It happens: You invest time and money in training a new hire only to lose the employee to a competitor. But what can you do?

Some companies are recouping that training cost by contractually obligating employees to work for a set period of time—in some cases, as much as two to four years. If they leave before the contract expires, employees are required to repay the training costs.

But with the tight labor market, is this practice a good one?

We recently asked TechRepublic members about this new method of retention. While the majority of respondents described training contracts as a fair, reasonable retention and cost-control strategy, others called it a shortsighted approach that causes long-term repercussions for recruitment and retention.
We asked human resources experts and IT analysts about the practice of requiring employees to sign commitment contracts in exchange for training. In an upcoming article, we’ll feature their recommendations.
Those in favor vary on time restraints
The high costs of IT training and a lack of employee loyalty were the main reasons 13 of our respondents considered such contracts to be a sound practice.

Most considered the contracts primarily a means of recouping training expenses rather than a method of retaining employees.

“I tend to think it is a viable option for an organization’s benefit,” said Ollie McGahee, the systems administrator for the Wayne County, GA, Clerk of Courts and an adjunct professor with the St. Leo University’s Savannah Center. “Certainly, there is an investment on the behalf of the organization when an employee has the opportunity to receive additional training.”

But respondents varied widely on what they felt was a reasonable period of time for the investment.

Mike Lanphear, a network support analyst with the Merced County, CA, Human Services Agency, recommended a two-for-one exchange—two months for every two years—but said it depended upon the level of training. For instance, he placed a two-year minimum on the training required for programs like the CNE.

David Buzzell, CIO of The Sedona Group, requires employees to sign contracts in exchange for training. Buzzell said short classes and seminars do not have a time commitment, but more expensive, time-intensive programs such as the MCSE do.

The Sedona Group uses a formula that equates a month of labor for every $1,000 of costs; for example, a $7,000 course would require seven months of commitment.

A punishment to fit the crime?
What do you do if an employee reneges on the contract? One Philadelphia-area software support company sues employees who leave before their 13-month contract, signed as a condition of employment for entry-level help desk staff, expires.

In exchange for the company’s on-the-job, three-month training program, employees are also asked to make a verbal commitment of two years, according to the company’s hiring manager, who asked that his name and the company’s name be withheld.

“During the first month, they have no expectations of productivity. During the second and third months, we expect about 50 to 75 percent productivity,” the hiring manager said. “Trainees are paid a full salary. They are expected to give us a two-year commitment.”

So far, the company has never lost a case. However, it has not sued when the employee leaves after 13 months but before the two-year verbal commitment expires.

In general, TechRepublic members agreed that such contracts should be pro-rated.

Dana McConnell, a systems administrator, said he recently turned down an offer from a company that would have required him to repay all training costs if he left in four years.

“I found this excessive,” McConnell said. “I would have accepted a more graduated approach. For example, if I left in the first year, I would pay back 100 percent. If I left in one to two years, pay back 75 percent …. Four years is a long time, especially as people change jobs now.

“If I had trained to get certified and had other training as well, I might not have been able to afford to switch jobs! But maybe that was the point.”

Cons: A shortsighted, bean counter solution
Many TechRepublic members say it is counterproductive to force employees to sign training contracts. And in the end, if your competitor doesn’t require such contracts, you may find yourself on the losing end of recruitment.

Don Van Fleet, a MCP/MCT and technical instructor with IntelliMark IT Solutions Group in Mechanicsburg, PA, said his location uses free training as a way of attracting and retaining people who are interested in improving themselves.

The benefits vary by department. Help Desk Services receive up to 10 days of instructor-led training and unlimited access to computer-based training, according to Van Fleet. By comparison, application developers and instructors can take as much instructor-led training as they can fit into their schedules. Additionally, Van Fleet said, the company has an on-site testing center where employees can test for certifications. The company pays for the test, but does not cover the expense of retesting.

The payback? According to Van Fleet, it’s rare that someone leaves the company after training. In fact, the policy encourages loyalty.

“We don’t have 20 percent of our people waiting for their education contract to expire. We don’t have people staying out of classes because of a commitment,” he said. “We don’t have people leaving every other week for 50 percent salary increases. We have 170 employees who want to be working for us for the long haul.”

Tim Sireno, a network engineer for Econ Marketing , called the issue “a classic example of managers worrying more about the bean counting, rather than the other important intangibles.”

Sireno argued that an employee who is not given the training to do a job is a costly mistake/time bomb waiting to go off.

“Many workers will quietly ‘dig in’ and try to tough it out,” he said. “Oftentimes, these same employees will become disenfranchised and turn into ‘bad advertising’ machines for the company …. This will turn away potential employees and customers. And when this condition is left unabated for too long, it will lead to the worst consequences—the employee’s general dissatisfaction will sour their day-to-day interaction with the customers and turn away those customers!”

He also said that providing training as an added benefit shows that you value the employee as a company asset.

“The company is, in essence, a social creature existing in a social environment where the basic rules for social gatherings do generally apply,” Sireno said. “When the participants are feeling good and enjoying themselves, they will stay around longer and contribute to the interaction in a good way.”

An unusual alternative
Jeff Granquist, a business development manager with Diversified Computer Consultants , offered an unusual solution. He suggested offering training without contracts, but providing employees with a clear growth path so they will not be tempted to leave.

But he also has a condition: If too many employees take advantage of the free training, outsource the jobs.

“Most IT people don’t like third parties coming into their turf,” he said. “My message is: I’ll spend the money to train you … as long as you stay around. If you leave, then we’ll do what is necessary to keep this business running.”
How do you keep your staff up to date on the latest technology? Do you have a minimum annual training requirement or do you expect them to keep up on their own time? Share your experiences with us or post below.