company will pay for workers' college degrees in a bid to decrease turnover.
First Starbucks, now Chrysler.
On Monday, the United States division of Fiat Chrysler Automobiles will announce that it will offer free college tuition to the 118,000 employees at its Chrysler, Jeep, Dodge, Ram, and Fiat dealerships.
Part-time and full-time employees who have worked at a dealership for 30 days are eligible to enroll in an associate, bachelor’s, or master’s degree program in 40 degree categories at Strayer University, a 123-year-old for-profit college based in Virginia. They can take classes online or at one of Strayer’s 77 campuses. The program will be introduced to 356 dealerships in Florida, Georgia, South Carolina, North Carolina, Alabama, and Tennessee on Monday. The company expects to roll out the program to its 2,400 dealerships nationwide later this year.
The new benefit is geared toward attracting and retaining the right kind of talent, says Al Gardner, vice president of dealer network development and president and CEO of the Chrysler brand, FCA US. Dealership showrooms experience annual turnover between 45-60%, Gardner says. Selling cars is “a wonderful thing,” but it’s a tough job, he says. Some salespeople create their own customer base, but that takes a commitment of three to four years on the job. If workers stay for six months or so, it’s hard to achieve that goal, he says.
Conversations with dealers prompted the plan for free college education, Gardner says. “Their largest issue is how to attract the right talent to take customer service to the next level.”
The program is a joint effort between FCA corporate and its dealerships. Employees will have access to the benefit, which covers 100% of tuition, fees, and books, if their dealership pays a flat fee to FCA to cover part of the program. Gardner declined to specify the fee amount. Neither Gardner nor Karl McDonnell, president and CEO of Strayer Education, would disclose what the program would cost the automobile company. McDonnell said that a bachelor’s degree at Strayer, excluding books, typically cost $42,000. (The Internal Revenue Service effectively caps the tax-free tuition benefits an employee can receive per year at $5,250. Anything over counts as compensation and the employee incurs taxes accordingly.)
Strayer and FCA first connected when the auto company asked the university for input on its internal training programs. FCA teamed up with Strayer on a free college program because it has what the company was looking for: accreditation, national reach, expertise in adult learning, and flexible academic offerings, according to Gardner. He says he is not concerned about Strayer’s for-profit status. A 2012 Senate report on for-profit schools found that Strayer “is doing a much better job of serving students than most of the companies examined.”
FCA’s education plan is similar to the one announced by Starbucks last month. The coffee chain offers full- and part-time employees full tuition coverage through Arizona State University’s online degree program. The big difference between the two programs is that Starbucks employees must initially pay for their courses; Starbucks reimburses student employees at the end of each semester. FCA will cover workers’ tuition upfront.
“It’s vitally important that we don’t ask these employees to put a cash outlay and then wait 90 or 180 days for reimbursement. Many of them couldn’t afford that,” Gardner says.
In the last 12 months, as the labor market has tightened, more companies are interested in offering employees tuition assistance, says Mark Ward, vice president and general manager for EdAssist, a company that advises employers on their tuition assistance programs. The increased interest comes after a decline in such programs following the recession. A study of nearly 300 employers commissioned by EdAssist found that 71% of companies offered tuition benefits in 2012, down 16% from 2009.
Ward says that more recently, employers are realizing that the benefit is considered especially valuable by a growing segment of the workforce: millennials. An EdAssist survey of millennials released last month found that if asked to choose between similar jobs, nearly 60% of respondents would pick the job with strong potential for professional development over one with regular pay raises. One in two millennials said they expected an employer’s financial support in paying for further education.
In an ideal world, employees wouldn’t have to rely on their employers to get an education, says Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce. On the other hand, employees who participate in tuition assistance programs are often developing skills that are directly related to their jobs, he says. “The economic power of that is great.”