Don’t call a payment a ‘penalty’. We provide you with a list of stored cookies on your computer in our domain so you can check what we stored. It has been reported that some large firms, such as Capita and FDM, are putting some employees through training schemes which cost very little, but which the firm is requiring people leaving their employment after completing the courses to repay much larger sums, reportedly up to £18,500. Contact us Payroll Equally, if the business has incurred fees but received grants from other bodies or public authorities to cover the costs, then the fees should be reduced; it will not be reasonable to seek duplicate recovery from the employee. Read this guide for more information. If you would like to insert a repayment of training costs clause into your contracts of employment, If you want to enter into a separate repayment of training costs agreement, For tax issues in relation to training costs. Click here for a full list of third-party plugins used on this site. Although the label the parties have attached to an agreement is not conclusive, it will make it harder to argue that it is a genuine pre-estimate of loss. For this purpose 'repayment of training costs' clauses can be inserted into employment contracts, internship contracts or apprenticeship agreements. This guide looks at what constitutes a repayment or clawback clause; what can be repaid via such a clause; whether such clauses are actually enforceable in law; the relevant employment cases on repayment clauses; some drafting tips to consider if you want to use such a clause; and lastly how to go about enforcing such a clause. For example, if an employer sends someone on a course which costs the employer £2,000, and the employee leaves their employment immediately after the course finishes, then the employer has received no benefit from their investment and, with a properly drafted agreement in place, could legitimately recover the £2,000. Please be aware that this might heavily reduce the functionality and appearance of our site. A while ago I wrote a post about the repayment of training costs and it appears to have hit a nerve. Can an employer reclaim enhanced maternity pay from an employee who does not return to work, or a termination payment from an employee who lodges tribunal claims, despite agreeing not to? [email protected] | Tel: 01243 836840, Pure Employment Law is the trading name of Pure Employment Law Limited, registered in England and Wales with company number 07134294 and whose registered office is 1 Little London, Chichester, West Sussex, PO19 1PH. if you cease employment before you attend the training course but the Employer has already incurred liability for the costs, [100]% of the cost or such proportion of the costs that the Company cannot recover from the course provider shall be repaid; if you cease employment during the training course or within 12 months of completing the training course, [100]% of the costs shall be repaid; if you cease employment more than 12 months but no more than 24 months after completion of the training course, [50]% of the costs shall be repaid; if you cease employment more than 24 months but no more than 36 months after completion of the training course, [25]% of the costs shall be repaid. The repayment reflected the employer’s loss of a qualified employee and the amount to be repaid decreased over time. How have you calculated the sum to be paid? If so this right needs to be expressly set out in writing, otherwise it runs the risk of being an unlawful deduction from salary. they are paid a significant sum, but this is subsequently found to be based on misleading or misstated accounts, to recover or withhold some or all of the costs you have incurred for something which will benefit the employee (e.g. The latest guidance on the extended furlough scheme, Fines for employers who knowingly allow a self-isolating worker to attend the workplace, Furlough scheme extended – what we know so far, Three things the Johnny Depp case teaches us about Employment Tribunal litigation. To control which cookies are set, click Settings. In such a case, it may be particularly important to fix in advance what sum will be paid in the event of a breach. the business breaches the employment contract and the employee can argue they have been constructively dismissed), then the business can still seek to enforce the separate repayment terms. COMPLETION DATE OF TRAINING: REIMBURSEMENT MONTHS 0-6 100% MONTHS 7-12 75% MONTHS 13-18 50% MONTHS 19-23 25% MONTH 24 0% . Is it lawful for an employer to demand the repayment of training costs? That is why it should be carefully drafted to ensure it does not get challenged under this category. Give proper thought to the situation and set out reasonable terms. Learning & Development Workplace Issues including Disciplinary and Grievance. Our website uses cookies. For example, in. Kathleen Healy explains how to ensure your repayment clauses are enforceable. The courts are likely to take into account notes detailing the business’ assessment of the situation and thought process, so keep records of these and set out your rationale in correspondence with the employee. Typically this will be in the contract of employment and ideally the relevant clause will also provide that relevant costs can be deducted from any salary or other payments due to the employee. But importantly for employers, it can also be used to set out when an employee might become responsible for repaying any of those training costs , as well as how that repayment would work. If it is designed to prevent the employee breaching the contract, it is more likely to be a penalty. As such, it was a genuine pre-estimate of loss. what the clause relates to, e.g. In most cases they relate to training fees and relocation fees paid for the benefit of the employee. Click here for a full list of Google Analytics cookies used on this site. Consider if it may be appropriate in some circumstances not to demand repayment e.g. Digital. Quite reasonably, employers want a return on their investment before the employee chooses to move on. If the employees decide to leave the organization, an employer can demand that they reimburse the training costs. These clauses will be enforceable if they are a ‘genuine liquidated damages clause’. See our extract of a training repayment clause below: Except in the circumstances set out in clause [ ] you shall repay the Employer as follows: Standout firm known for its personal insolvency work for clients including private companies, individuals and governmental institutions. This time I am writing from the employer’s perspective, expanding the theme and updating it. Subject to the question of enforceability (see below), there are no legislative limits on what can be repaid. Change Management Your choice regarding cookies on this site, Dealing with corona virus in the workplace, Changing terms and conditions of employment, Data protection - General Data Protection Regulation (GDPR), Drafting tips for contracts of employment, HR tasks on the sale and purchase of companies. However, care needs to be taken when drafting the clause to ensure that it is enforceable. In law, a provision that a party to a contract has to pay the other party to the contract a stipulated amount in the event of specified event, for example a breach of contract or an employee leaving their employment, will only be enforceable if the amount that the party has to pay is a genuine pre-estimate of the other party’s loss. Specialist Services - Litigation and dispute resolution, Specialist Services - Residential property, Specialist Services - Commercial property, Contact me for more information about our fixed fee service to recover training costs, I consent to Moon Beever contacting me about further offers and services, I consent to having the above details kept on file for newsletter purposes, Constructive, wrongful and unfair dismissal, Restrictive covenants, confidentiality, obligations & team moves, Freehold and leasehold acquisitions and disposals, Third Sector, Public & Government services, Insurance providers: General & Regulatory Matters, It provides for payment of a specified sum by the employee in the event of his breach of contract; and, If the sum specified is disproportionate in comparison with the greatest loss that could possibly have been proved as a result of the breach. It is not that unusual for employers to require employees to repay their costs of training or other professional fees that the employer has incurred on their behalf if they leave their employment. In comparison, a penalty clause is penal because the innocent party requires payment of a sum which is typically more substantial than the damages they could recover in common law, with the intention of deterring the employee (for example) from breaching the contract. Best practice is to inform the employee that you are going to exercise the clause. It nevertheless remains good advice that the more proportionate the sum the employer seeks to recover, the more likely the court is to enforce the provision. We fully respect if you want to refuse cookies but to avoid asking you again and again kindly allow us to store a cookie for that. Always get the employee to read the terms, take legal advice on the terms if they wish and sign and return the agreement to the business.
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