Why clarity is required to settle the clawback issue

Why clarity is required to settle the clawback issue

The director at AJ Chambers discusses how to cope with the "clawback" issue

The fortunes of UK accountancy firms have taken a distinct upturn, with many of the best practices posting revenue increases of between 5% and 20% across all levels of the business in the past year. This success has led to expansion in areas such as audit and corporate finance where employment opportunities have increased as a result.

However, the fiscal sector is something of a “candidate-dry” market currently, as there aren’t enough suitably-qualified would-be employees to fill the growing number of vacancies. This has ignited a determination in companies to retain the staff they have – which is good news for the employee if they’re prized enough to earn better working conditions and wages. It’s not so good, however, if this employer possessiveness results in unreasonable ploys to make them stay.

Costly lesson

At AJ Chambers, the majority of candidates placed by the company are part or newly qualified accountants. For trainees, this means that their employer – for the two or three years it takes them to qualify as a professional – will be funding their training in the form of tutoring, materials and time-off, resulting in a tariff which can amount to several thousands of pounds over a period of time.

This cost may well become an issue if the employee decides to leave before they qualify. In almost all cases when this happens, there will be a condition in the employee’s contract that they will – quite rightly – be liable for the cost of the pre-qualification training provided through what is termed a “clawback fee”. To reiterate, this is perfectly fair practice. An employer presumably invests time and money in training new staff in the hope they, not another company, will be the beneficiaries of their new-found knowledge and experience. There is a growing issue, however, with companies that fail to outline the outcome of an employee’s early departure in terms that leave nothing to interpretation.

Cloudy issue

An open-ended, vague approach to addressing clawback fees in employee contracts can lead to uncomfortable conversations for all parties concerned. It can come as a mighty shock for a trainee employee to be told that they must pay a clawback fee amounting to thousands of pounds before they leave; shock which might quickly turn to resentment if on consulting their contract the clawback issue is fudged or at the company’s discretion.

It’s unlikely that a young trainee will have the financial reserves to pay the requested costs. In such cases the next employer might be minded to pick-up the pay-off fee, particularly if it’s a coveted candidate. In most instances, however, the staff member, unable to pay their way out of a position, is left to see out their contract in an environment that is potentially toxified by their dashed desire to leave. The candidate’s potential new employer has also lost out, as on a wider-scale, the movement of skilled labour in the market becomes hampered.

Compensation

It must be stated once again: clawback fees are perfectly standard, best practice. Firms that have invested a lot of time and money to train rookie staff should be properly compensated if they offer their talents elsewhere before an agreed time. It is absolutely vital, therefore, for companies to state with absolute clarity the applicable terms and conditions for staff that leave mid-qualification. Whether in the form of a sliding scale whereby the longer a trainee stays with a company the less “clawback” they have to pay, or a standard, “flat” fee assigned to all early-leavers; as long as the clawback conditions are set out in black and white within a contract, then everyone – recruitment consultancy included – knows where they stand. For one thing, this clawback clarity will help avert many a potentially difficult employee/employer conservation.

James Done is director at AJ Chambers Recruitment, the UK’s leading public practice recruiter.

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