Training costs are an immense cost to any organisations. Investing in staff in the long term maybe beneficial for the company but what happens when staff are fully/part trained and are considering leaving the business?
More businesses are aware of the financial consequences if investing in an employee and thus enforcing training agreements is one way of recuperating the cost.
Training agreement
A training agreement is between both the employer and the employee and its’ sole purpose is to protect the employer financially. Both parties must sign the agreement to be enforceable. Should the employee decide to leave midway through training or at the end of the training, the employer is able to recover some of the cost. Most employers operate a sliding scale over a 12 month period which typically starts at 100% sliding down to 0%. Should the employee remain at work for a longer period of time then the cost of paying back the training fees is substantially reduced.
The training agreement would include a clause stating ‘the cost of ____x_____ training will not be borne by the Company and is therefore subject to a sliding scale agreement which requires repayment by you to the Company in the event of the termination of your employment. The Company reserves the right to deduct a sum equal to the whole or part of the cost’.
The training agreement would heavily detail the terms of paying back the money, ideally through payroll. It is important that the employee has signed and agreed to this in writing; without agreement, the deduction would be an unlawful deduction of wages.
National Minimum Wage
There is also the question of the deduction falling below the National Minimum Wage (NMW).
In the case of Commissioners for HM Revenue and Customs v Ant Marketing Ltd 2020, a telemarketing company required new staff to participate in a mandatory training course for 3 days. The new recruits were told to sign a training agreement so should the employee leave the business for whatever reason within a six month period (resignation, act of gross misconduct) the money would automatically be deducted from their final salary.
There were 2 parts to this case, the first being the training agreement and the second being that the new recruits were offered accommodation via a third party of the organisation and rent was deducted from their wages.
The Company was issued with an underpayment notice from HMRC as the employees pay fell below the NMW.
The outcome of EAT was that the rent was not a reduction of wages as it had no connection to Regulation 14 of the National Minimum Wage Regulation 2015. However, the EAT stated the company was wrong to deduct pay in relation to the training agreement as wages fell below the NMW (Regulation 13).
It is important employers get it right. In some circumstances NMW rules may not apply should the arrangement agreed fall with the provisions of regulations 12 and 14 – see National Minimum Wage Regulations 2015 for further information.
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