How Can We Frame a Training Cost Clause for Engineers Leaving Early?

"It is informed and agreed that XYZ Solutions provides training worth Rs 50,000.00 (Rupees Fifty thousand only).

Context and Background

Please note:
- We are a software development firm.
- We are framing an agreement for one contract with an engineer.
- If the person leaves the job before one year, we want him liable to pay Rs 50K. Our senior engineer spends time with them, helping them understand advanced topics. We want this to be included under training.

Request for Clause Suggestions

Please suggest how we should frame the clauses. As I read here, companies need to prove that training was given."

Certainly, a clause to refund the training costs incurred by the establishment in respect of an employee shall be incorporated in the contract of employment. However, it will be your company's duty to prove that the company has spent the amount equal to the sum demanded exclusively for the employee.

Regards,
Madhu.T.K

Recovering Training Costs from Employees

If you are paying training fees to an outside provider for training your employees, the cost of training, along with incidental charges spent for training purposes, can be recovered if the employee leaves the organization within a stipulated period, say one year. This should be a clause in the employment contract.

If the employee has already joined based on the contract of employment, the said clause can be incorporated in the order/advice of deputing them for the training, and acknowledgment must be obtained from them.

If a senior person guides the employee in executing tasks or performing work, it cannot be considered as training. The cost (such as the salary of the senior) cannot be recovered unless it is done formally, keeping the employee away from the workplace.

Role and Responsibilities of a Senior Engineer

The salary of a senior engineer is 30K per month. He spends almost 50% of his time guiding and explaining the finer details, advanced concepts, and clearing their doubts, mistakes, bugs, etc. He guides them throughout the year, and there are 4-5 juniors under him.

Thank you,

Palak

The Issue of Employee Retention in Small Software Companies

The issue being raised is very genuine since small-sized software companies put in effort, energy, time, and money to train freshers for their own business. Such companies are not training establishments to develop people for use by big companies. However, the big fish lure these employees with higher remuneration to join them, even without a relieving letter from the previous company. While big companies may not accept it as an unethical practice, organizations like NASSCOM may want to look at this issue if they are interested in the growth of small businesses and entrepreneurship.

Comments and further discussion on this issue can at least help in creating a consensus among the small software companies on how to legally protect their own interests. I personally find no harm in stipulating the refund of training and infrastructure costs by an employee who leaves the company without completing one year of service after finishing the training (which includes on-the-job training), as a term and condition of employment. If a fresher is not keen to join as a trainee on these terms and conditions, he/she need not sign the employment agreement.

Proposed Common Yardstick for Employment Agreements

If every small software company adheres to a common yardstick of 'one year training + one year post-training service' or refund of the full cost of training for premature separation from the company (except termination of services by the management), there can be a common ground to set up and streamline the employment process.

Reevaluating the Training Clause Approach

Don't you think you are going the reverse way here?

The Correct Reasoning Sequence

1. The company spends money and efforts on training. They "know" the cost of training and can justify it (say 50K).

2. They don't want the employee to leave the job unless the training cost is recovered by the gains from services provided by the employee. They know the ratio of gains against cost to define the term.

3. This term (say 1 year) is agreed upon between the company and the employee.

Your Current Reasoning Sequence

1. The company does not want the employee to leave the job sooner. (You are not sure if you can provide an environment where they would want to stay at least a year).

2. A clause is put in the agreement with an inflated amount, based on the salary offered, so the employee cannot afford to leave.

3. Actually, the company does not pay much for the training itself. Generally, there is internal training of 1 or 2 weeks. Then the employee trains on the job. The senior engineer is generally a team lead, whose responsibilities include services from their juniors, and they do not book separate time on "training" throughout the year.

4. Then the company is now searching for reasons on how to justify the amount, so if they have to go legal in the future, they are covered. For this, the help of such forums is taken.

Ethical Considerations

Is this the real purpose of this forum? And is the HR department also not responsible for ethics? How does it fit into ethics to find the reasoning on the internet for the expenses that are not actually directly done by the company?

Suggestions for Improvement

1. Estimate the initial 'formal' training cost.

2. Some companies call this period a 'probation' period, so the quality requirements need to incorporate the 'training curve' for employees for this on-job training period into your quality system (say performance index or earned value). Give a clear picture to the employee about their training curve.

3. Ask the senior engineers to record the efforts for training in the quality management documents.

4. If the 'budget' of 50K is not fulfilled, then provide some additional training to the employee, so you would actually have a 'better trained' employee. Remember, the basic need for training is for the betterment of employee assets, not to justify the clause in the contract.

Hope I was helpful, and pardon me for any strong words up there!

Regards,
Amod.

As you know, there have been numerous litigations pending in various courts over the bond during training. It's very difficult to draft a foolproof agreement of a bond that cannot be challenged in Indian courts. However, certain aspects have to be looked into very closely.

Proving Training Costs

First of all, proving beyond doubt how much and in what manner the employer incurred certain costs on training the employee is crucial. Though it could be arbitrary, complete documentation would be helpful and should be verifiable.

Designation and Training Period

Secondly, many companies follow a "Management Trainee," "Engineer Trainee," or similar designation for the initial appointment, with a provision for confirmation subject to the availability of posts, etc. This system aids the employer in showcasing that the entire period the employee has been under training and whatever CTC during the period is the "cost of training."

Visible Evidence of Training

Thirdly, as the adage goes - "...not only should justice be done, but it should also be seen to have been done," which means there should be visible evidence that the employee is indeed under training. This could be ensured by more than one method. For example, prepare and circulate a detailed training manual and conduct the day-to-day affairs accordingly. Earmark certain hours of the duty hours as "training hours," which should be well-documented.

Role of Trainer Officer

Fourthly, there should be an exclusive Trainer Officer whose time should be substantially spent with the "Trainee."

Progress Reports

Fifthly, a periodical progress report should be prepared about the Trainees' progress together with the progressive amount spent (CTC) on each such person and issued to the trainee with acknowledgment.

Like this, we can think of some more conditions to strengthen the objective. Needless to say, the success of this exercise would depend much on avoiding unfair labor practices.

Regards,
Kumar S.

I understand the HR side of this discussion. I have managed situations where this was implemented on a very large scale and even worked on recovery when there was non-adherence. However, is this legal? How far can these training or travel agreements be challenged in a court of law?

Regards,

Thank you for your comments on my suggestions. To make things legally viable, senior individuals from NASCOM or prominent IT companies should step forward and address the issue of how to help small software companies survive against the threat of larger competitors who hinder their growth by poaching their trained workforce. It is important not to shy away from this responsibility.

Let's await some comments from them and then discuss any legal issues that may arise.

Regards