Training Clawback Agreements

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Training clawback agreement

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There has been a significant increase in situations where a Company wants to recover the cost of training from an employee where the employee leaves the Company soon after the training has been completed. This is where introducing a training clawback agreement can be useful. 

The idea of recovering of training costs is not new but the high cost of training coupled with the employee’s desire to better themselves and further their career making them more attractive on the job market is a significant factor in this subject being high on the agenda.

In some cases, the cost to the employee if a Company recovers training costs can run into thousands of pounds and invariably this is far greater than the money available to deduct from when the employee leaves – this creates further problems.

These are often referred to as training clawback agreements.

How do training clawback agreements work?

It is an agreement between employer and employee to recover training costs such that the employer pays for the training and the employee agrees to refund the cost of the training should they decide to leave within an agreed period of time. The clawback is normally done on a sliding % basis with the clawback reducing further over time.

Are training clawback agreements lawful?

Yes – an employer can recover training costs/fees from an employee who leaves within a certain period of time provided that there is a clear provision in the contract of employment or in a separate written agreement where the employee has consented.

In some cases there will be a “catch all” clause in the contract of employment which enables the employer to reserve the right to deduct monies when the employee leaves in respect of training that the employer has paid for. Such clauses can be quite generic in nature.

Alternatively, when an employer agrees to send an employee on a training course and/or fund them through studies or a qualification, the employer’s willingness to fund the training is conditional on the employee agreeing to sign a clawback agreement in respect of the course fees should they decide to leave.

What are the timescales?

There are no set timescales and very little statutory control over clawbacks but most Companies do a sliding scale on a % basis such that if the employee leaves after – say 2 or 3 years – there is nothing to pay back.

Typically the % clawback if the employee leaves just 6 months after the course would be 100%, reducing to 75% if they leave 6-12 months after completing the course – but this is only a guide.

How do you clawback the money?

In most cases the amount owed by the employee will be deducted from their final monies but where the amount is considerable, further payments terms will have to be agreed. However, there must be a specific clause making provision for deduction from final monies – or at least the employee’s written agreement, otherwise you are into the realms of unlawful deductions.

How do you calculate the amount to be recovered?

With difficulty! This is never straight forward because in addition to funding a course, the employer may have funded exam fees, text books, accommodation, travel etc.

It can get quite messy and it might be perceived as churlish if you start to recover 50% of the mileage costs for an employer to go to a course so it is important to be pragmatic and come to a sensible mutual agreement.

Can clawback arrangements apply to all external courses?

Yes – but training clawback arrangements are primarily designed to protect the employer in situations where they have invested a significant amount of money sending an employee on a course. Recovering a few quid after someone has been on a 1 day First Aid Refresher is a bit petty but it is not unreasonable if you have spent over £1,000 on an employee’s professional qualification and now they are more qualified, the employee has increased their market value.

But, relying entirely on the law in these situations is unhelpful and it is more sensible to exercise common sense. Employers want to demonstrate their commitment to employee training and development and foster an environment where talent is recognised but the reality is that some people will always think the grass is greener…..and leave.

Conversely, employees may be somewhat reluctant to put themselves forward for training and development if they think they are going to be slapped with a training costs recovery agreement every time they go on a course.

Whilst generic clauses in a contract about recovery of training costs serve a purpose, it is always preferable to draw up a clawback agreement with the employee at the point at which you commit to fund the training.

AB HR Solutions offers HR support to businesses, if you want advice or support on any of the issues raised in relation training clawback agreements, get in touch.

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