It is increasingly common for employers to offer to pay training costs on behalf of employees. But what happens when they leave? Can you get your investment back?

Covering training costs

In today’s job market, employees are expected to have a greater level of educational qualifications than in previous years to get a job offer. It is not uncommon for many entry-level jobs to require an undergraduate degree.

Many employers assist their staff financially to obtain qualifications to complement their day-to-day roles. For sum of us, professional qualifications are a requirement.

What if, having paid out significant sums of money for employee training, that employee hands in their notice?

Repayment of training costs

It is tempting for employers to demand repayment of their investment in the employee when they leave.  Whether this is possible depends on the employment contract.

If there is no contractual right to allow the employer to demand repayment, the money cannot be recovered.

Some employers will try to recoup the training costs by making deductions from the employee’s salary during their  notice period.  However, it is highly likely this would be regarded as an unlawful deduction from wages and end up in  Tribunal claim.

Just because the employer has included a clause in the contract to claw back the fees, it does not mean that the employer is able to rely on it. Unless the discretion it watertight and well drafted, it could be seen as being a “penalty clause” – something which disproportionately punishes a party to a contract for a breach. A penalty clause is unenforceable –  the money cannot be recovered.

What about the Apprenticeship Levy

The UK Government, recognising people often find it difficult to gain the skills needed for jobs in a modern economy given the rising costs of studying, have increasing the availability of apprenticeships.

The Apprenticeship Levy is a ‘tax’ on employers with a salary bill of over £3 million. Employers who pay the levy are able to get access to funds to spend on apprentices and training.

There can be no recovery of the Levy from the apprentice. Apprentices cannot be asked to contribute towards the levy, even if they leave the training early or their employment ends.

If the cost of the training was paid partly by way of the Apprenticeship Levy and partly using the employer’s funds, it may be possible for part of the training costs to be recovered, but in practice this amount is likely to be so insignificant that the cost of pursuing it is not justified.

National Minimum Wage

The NMW rate for employees and workers depends on their age. You can see the 2019 rates here.

Paying less than NMW can result in a claim for unlawful deduction from wages, as well as investigation and enforcement by HMRC.

From time to time the government publishes lists of offending employees.

So, even with what appears to be a well drafted and watertight clause permitting the employer to claw back training costs from wages, there is a risk that, should a deduction, the employee will have been paid below the NMW.

What should employers do?

Employers  must take care not to draft repayment clauses that are excessive “extravagant and unconscionable. There is a fine balance to be drawn to allow for reasonable recouping of fees.

As some general guidance there should be:

  • An obligation on the employee to repay fees at a reasonable level;
  • A sliding scale of repayments, where the amount payable by the reduces depending on how long has passed since completion of the relevant course;
  • Have a cut-off period after which time no repayment is required; and
  • A specific contractual right for you to deduct training fees from wages or notice pay.

Any repayment agreement between employer and employee should be in writing and ideally signed by the employee before the training commences and clearly state which course is being paid for and which the employee is liable to repay in the event of them leaving.

One course may lead to another – an NVQ may lead to a foundation course and then to undergraduate degree. The employer should ensure that the employee signs a new repayment agreement for each new course that they start.

Getting it wrong can be incredibly costly.

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