We all understand that training and developing employees is a necessary costs of running a business. The cost depends on the size of the business, number of employees, as well as the training requirements of your industry. This article discusses whether you can recoup training costs from your employees, and if so, what is the recommended approach.
Deducting from their pay
Taking money out of an employee’s pay before it is paid to them is called a deduction, and there are very limited situations where an employer can make deductions from an employee’s pay. Under the Fair Work Act, an employer can only deduct money if:
- the employee agrees in writing and it’s principally for their benefit, or
- it’s allowed by a law, a court order, or by the Fair Work Commission, or
- it’s allowed under the employee’s award, or
- it’s allowed under the employee’s registered agreement and the employee agrees to it.
Examples of a benefit to the employee include salary sacrifice arrangements or additional payments into an employee’s super fund.
We don’t suggest this is the best way to go about recouping training costs, and recommend that you check the terms in your employment contracts, award or enterprise agreement and seek legal advice before making any deductions.
Entering into a Training Agreement prior to the training
One common frustration we hear is when an employer pays a hefty amount of money to send an employee to training, only to have them resign a short while later.
If you wish to recoup a training cost in this instance, it may be difficult if a prior agreement is not in place. We suggest you to include a clause in the employment contract that notifies them of the requirement to enter into a training agreement for any paid training courses they attend during their employment.
The training agreement should state that if an employee resigns within a certain timeframe of completing a paid training course, they will be required to repay a certain amount of money to the Company.
The time frame could be a sliding scale, e.g., the training agreement could state:
- if they resign in 3 months, they are required to repay 100% of the training
- If they resign in 6 months, they are required to repay 50% of the training
- If they resign in 9 months, they are required to repay 25% of the training.
At the end of the day, there is nothing stopping you from asking your employee to pay for their own training. However, if the employment contract does not include a training agreement or the modern award or enterprise agreement is silent on the matter, the employee has no legal obligation to reimburse you for the training.
If this all seems to hard, if you are unclear on the steps, or afraid that you would make a mistake, give us a call on 1800 577 515 or email at email@example.com. Alternatively you can book a video chat at https://calendly.com/adrian-ahr/book-a-15-minute-chat