Recovering training and other costs after employment ends – what’s the position?

Employers often pay for their employees to attend work-related training, or cover the cost of other fees incurred in connection with employment. These costs can be significant, and if an employee leaves within a few months of payment, the employer may feel that they have not gained much from covering the costs. This is especially so for small businesses. Employees will often not be in a position to pay for the training or other fees, so this may leave employers in a difficult position moving forward.

This is a topic which has been the subject of much debate lately, with a number of newspapers shedding light on the NHS nurses who have come to the UK from overseas, had expensive fees paid for them (including in relation to training, immigration and recruitment), and who now feel trapped in their jobs as they cannot leave without repaying these fees to the NHS.

This article will look at the recovery of training costs and other fees which employers may pay on their employees’ behalf, and what employers can do to protect their position.

What exactly can be recovered?

• Training and course costs;
• Professional registration or membership costs; and/or
• Immigration-related costs.

As the name of this article would suggest, training and course costs which an employer pays on behalf of an employee can be recovered. These should be the true costs which the employer has paid or will pay for the employee.

As well as training costs, employers who pay professional registration or membership fees on behalf of their employees may well be able to recover such fees. Consideration should be given to how often these costs arise and how they can be recovered from employees.

Some employers will also pay immigration-related fees, or other recruitment fees, in order employ skilled workers to come and work for them from outside the UK. These fees may also be recoverable or, in some cases, refundable.

How can these costs be recovered?

• Separate written agreement; or
• Employment contract.

These costs can only be recovered if an employee has agreed, in writing, to their recovery. The usual approach will be to seek employees’ agreement to recovery of these fees in a separate agreement or through inserting a clause in the employment contract.

A separate agreement may be more appropriate for existing employees who are embarking on training courses. The employment contract approach may be more suitable for new employees and where the employer knows that it will be incurring such costs from the outset. Indeed, current employment law requires employers to set out the types of training they will pay for, and those which the employee will be responsible for, in the employment contract.

Whichever approach is adopted, an employer should be careful to ensure that the repayment mechanism is clearly worded and reasonable in scope. This means setting out the exact fees to be recovered, together with the circumstances in which they will be recoverable.

Whether a repayment provision is reasonable or not will turn on its precise wording. However, the courts have found that a tiered repayment agreement, providing for a proportionate amount of fees to be repaid if the employee left within a certain amount of time of the fees being incurred, was reasonable in one case. The tiered repayment approach is one which many employers seek to rely on as, after a period of time, they will have often seen at least some of the benefit of the training (or whatever it may be) such that it is no longer reasonable to charge the employee the full cost.

It goes without saying that repayment provisions should not be used by employers as excuses to deduct sums from employees on termination where they have not actually incurred such sums. For example, where sums are deducted to cover training costs but no such training occurred.

Are there any risks?

Yes. Even if an employer takes care in preparing a reasonable repayment agreement, an employee who has training costs deducted on the termination of their employment, may well take the view that the deduction was unreasonable.

An employee’s remedy would be to bring a claim against their former employer for unlawful deductions from wages. They may argue that the clause (or agreement) is a penalty clause, or simply not representative of the true position, and seek repayment of the fees.

A clause will be a penalty if breaching it amounts to a detriment and this detriment is disproportionate to any legitimate interest of the employer in enforcing repayment of the fees. Such clauses are unenforceable in law.

An employee may also argue, similar to the NHS nurses discussed above, that the repayment agreement is effectively preventing them from seeking alternative employment. This may be what’s known as an “indirect restraint of trade”, and potentially unenforceable.

The employer will want to point to the employee’s written agreement to the deduction of training costs. This is one of a number of defences which an employer can seek to rely on in relation to an unlawful deductions from wages claim. Again, much will hinge on whether the clause or agreement has been drafted in such a way as to make it a penalty clause or an indirect restraint of trade.

For employers to be in a strong position then, and to avoid their senior management spending valuable time and money on potentially low value Employment Tribunal claims, we would recommend that they look at carefully preparing repayment agreements or clauses.

The Employment Team at Leathes Prior Solicitors are highly experienced in advising clients on clawing back training costs and are able to assist clients with preparing bespoke training cost agreements or clauses for inserting into employment contracts. Since 2020, employers are legally required to include provisions on training in any new employment contracts, so if employers are taking on new staff, this may be a good time to address repayment provisions. Please contact us on 01603 281153 or email cyung@leathesprior.co.uk for more information or assistance.

Note: The content of this article is for general information only and does not constitute legal advice. Specific legal advice should be taken in any specific circumstance.