Training costs when employee leaves?
Can an employer recover training costs when an employee leaves?
It is becoming increasingly common practice for employers to offer to pay training costs on behalf of their employees, however, what happens when the employee leaves, can an employer recover training costs?
How can employers recoup the investment that they have made in that employee?
It is expected in today’s climate that employees are expected to have more qualifications than perhaps they would have previously had to have had for certain roles. As such, it is not uncommon for an employer to invest in an employee by meeting external training costs to upskill their employees. It is also true that in today’s climate employees are more likely to change roles and as such change employers.
If so how can an employer protect their investment that they have made in an employee when an employee resigns?
Much of the answer will lie in whether the employer has a contractual right to claw back training costs when an employee leaves. If there is no contractual right to claw back the training costs then an employer will be unable to recover the monies. In this situation an employer may try to deduct the costs from the employees’ salary whilst working their notice. This runs an increased risk of the employee making a claim of unlawful deduction of wages or indeed if the claw back that the employer made brings the employees’ salary under the national minimum wage, the employee can have a claim for non-payment of the national minimum wage.
However, even though an employer inserted a claw back clause in the employees’ contract of employment in an attempt to recoup on their investment, should an employee leave shortly after completing training or before completing the training, the employer needs to be careful that the clause is carefully drafted so as not to amount to a penalty clause. A penalty clause is a clause that can be construed as a punishment. As such, a penalty clause will not be enforceable by the employer.
In 2017 the government introduced the Apprenticeship Levy which is a tax on employers with a pay bill in excess of £3m. Those employers who pay the levy are able to access funding for apprenticeships and training. However, employers are unable to recover the levy from the apprentice if either the training terminates early or the apprentice leaves employment.
So what can an employer do when an employee leaves employment either during or shortly after the employer has invested in training for that employee?
For employers, it is important to have the contractual right to claw back training costs. However, the employer needs to ensure that the drafting of such repayment clauses are such that they are not deemed to be “extravagant and unconscionable”. The employer must make certain:-
- There is a sliding scale of repayments whereby an amount to be repaid by the employee reduces depending on the length of time that has passed between the completion of the course and the employee leaving employment;
- Allow the contractual right to deduct such training fees from the employees’ wages or notice pay;
- To have an obligation on the employee to repay the training fees at a reasonable level;
- After a certain period of time no such repayment by the employee is required.
With regard to National Minimum Wage, there is the concern that the employee would have a claim should the deduction from the notice pay make the employee fall below the National Minimum Wage requirement. Case law has clarified the position as to whether the employee would have a claim that where an employee resigns or is guilty of misconduct which results in the seeking of the repayment of the training fees by the employer, then such a deduction will not have to be considered for National Minimum Wage purposes.
If, however, the employer was to make the employee redundant and such a deduction would result in the employee receiving less than the National Minimum Wage, the deduction would then be taken into account.
The employer should also ensure that any such agreement for the repayment of training fees is entered into with the employee prior to the commencement of the training.
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