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News added on 27.08.2019

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Deductions to pay

Can you make wage deductions for staff training?

Costa Coffee has hit the news headlines for allegedly deducting £200 from employees’ final wages to cover the costs of their training. Is this type of wage deduction lawful?

The allegations of unfair wage deductions have been made against one of Costa Coffee’s franchise partners, which runs multiple Costa Coffee branches in Essex. A flat £200 wage deduction has apparently been made from several employees’ final payment of wages to cover their training costs. Costa Coffee has responded by saying there are clauses in some employment contracts outlining the wage deductions for training and that “deductions are circumstantial and reviewed on a case-by-case basis by the partner”. However, a number of employees have claimed their employment contracts don’t have clauses relating to deductions, with some even saying they were never given written contracts.

If you invest in external training for employees, it’s perfectly legal to reach a contractually binding agreement with them to recover these training costs in the event they leave your employment within a short time of that training being completed. Any such agreement should enable you to deduct the costs from the employee’s final salary payment. This is because the Employment Rights Act 1996 provides that you can’t make a deduction from a worker’s wages unless either: (1) the deduction is authorised by a relevant provision of the worker’s employment contract, provided always that they’ve been given a written copy of the contract or a written explanation of the relevant terms before the deduction is made; or (2) they’ve previously signified in writing their agreement or consent to the deduction. So, you can either insert a relevant provision into employment contracts or, better still, you can ask the employee to sign a training costs agreement each time that external training is approved. Do make sure the agreement is signed before the training starts. This is because the employee’s consent must precede not only the deduction itself but also the event or conduct giving rise to the deduction. In addition, any tie-in after completion of the external training should be on a tapering scale, so that the longer the employee remains employed, the less they will have to pay back if they leave because the more benefit you will have gained from their new skills, knowledge or qualifications. As a general rule, allow for a proportionate recovery over a twelve-month period, with the amount owed reducing by one twelfth for each complete month worked after the end of the training.

However, in Costa Coffee’s case, it appears that wage deductions were made for time spent by managers/senior staff giving internal training to new employees. Even with a contractual deduction from wages clause in the employment contract, that probably isn’t a lawful deduction as giving on-the-job training to an employee when they start work for you is part and parcel of taking on new staff and it also isn’t a tangible expense. Making a deduction for that internal training when they then leave your employment is therefore likely to constitute a penalty clause for leaving. Penalty clauses are unenforceable.

You can only make wage deductions for external training costs if they’re authorised by the worker’s contract or the worker has previously signified in writing their consent to the deduction. Even with a contractual clause or agreement, making wage deductions for internal on-the-job training when an employee leaves your employment is likely to constitute a penalty, and penalty clauses are unenforceable.

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