Companies give two reasons for requiring employees to sign contracts stating they will work for a specified period in exchange for training: to recoup the costs of training and to deter the employee from leaving.
But employee relations experts say this practice is at best ineffective and at worst a detriment to recruiting and retaining good employees. Instead, experts recommend that businesses create in-house training programs and change the way they approach employee compensation.
Contracts don’t work
If you’re using contracts to deter employees from leaving, you may ultimately be hurting your chances of recruiting new workers, according to Gartner vice president and research director Diane Tunick Morello.
“I think it does affect your ability to recruit. In a free market, no one wants to walk into something that would be a negative,” Morello said. “It is a disincentive. If I go to an organization that promises to train me, to equip me to be able to do their work, then that’s the cost of doing business.”
|A 1999 poll of TechRepublic members showed that most paid for their own certifications.|
You’re also likely to get a bad reputation in the all-too-small IT community if you sue a former employee to enforce the contract, according to H. Michael Boyd, a human resourcing strategies researcher with International Data Corporation.
“Most companies don’t bother because you’re going to sit there and say, ‘I don’t have that kind of money, sue me,’” said Boyd, who also holds a doctorate in sociology. “The cost of them going to court, the bad public relations, the bad employee relations, and everything else make it untenable. They’re not going to do it.”
Most likely, the employee won’t even suffer a financial loss if they do repay the training. Businesses now are offering to pay off an applicants training obligations or offering sign-on bonuses that cover the costs of training.
We asked TechRepublic members their thoughts on requiring employees to sign time commitments in exchange for training. Most saw a need for such policies. See what your peers say about the pros and cons of this practice in “Indentured ITs: Should your employees sign training contracts?”
Such contracts will help you at least recoup the cost of training in the short term, but ultimately, training is just part of doing business.
“The same companies that are whining about their people leaving after they get certified are the very same people that say to other people’s employees, ‘Oh I see you have a certification. I’ll pay you more money,’” Boyd said.
In the past, companies realized that ultimately, everyone shared the cost of training workers, he said.
“What you knew as an industry was that it was going to even out,” Boyd said. “So you were going to hire someone from another company because they had a certification and someone was going to hire one of your employees because they had the certification.”
Boyd suggests that the same still holds true: “You’re going to pay your share into the training market no matter what.”
If you do decide to use such training contracts, Boyd recommends you take the following precautions:
- Tell employees about training contracts before you hire them.
- Make sure the contracts apply to everyone.
The best way to recoup your training investment is to find ways to keep your employees happy and challenged. Otherwise, you’re losing much more than the cost of training the employee.
But how do you keep the competition from luring them away? The analysts we spoke with suggest that businesses provide more in-house instruction to cut training costs and creatively compensate employees after they obtain new skills.
Create in-house apprenticeships
You can stretch your training dollars by cultivating an atmosphere of continuous learning, rather than viewing training as an “event” that employees can attend once or twice a year, Morello suggested.
She compared the practice to an in-house apprenticeship program that allows employees to learn on the job from each other.
“You get a lot more out of someone’s training and expertise and education, if, for instance, you put them into continuous learning environments where they learn on the job in new rotations, new assignments, or in an apprenticeship fashion and you’re not paying or writing a check for some course that someone was going to,” she said. “You’re actually giving them the opportunities, the education, and the learning in the context of the way work is done.”
Instead of using contracts to keep people, companies should examine why employees want to leave, recommended Don Sheppard, chief executive officer of Sheppard Associates , an international employee relations consultant firm based in Glendale, CA , whose clients include Fortune 500 companies.
“It’s very simply understanding what people want in a job or career and being able to respond to that within your own organization,” he said.
Often, employees leave because they do not feel a company offers them opportunities, challenges, or respect, Sheppard said. One way to fill those needs—even if you are a small company—is to move away from a management-track career path and establish what Sheppard called dual-career opportunities. Sheppard describes a dual-career track as rewarding employees based on their contribution to the company’s success, as opposed to a management track, which essentially rewards employees based on their titles.
“An individual contributor is often more valuable than a manager and so companies set up what are called dual ladder career tracks,” he said. Why shouldn’t someone in an organization who is contributing to the success of the organization be paid as much as somebody who may have gone into a management track?”
This approach can give smaller companies a big advantage if they’re willing to take it. Ironically, they still tend to base compensation on the company’s hierarchy, Sheppard said.
“Small companies are much more able to offer a challenging environment than large companies can because they’re more flexible,” he said. “Small companies need to realize that being an individual contributor is as valuable as following any management track.”
The smart companies compensate employees based on their contributions, not their titles, Sheppard said. The rest will continue to lose out.
“The contract that keeps people with organizations is how they get treated once they join an organization,” Sheppard said.
Would you work for an organization that required you to trade time for training? If your answer is no, think again. Are there any terms under which you would sign such a contract? Let us know by e-mail or post your comments below.