Will Kroger's tuition assistance program attract and retain workers?
- Kroger this week introduced “Feed Your Future,” a learning and education benefit for workers, as part of the company's larger “Restock Kroger” growth effort, according to a news release. Feed Your Future will support both full- and part- time employees, whether they are pursuing GEDs, MBAs or professional certifications, Kroger Chairman and CEO Rodney McMullen said in the news release.
- McMullen credits lower federal taxes under the Tax Cuts and Jobs Act for giving Kroger the ability to provide the benefit to workers. The tax overhaul is expected to save the grocer about $400 million per year, and Kroger executives have said they will use around a third of that savings to benefit workers, including pay raises and boosting the company match to employee 401(k) savings plans from 4% to 5%.
- Employees must be with the company for at least six months to qualify for Feed Your Future. Kroger will offer workers an education benefit of up to $3,500 a year – or $21,000 over the course of their employment – toward education and development opportunities. It also will allow employees a leave of absence to focus on their education without losing their position or seniority within the company.
Kroger is feeling the pinch of a tight job market. McMullen hints at the overall goal of the Feed Your Future program when he says, “We believe investing in education will support and encourage lifelong learning and reinforce our ‘come for a job, stay for a career’ opportunity culture.”
These programs can be good for both workers and businesses. A recent report by the Lumina Foundation suggests that education benefits, if done strategically, can more than pay for themselves by reducing employee turnover. These programs can be affordable for the businesses that offer them. Authors of the Lumina report note many companies looking to launch education programs turn to for-profit colleges, which took a hit during the recession and offer steep discounts to businesses in order to gain access to their workers. The education programs also are tax deductible for companies.
What's more, Feed Your Future comes at a time when Kroger and other retailers want to keep employees happy but also are worried about demands for significant pay increases. Because food retail is a low-margin business, pay raises can trim earnings. Although Kroger is among companies that have recently increased starting pay for hourly workers, company officials may fear widespread state calls for wage increases.
The federal minimum wage has stayed at $7.25 since 2009, but that hasn’t stopped states and cities across the country from passing their own pay increases. According to a September report from UBS analyst Michael Lasser, 31% of U.S. grocery stores are in states with wage increases planned over the next three years. Two of the most vulnerable retailers, he noted, are Kroger and Sprouts Farmers Market.
Kroger also may be looking to keep up with competitors. Publix reimburses employees to up to $3,200 annually. There's a lifetime limit of $12,800 if they are studying at a four-year college or university, or $1,700 a year with a $3,400 cap for students enrolled in community college, technical certificate programs or individual courses.This program, like many others offered in a variety of retail industries, is tied to specific coursework related directly to a worker’s job or plans to advance within the Publix family.
Still in very early stages, Kroger’s Restock program — including Feed Your Future — seems to be a step in the right direction for the supermarket giant. After announcing the new strategy, Kroger’s stock price stabilized, after dipping 14% in 2017 as investors remained wary of competitors.
The education benefit could be a plus for both the grocer and its workers if those employees do, indeed, grow in skills, stay with Kroger and advance within the company. Still, these programs tend to be underutilized by workers who either may not be aware of the benefit, or who face other obstacles to attending college, such as transportation, family obligations or who lack finances to pay school costs not covered by an employer’s plan. Kroger should ensure that employees know about their new program, and go the extra mile to support their taking advantage of it.