Yearly archive for 2019

In the October 1, 2019 Ask The Headhunter Newsletter an HR manager complains about the cost of employees quitting right after they complete training.

Question

Can we charge new hires a penalty when they quit and leave us short-staffed? Can an employer state in an employment contract that if the new hire does not stay for a certain number of days, we retain the right to withhold $X to reimburse us for the time we spent training them? This Generation X and their job-hopping is costing this hospital tens of thousands and we are trying to find ways to teach them – work or lose money. Use us – lose money. We’re having a tough time with it. I did research. You came up.

Nick’s Reply

It’s troubling that any employer would ask this question, but even more troubling that you signed your e-mail with PHR after your name, which means you’ve passed the test for a Professional in Human Resources certification. Really: GenX is costing you money?

I’m not a lawyer. I suggest you reach out to a good employment and labor attorney for advice. However, my guess is that an employer can include any terms it wants in an agreement as long as they are not illegal. After all, no one is required to sign it. The question is, do you — a PHR — really want to go there?

Costs of training and quitting

Now I’ll give you my opinion: An employer should never require reimbursement for its time training new hires. It’s part of the investment we make in people. (This is different from a company offering paid education benefits – e.g., cash to help earn a degree relevant to the job. Education benefits are optional and usually granted under a separate written agreement.)

Quitting is an overhead cost. Not all people will stay, and you can’t make them pay you. Training on a new job, new skills, and time to come up to speed are all components of compensation — all of which they get to keep.

Training is part of what entices a person to accept a job. Who wants to make a move to a job that’s not going to improve their skills, knowledge and expertise – not to mention pay? (Some people will wisely trade higher salary for training and new skills. But in this market, I think they know they can expect both!)

If you don’t see my points, try this: Advertise jobs that require applicants to cover their own overhead costs. Tell them they must pay for training if they get hired. Lotsa luck.

The training investment

Training its employees is how every company helps improve and develop the overall worker pool. It’s an investment in the economy that everyone benefits from, even if in some instances it causes a loss due to worker mobility. If every company insisted on “owning” the training and experience it gives to new hires, how would the labor pool keep up with changes in technology? More to the point, how would you attract the best workers with nothing more than salary?

Of course, you should not hire anyone that you suspect plans on quitting after training is done. (I don’t think many job seekers play that game. More likely, some other factor is making them move on.) But it’s HR’s job — and the hiring manager’s — to assess and judge job candidates. Are we ready to take a risk with this particular candidate?

There are of course no guarantees to any business decision. Or, for that matter, to personal decisions. For example, can we get our money back if we decide to marry someone that decides to move on?

Who pays for quitting?

Your job in HR is to make good judgments and hiring choices. If the new hire quits too soon, should your pay be docked? Should the hiring manager’s pay be docked?

Let’s take this to the next logical step. If a new hire isn’t as productive as expected, should a company be able to recover the difference from them as restitution for lost profits? Where does this end?

You asked whether an employment contract might be the solution, by making reimbursement explicit. But, are you really prepared to give new hires an employment contract? Unless it’s for a C–suite position, I doubt it! If you in fact use employment contracts for all your hires, then I say more power to you – and include any terms you think you can get away with! Just remember that sound contracts are designed to benefit both parties. (See Employment Contracts: Everyone needs promise protection.)

For example, I’d advise any job candidate to consider signing your contract only if it includes compensating terms. For example, the hire will agree to reimburse you for training only if you agree to a severance package of $X if you terminate the hire at any time for any reason other than “cause.” Seems fair, doesn’t it? What fault of the new hire’s is it if your management team makes decisions that lose money and force a downsizing? Shouldn’t you be on the hook for the hire’s lost income?

Competitive edge

Quitting and job hopping are symptoms, not the problem. The problem is jobs and employers that don’t satisfy workers. People hop because you’re not being competitive. Your competition offers them a better deal that might include new skills and training in addition to higher pay. That’s why we refer to it as a job market.

Consider this analogy: If your company’s customers “hop” to a competitor that offers a better product, whose fault is it? Or, is it actually a signal telling you to improve your product? I suspect that other problems are triggering employees to hop after they complete training at your company. Your competitive edge is understanding why people stay.

Your assumptions may be the problem

I appreciate your company’s difficulties, but I think your attention is misplaced. Peter Cappelli, a labor researcher at the Wharton School, suggests that employers themselves own the problems they blame on workers. (See Why Companies Cannot Find the Employees They Need.)

The “talent shortage,” says Cappelli, is actually a problem of affordability. Employers are not willing to pay market value for the talent they need. (Just look at the paltry increases in pay reported by the Department of Labor, in a time when unemployment is low and demand is high.)

More relevant to your question, Cappelli’s findings suggest the real problem is a “training shortage.” Attracting and keeping good workers may be more difficult today because employers have drastically cut their investments in training and employee development. Employers seem to insist on “just in time labor” – people who’ve done the job for five years, already possess the requisite skills, and are willing to do the same work for a new employer for less pay. But who aspires to such an “opportunity?”

Your organization is doing the smart thing – providing training. But I think your assumptions may be incorrect. My advice is to offer training without a catch, then make sure something else isn’t triggering quitting. Use training as an enticement to attract the best workers. But also look at the other factors that help you keep your new hires. I’m not going to tell you what they are. You should figure it out and act to keep your employees happy. Isn’t that what HR’s job is?

I see you sent your e-mail after you viewed the Talk to Nick section of my website. If you’d like to schedule a consultation, I’d be glad to talk with you.

I wish you the best.

Who owns what you learn at a job? Should employers be able to recover employee training costs? Should you ever be penalized for quitting? Do job-hopping GenXers need a lesson?

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