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Failure to mitigate training risks could be costly

Published on Saturday, 24 Sep 2016

The Background

Employee training and development programmes are a crucial aspect of effective talent management and people strategies. Training and development have become key retention tools by which organisations are able to retain staff and utilise and mobilise fungible skills.

Development within an organisation also reduces the costs of lateral recruitment, as staff move internally according to skill set rather than just role.

From an employee engagement perspective, good training and development programmes motivate employees – and they stay longer with a company which has invested in them.

The benefits also extend to succession planning, ensuring that the organisation has a pipeline of talent that it maps against skills and roles required in the future. These programmes identify any knowledge or skills gaps needed to move existing staff up and into those positions, as well as employees that are suitable for taking over key leadership roles within the business.

In times where the economy creates pressure on standard salary packages, many businesses are still able to justify training and sponsorship programmes as part of their development expenditure, and use these to incentivise staff.

However, with tuition fees for some professional degrees, such as an MBA, costing a little over HK$500,000, it is a costly investment for employers if risks are not mitigated. Other than costs alone, there are other issues to consider when rolling out training and development programmes.


The Strategy

Businesses should implement a sponsorship policy that outlines eligibility criteria for sponsorship of training and development.

Employees should also be encouraged to provide a business case for the training they are seeking. Often department heads are the key decision-makers in this regard, but HR oversight ensures transparency and consistency in implementation. This will mitigate the risk of any discrimination or favouritism claims by employees.

It is not just the course fees that need to be considered but, in some cases – such as overseas study – companies must also consider immigration requirements and whether they will offer travel costs or a daily living allowance to staff. These must be carefully checked for any potential income tax issues that arise in other jurisdictions.


Another key document will be a sponsorship agreement between the employer and employee. This will create a contractual obligation between the employer and employee and will minimise risks of future disputes. Some courses require the employer to pay the fees up front and some are paid by the employee and reimbursed by the employer.

Many employers are concerned that sponsored employees may leave the company when finishing their training or development programme – so it is important to outline any repayment terms if the employees fail to stay with the company for a certain period after sponsorship. For example, employers may want to use a sliding scale of repayment, depending on how long the employee remains with the company and the final date on which the fees would be waived.

Some employers deduct certain amounts from an employee’s wages for training and development, but must be careful that the wages provisions in section 32 of the Employment Ordinance are met at all times.

Alternatively, employers could provide the employee with a loan or a “forgivable loan”, where the sum owed will be reduced when certain conditions are met, which may amount to a permitted exception for the purposes of the Employment Ordinance.

Where additional qualifications are particularly important to a company, employers can also consider adding on a success bonus upon completion of the course and achievement of the specified goals.


The Risks

In the unfortunate situation that an sponsored employee does leave the employer, it is wise to institute post-employment restrictive covenant clauses.

Upon completion of a professional qualification, some employees see their new qualification as larger bargaining power for more seniority or higher pay with another company – who may be the employer’s competitor.

Having a well-drafted restrictive covenant clause will allow the employer to take action against a former employee working for a competitor. This will also act as a deterrent for any other employees who may be tempted to move on to another company having taken the benefit of a sponsorship programme. 

This article appeared in the Classified Post print edition as Failure to mitigate training risks could be costly.

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