Avoid these training repayment clause mistakes

What is a training repayment clause? The term clause gives a clue, because it is contractual – a clause within a contract. You cannot just impose a repayment if they leave, it will need to have been agreed to beforehand or it will fall foul of statutory law under unfair deduction of wages. This could either be in the format of a contract or another written agreement. In this blog we look at the the common mistakes employers should avoid when it comes to training repayment clauses.

While Henry Ford’s apparent retort to “What if I train them and they leave?” was wittily “What if you don’t train them and they stay?”, a pragmatic third way is: training repayment clauses.

But what are they, how should they be drafted and when can they be used? Because they are a little more complicated than meets the eye.

What is a training repayment clause?

The term clause gives a clue, because it is contractual – a clause within a contract. You cannot just impose a repayment if they leave, it will need to have been agreed to beforehand or it will fall foul of statutory law under unfair deduction of wages. This could either be in the format of a contract or another written agreement.

Common training repayment clause mistakes

So you create a training repayment clause in advance of training being done and get the employee to agree to it in writing: whether that is a clause in your employment contract, a standalone training contract or a written statement.

But that does not give you carte blanche to do what you like. There are several ways in which you can misstep which would render your agreement unenforceable if it were challenged.

Not being specific – Your employee needs to understand what they are agreeing to, so the type of training covered; the cost (or a method of calculating it); and the trigger for repayment, like form of departure and a time period. Special consideration should be given to situations like redundancy or maternity-related departures. If your wording is loose, you will find it easily challenged.

A punitive clause – If the repayment terms are deemed in excess of your legitimate business interest they are unlikely to be enforceable. This means they should compensate for real costs only.

Making it a cliff-edge liability – There is danger in having them on the hook for 100% liability for a set time and then 0% afterwards. It is safer for you, and fairer, that a sliding scale is used. For example, your clause may require 100% repayment if they leave within 0-6 months, 75% repayment if they leave in 6-12 months, a 50% repayment within 12-18 months, 25% in 18-24 months and no liability thereafter.

An unclear payback mechanism – If you just take what is owed from final salary (including payment in lieu of notice) without explicit consent, you can still be guilty of unfair deduction of wages. So ensure this consent is drafted into the clause, or outline an alternative repayment method such as instalment payments after the employment ends or the issuance of repayment invoices with set due dates.

Retain evidence of relevant costs – You will be in a much better position to enforce repayment costs if your clause has described how you will evidence relevant costs, and then, of course, you have kept this evidence to back up your claim.

National minimum wage consideration – If the training is a mandatory requirement for the job, the training cost will count against the national minimum wage, so payment cannot be recovered if it would take their pay below that level.

Technical help from The HR Dept

A key question to ask yourself is: Is your wording fair, proportionate and transparent?

Helping SMEs get the wording right on legal documents like training repayment clauses is one of our USPs. We offer the same expertise as employment law firms but at a lower cost. This makes us a natural choice for SMEs who want to do things correctly on a budget. Get in touch today for a review or a new clause drafted. Call us on 01179 702955 or visit www.hrdept.co.uk