Employer enforcing financial exit penalty per study support repayment

[GHN]

Hello everyone and to anyone that can help

I have resigned from my full-time employment and I am currently working my notice. To date I've been with the company approx. 10 months, and with my 2 month notice I will have been with the company for about 12 months in total.

I wasn't planning to leave within this time frame, knowing full well I would be liable to repay a hefty amount study support, but a combination of being approached out of the blue for an offer that my current employer cannot match both financially or from a career advancement perspective, and personal developments at home, means I know find my self in the predicament of having to negotiate hard to agree a reasonable study support repayment solution with my current employer.

When I joined the company they actually agreed to take on the study support I owed to my previous employer, which was very decent of them. In the region of £3.7k. They have since said that it is commonplace, but at the time made out like I was asking for the earth. Go figure.

I agreed to have the £3.7k partly repaid to me (what I had paid to prior employer from 3 monthly instalments and also from a final salary deduction of £800.00, which did not bring me to the level of or below the national minimum wage 'NMW', but not far off). The remainder was paid to my ex-employer direct after my 3 month probationary period.

I had also built up another £3.8k of study support costs during my employment (3 courses and exams). The final exam was sat in November 2022 and the results were published in January 2023, and thankfully I had passed. The course was complete.

I handed my notice in March 2023.


My study support repayment is worded as follows:

"
This agreement forms an express written term of the Employee's contract of employment.

The purpose of this Agreement is to allow you to undertake agreed education and/or training which is of direct benefit to the Company and yourself, and which the Company is prepared to fund subject to your acceptance of refunding to the Company in the event of your employment terminating within a given period of time.

You agree that if the Company provides such funding you will attend all classes and pass all assessments and exams to a satisfactory level.

This will be pursued from 1st September 2022.

The amount to be repaid by the Company is £7,581.00. This is an estimated cost of the course. In the event of termination an exact cost will be confirmed. "

[Just interrupting here. The study support was made up of £3,717.00 paid to my previous employer for study support carried to the new company, and the course fees built up during my employment under this new study support was £3,864.00, made up of course fees and exam fees. Therefore to avoid any confusion, the total is as per the estimate, exactly £7,581.00].

"
If you do not complete the course (for whatever reason) or your employment with the Company ceases during the period of the course for whatever reason, you will refund the full amount to the Company. (The Company may, at its sole discretion, waive the repayment of some or all of the amount if the course is not completed with its consent).

If your employment with the Company terminates after the completion of the course, then the whole or part of the amount paid in respect of training fees shall become due immediately and repayable to the Company by way of deduction from your pay, or otherwise, in accordance with the following schedule:

Termination of Employment Portion of Course Fees Repayable
During the Course or upon termination of the course 100%
Up to 12 months after completion of course 75%
Up to 24 months after completion of course 50%
Up to 36 months after completion of course 25%
Thereafter Nil "

[It then goes on to say about my authorsation for the Company to make deductions from pay.]

"
I also authorise the Company to make any deductions from my pay, or from any final monies due in the event of termination of employment, in respect of the amount set out above. If any balance remains outstanding after such deduction(s), I undertake to re-imburse the Company accordingly."


Per the sliding reducing scale, my line manager has confirmed I am liable for the 75% of the total. Approximately £5.7k. I think that's fair per the wording above?

My question is, is it lawful for my employer to make deductions from all of my notice period wages down to the NMW to reclaim course fees?

My ex-employer agreed an amount with me that wouldn't leave me in a state of financial crisis when I left, and although the monthly repayments were steeper than I had anticipated, they were manageable and as stated above, were ultimately paid by my now current (soon to be ex) employer. This is not the case with me new employer who won't take on the study support, and although the higher salary and prospects the job can bring in the not too distant future are promising, and more than what my current employer is willing to counter, I really cannot afford to pay the majority of the £5.7k back all at once (within 3 months essentially).

My current employer is proposing to deduct £1.5k from my pay in March, £1.9k in April and £0.9k in May, and is stating that the bonus I would have earnt for the quarter (£0.5k) and residual holiday pay (£0.7k) will be offset against the study support in my final May salary. Not sure if this is allowed? Apparently the quarterly bonus (calculated Jan to March) is discretionary so he's 'doing me a favour' by allowing me to have it, only to deduct it from what I owe them, rather than allowing me to be paid that amount and choose how to spread it over the cost of the repayment, possibly through monthly instalments. This is also the case for my accrued holiday pay (4.5 days apparently).

So, their proposal would leave me with £1.4k outstanding of the £5.7k, which they have not been able to confirm whether the final outstanding sum can be repaid over a period of time (i.e., 12, 18, 24 months), or is due immediately, so likely due immediately May 2023 given their attitude.

Personally I think they are just playing hard ball in a somewhat juvenile attempt to make me stay with the company, even though they haven't counter offered with the same salary or career opportunities that the role I am leaving for can offer, which at least financially I can benefit from immediately, and they are aware of that. I had a discussion with my line manager today that alluded to a 'similar' package that may be available within 6-7 months... sounded a bit pie in the sky.

I also believe it is unreasonable to impose a study support sliding scale over 3 years, which I think is excessive really as the norm is typically 2 years. They then expect me to pay 75% of it back almost instantly. When I first joined the study support agreement was 2 years and I initially signed a separate document to the contract for study support fees that was 2 years, but right before the study support was due to kick in a few weeks later (3 months in after my probationary period) they presented me with a 'corrected' study support that shifted from 2 years reducing sliding scale, to 3 years reducing sliding scale.

Contract was written exactly the same, except the training fees repayable were scaled differently:

"
Termination of Employment Portion of Course Fees Repayable
During the Course or upon termination of the course 100%
Up to 12 months after completion of course 50%
Up to 24 months after completion of course 25%
Thereafter Nil
These recoupments are in respect of the full course fees. "


At around the same time they also handed me a variable contract amendment document, which had me agree to change my notice period from 1 month to 2 months. So what I was originally told in my interview, what was stated in my original contract, and what terms I was under the impression I was onboarded with were suddenly all being changed, right before they were due to start paying my study support. Bit suspect eh?

Unfortunately I felt stuck between a rock and a hard place, as they were due to pay off the remaining balance to my ex-employer at the time of handing me the 'corrected' study support agreement and variable amended notice period document. I suspect they probably had this planned all along, but I don't think there is much I can do about that as I signed them.

Is there any legal terminology that I can use to push back on what I deem to be punitive penalty clauses? I don't expect to not pay the study support back, but I do expect a reasonable negotiation to be available and a suitable repayment plan agreed that won't put me in a state of financial crisis. I was hoping to match the study support repayment with the length of the sliding scale reduction (3 years), with maybe a manageable deduction from my final salary (not salaries... but my last 'full' month's pay, so April) and put the rest on a a monthly repayment plan spanning 36 months. Hell, I'd even agree to 24 months at this rate.

Any advice would be greatly appreciated!

[atticus]

Why do you think these very common provisions are penal? This employer got you out of a hole when they agreed to pay money that you owed your previous employer when they took you on. The situation is closer to a loan. I bet they feel that you have a funny way of thanking them.

I suggest that you negotiate to pay over time.

[ULA]

A couple of legal points in terms of what you have set out.

1. You agreed to the contract terms and sliding scale. Yes they may have changed the time period from 2 years to 3 years and increased your notice period but as you state you signed them so they are enforceable.

2. A deduction for training courses can only take someone's pay below the National Minimum Wage if they agreed to pay back costs because they have chosen to leave their employer i.e. resign.

In terms of how they are proposing to recoup the £5,700 my maths come up with a different figure to you taken from your post:

Pay in March £1,500
Pay in April £1,900
Pay in May £ 900
Bonus £ 500
Holiday pay £ 700

Total £5,500
Remaining to pay £200

An employer is not going to want to risk having such a large sum of money not being repaid because and ex-employee decides not to stick to a payment plan.

As atticus has said you can try and negotiate for a longer term to repay but if they do it is likely to be months and not years.

[GHN]

Sorry just on the maths piece, I meant to say that the bonus is included in the April deduction and the holiday pay is included in the May deduction.

£1,420 left to pay after three salary deductions.

I’ve just spoken to them this morning, and sorry to say they are being completely unreasonable and won’t engage in any negotiations.

I was advised this morning the £1.4K owing after the salary deductions they want paying within 3 months.

This means I have to pay £5.7k within 6 months. This to me just seems like they are being petty because I’m leaving. It also seems completely unreasonable given my circumstances, that they are aware of (didn’t allude to this before, but my wife is going on maternity pay so reduced salary. This would be a joyous occasion usually, but we lost the baby late in the pregnancy. Not trying to pull at the heart strings here, just laying it out as it is. So financially and mentally I feel I need to move on, and there is a genuine financial worry if I have to pay back £5.7k in 6 months - I just can’t afford it).

I completely agree that I will be expected to make salary deductions (I proposed to meet in the middle at £2.1k, rather than £4.2k), and the residual over 3 years to match the study support agreement I signed. This in my head is a reasonable time frame given the agreement is 3 years, and if they disagree then they are acknowledging the study support agreement timeframe and terms are unreasonable?

I was just after a bit of support and advice really in terms of what I could say when trying to negotiate the terms of the repayment. To confirm, I’m not trying to get out of repaying any of this.

[theberenger]

As the others, who are far more knowledgeable than me, have said already, you agreed to be bound by the terms of the repayment schedule, so I don't see any way you can force their hand, particularly when you consider how the situation looks from their perspective; they dug you out of a hole with your previous employer, they funded your training and examinations, and now, less than a year into your service with them, you're thanking them by taking all that newly-gained knowledge and using it for the benefit of a different employer.

The reason I wanted to post, and I'm hesitant to do so because I'm aware others may not consider this a wise idea, but have you considered other ways of meeting the financial obligation, besides deduction from salary? For example, could you obtain a bank loan that would mean you could pay them back in one go, and repay the loan over a more agreeable term?

[GHN]

Thanks theberenger the loan is something I hadn't considered. Probably would be useful as it spreads the repayments (which is what I am looking to negotiate with them essentially), rather than paying it more or less all in one go.

I wouldn't say they dug me out of a hole so much as they offered to pay it but brought my salary down to the minimum banding when I joined (so down by £3k). So... yeah, almost like a double hit from my perspective now.

I'm not under the illusion that business' do things out of the goodness of their heart, so they definitely got their pound of flesh from me, and some through many unpaid overtime hours over the past 10 months.

Perhaps if the company had counter offered with something sensible, or paid the market rate, employers and employees wouldn't find themselves in this situation - as people leaving mid-way or not long after completing their studies this is quite commonplace.