Recovering Training Costs
June 26, 2023
There are many great reasons to invest time and money in training your employees, not least:
- Helps you to grow, attract and retain great talent
- Increases employee engagement and motivation
- Encourages innovation and new ideas
- Improves efficiency and productivity
- Reduces staff turnover
- Multi-skilled and competent staff provide greater flexibility
- Keeps your customers happy
- Impacts on the bottom line
But what happens if an employee decides to leave – can you recover the costs of your investment in their training?
The answer to this will usually depend on the terms contained in the contract of employment or any individual training agreement they may have signed up to in advance of their training course. It is important to be aware that a contract clause alone may not be sufficient to enable you to recover the costs of training.
Penalty?
In some cases, contract clauses that require the repayment of training costs have been found to constitute a penalty clause. This effectively means that one party is disproportionately punished for breaching the terms of the contract. If the clause is determined to be a penalty then it cannot be enforced and the money cannot be recovered. Express agreement before each event is highly recommended.
Training Agreements
Before booking a training course it is advisable to discuss the training with your employee and ask them to sign a training agreement.
A training agreement should outline the details of the training to be undertaken and explain what the consequences will be if they fail to complete the training or leave the company within a specified period after completion.
Typically a training agreement will outline the initial cost of the training and introduce a repayment schedule on a sliding scale. This means the longer the employee remains in employment, the less they will need to repay upon leaving.
How much can I recover?
Any training repayments should not be excessive or unreasonable – they should be reflective of the actual loss to the company. It should be assumed that the employer will benefit from the training undertaken by way of increased competence, efficiency, productivity etc so the amount to be recovered will usually be reduced to account for this. For this reason repayments are often agreed on a sliding scale.
How long should a sliding scale be?
The exact arrangements are for the employer and employee to decide, but must be fair and reasonable. An appropriate scale will usually be dependent on the length and cost of the training undertaken. An amount reducing over 12 months may be right for some courses, but for lengthier or more expensive courses, it may be appropriate to arrange the repayments over a longer period.
As an example you could agree an amount to reduce monthly or quarterly as set out below:
- Within 3 months of training – 100%
- Between 3 months & 6 months – 75%
- Between 6 months & 9 months –50%
- Between 9 months & 12 months – 25%
- After 12 months – 0%
Can I deduct the costs from final pay?
You must have an express written agreement in place to allow you to legally recover training costs. In some cases a well worded clause in the contract of employment will be sufficient to provide this legal right, but for best protection the training agreement should include a provision to allow you to make a lawful deduction from the employee’s wages under the terms agreed.
Unlawful deduction from wages
It is good practice to make sure you have an express written agreement for each relevant piece of training to avoid any claims of unlawful deductions from wages. This will ensure the individual is certain of their obligations and further agrees to any deductions that may become necessary.
What if there is not enough final pay to cover the cost?
A well drafted training agreement will include the ability to recover any remaining balance through agreed terms after the employee has left. Typically this could include an agreement to repay the final amount within one month of leaving, or if the amount is significant it may allow for a phased repayment of e.g. 3 months.
For advice on training agreements and lawful deductions from wages, please contact us: 01284 336060 or 01284 774726.