What makes the Starbucks tuition perk unusual among companies


The baristas who make coffee at Starbucks are about to get a grande new perk: Full tuition reimbursement for an online degree from Arizona State University for their junior and senior years of college.

The new program was unveiled Monday in a media blitz that included an emotional video, its very own hashtag and a launch event in New York featuring CEO Howard Schultz, ASU President Michael Crow and U.S. Secretary of Education Arne Duncan. Yet beyond the branding, the program does in fact take a distinctly unusual approach to the traditional tuition reimbursement benefit among companies.

For one, rather than reimbursing funds to the school of an employee's choice, Starbucks has partnered with a single institution. Starbucks also appears to be the first major company to partner with a public university's online program, according to Mark Kantrowitz, the senior vice president and publisher of Edvisors.com, a college financial aid Web site.

In addition, for many Starbucks "partners," as the company calls its employees, the new program could be more generous than traditional programs. Full tuition to ASU can run approximately $15,000 a year, according to estimates provided by a Starbucks spokeswoman. Most other companies that offer a tuition benefit, says Aon Hewitt partner Carol Sladek, keep it below the $5,250 limit the IRS sets for corporate tuition reimbursement before it's taxed as income.

"It’s a very different approach," Sladek says of the new Starbucks program. "Most employers are providing employees with more flexibility about where they’re going to school but lower dollar amounts." She calls the full tuition benefit "incredibly rich," but also acknowledges the lack of school choice means "it’s a tradeoff."

The program is also innovative in the way it staggers the benefit, encouraging workers to finish their degree while staying on as employees in the process. Workers will be eligible for partial tuition scholarships for their freshman and sophomore years, and those who enroll as juniors or seniors will receive full tuition reimbursement.

That approach should help retain workers in an industry that's known for high turnover"Starbucks is not an altruistic organization," says Bruce Elliott, the manager of compensation and benefits for the Society for Human Resources Management (SHRM). "There's got to be a business reason behind it." He says the design of the program, to his knowledge, is unique and shows that Starbucks is "looking to retain people and reduce their turnover. They're putting some money up front, but they're backloading the investment."

The new program comes amid an overall decline in tuition benefits among corporations. In SHRM's 2014 Employee Benefits Survey, which has yet to be released, 54 percent of companies offered undergraduate educational assistance, down from 61 percent in 2013. However, Elliott notes that tuition benefits are still "front and center" among larger companies.

Starbucks is not the first company to offer tuition benefits for hourly workers. In 2010, Wal-Mart began a partnership with the for-profit online American Public University, which gives employees and eligible family members a 15 percent tuition grant, as well as free undergraduate books and course materials. Other retail chains offer tuition reimbursement but with more restrictions; while still others, such as the chain Chick-fil-A, offer scholarship programs for which employees must meet certain criteria.

Of course, the features of the program are not the only thing that made Starbucks' announcement unusual. Schultz used the press conference to speak of income inequality, access to the American Dream and the responsibility of for-profit companies, calling the the program "a monumental historic moment in time for our company." This was no mere announcement of an employee benefit. It was an opportunity for Schultz to define the kind of company he wants Starbucks to be — both to employees and to customers.

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Jena McGregor writes a daily column analyzing leadership in the news for the Washington Post’s On Leadership section.
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