Can I recover training costs if an employee leaves?

Throughout an employee’s tenure at your business, you may well pay for them to attend various training sessions, but can you recover those costs if they leave? The answer to this depends completely on the employee’s contract or the terms of any training agreements they have signed. If there is no contractual right that allows you to reclaim payment, the money cannot be recovered. You may be able to offset the amount owed against the money the employee is due to receive during their notice period; however this comes with its disadvantages. In this article, our Employment Law team detail on what grounds you can reclaim training costs, the risks involved and what considerations you’d need to make in regards to National Minimum Wage.

What should I be aware of before reclaiming training costs from an employee?

While offsetting the costs of any training against the money due to the employee for their notice period is one way for you to recoup any training costs, you should be aware that there is significant risk involved in doing so, as the employee may bring a claim for an unlawful deduction of wages. The deduction may also have an impact on National Minimum Wage.

There is also the chance that if you do decide to recover the fees owed that the salary owed might not be enough to cover the full amount of the training fees. Without a separate contractual agreement to recover the remainder, you will be unable to recoup the additional costs.

Even if you have added a clause or an agreement in the employment contract, its mere existence does not automatically mean that you are able to claim the fees back. It will entirely depend on the wording of the clause or the agreement and when the agreement to recover was entered into.

Clauses involving repayment of training costs have been found in some cases to be a penalty clause, meaning that it disproportionately punishes a party to a contract for breaching the terms of the contract. If the repayment of training costs clause is found to be a penalty then the clause cannot be enforced and the money cannot be recovered.

What considerations should I make in regards to National Minimum Wage?

Depending on how the employee is leaving the business, there is a risk that if a deduction is made for a repayment of a training cost, they may end up having been paid below the National Minimum Wage (NMW). A failure to pay the NMW can result in a claim for unlawful deduction from wages, as well as investigation and enforcement by HMRC.

If the repayment arises because you terminate the contract of employment fairly, such as in a redundancy situation, the deduction can be made, providing it does not bring the pay owed to the employee below the NMW.

If an employee voluntarily resigns and carries out their notice period or commits an act of misconduct resulting in a deduction of wages for repayment of training costs, then you can make this deduction, irrespective of the implications it may have on the NMW.

If an employee resigns their post with immediate effect, citing breach of contract against you, you will not be able to deduct the cost of any training from the pay owed to them, as they are rendering the contract null and void.

Tips for employers regarding training

When drafting repayment of training costs clauses, you should include a:

• general obligation on the employee to repay fees at a reasonable level;
• sliding scale of repayments, where  the amount  due reduces depending on how long has passed since completion of the relevant course;
• certain length of time in which no repayment is required; and
• specific contractual right for the employer to deduct from wages or other sums due to the employee for repayment of fees.

Care should be taken to ensure that any repayment agreement between yourself and your employee is documented and signed before the training begins and clearly states as far as possible exactly which course is being paid for and for which the employee is liable if they leave.

You should ensure that the employee signs a new repayment agreement for each new course that they start. While an agreement that follows these guidelines can mean that you are able to recover at least some of the training costs, every case is unique and a blanket approach will not always work. While this can seem quite straightforward, we would always recommend that you seek legal advice when drafting these documents, as any incorrect information could lead to costly claims being brought against you.

Can I recover the Apprenticeship Levy?

The Apprenticeship Levy is a tax on employers with a pay bill of over £3 million, which came into effect in April 2017.

If you are using the Apprenticeship Levy, you cannot ask your apprentice to pay for, or contribute to, the levy even if they leave the training early or their employment ends.

However, if  the cost of the training was paid partly by the Apprenticeship Levy and partly using your own funds, it may be possible for the training costs paid by your funds  to be recovered, although it will be difficult for you to separate these funds out from each other.

If you are trying to reclaim training costs from a former employee, or you would like assistance in drafting a repayment clause, you can contact our Employment team on 023 8071 7717 or email employment@warnergoodman.co.uk for further advice.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice. All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.