Application of Payback Clauses in Italy: Business School Case Studies

1. Thessaloniki, 7 June 2011 Application of payback clauses in Italy: cases from an enterprise

2. Contents • Short Description • The payback clauses internal regulation • Payback clauses features • Strong and weak points • Examples • Questions

3. BUSINESS SCHOOL for SME’s • A private company providing training and consultancyservicesforSmall and Medium Enterprises - more than 25 yearsofexperience in the field, about 65 employees • Twodifferentkindsofcustomers • SME’s • Public Offices • Public Companies • Top Managers/Entrepreneurs • Managers, Employers • Graduates

4. Areas of interest Experts in education and training needs analysis in the main areas of: • Company administration • Strategy and marketing • Internationalization • Human resources and organizational • development • Production and logistic • Quality systems • Information technology • Clinic engineering

5. The payback clauses internal regulation • The payback clauses are regulated as agreement at company level • The clauses do not apply for part time or fixed time contracts • They are applied for general training, external vocational training, planned training through on-the-job • To validate the payback clauses, the training course may: • be related to work to be carried out by the employee • upgrade the employees’ qualifications • must be longer than one month • Training on very specific internal themes (such as the internal quality system management) is not included in the clauses

6. The payback clauses internal regulation • The following training related costs may apply: • Direct labour costs • Fees and payments for training courses • Estimated/calculated costs of internal training courses • The payback clauses become effective in case of voluntary resignation of the employee within the binding period of the payback clauses (Special agreements can be achieved in specific cases) • Not necessarily the payback of the employee is made of real money: it can be an agreement to notify the leave with an advance of at least 6 months – this can partially protect the enterprise from leave of the staff shortly after the training • The advisory service available for the implementation of payback clauses is Managing board and administration service

7. Payback clauses features • Every contract is made at individual level, so they can differ one from the other • The agreement on repayment/binding time must exist in written form • The agreement must be signed by both contract parts before the training has started • Labour/civil courts proof if the qualifications gained through training are transferrable to future employments • The individual contracts containing regulations of payback clauses are the 40% - around 20

8. Strong and weak points • Employees are more motivated after receiving a suitable training - they intend to use this opportunity to be trained and they are aware they can improve their role inside the company and of course do not want to loose their personal investment. • Companies do not waste time and resources for training someone ready to leave soon after the training • Employees are less attracted by changing company because through training they can achieve better roles inside the enterprise • The possibility of recouping training costs in case of termination of contract have a positive impact on investment in training, because there is a less significant leave and turn-over of staff, so the enterprise can invest more money                  

9. Strong and weak points • Some time such clauses are not easy to accept, because the employee can have the impression to be threatened by the enterprise  • Only several potential employees had problems in signing an employment contract with a payback clause, but it was solved after a negotiation. The employee considered the binding period too long • The current financial crisis have an impact on investment on VET and the use of payback clauses connected with this, since our company as others in Italy have less money to invest in training

10. A case study • An Account manager was employed by the organisation, and he was assigned with some specific economic and qualitative tasks. • Several money bonus were foreseen if he could reach his objectives, within a pre-determined framework of time. • In order to facilitate his work, a specific ad hoc training scheme was built for him. • Moreover an external expert consultant helped him as a personal trainer, to support him to get the necessary skills for his new job. A significant amount of money was invested to pay the external consultant and duly train the new employee. • The company and the account manager signed a contract where the employee is obliged to give notice before leaving of at least 6 months. Otherwise he has to pay back a percentage of the investment in training. This percentage decreases according to the number of years he works for the company. • Then...

11. A case study • Less than 1 year after the training he decides to leave the company, because he received a better offer. • The company decides to apply the payback clause, and forces him to pay a percentage of the training expenditures • The account manager does not agree with this resolution, and consults trade unions and lawyers – then decides to negotiate with the company. • Finally he is obliged to pay the 50% of the training costs

12. A second case • A secretary was employed and trained as operator in the secretary area (basically phone answering and receptionist) • The contract foresaw a period of at least 4 months of notice before leaving • The secretary decides to leave the company for personal reason (another job, closer to the place where she lives) a couple of months after the training • The company does not apply any payback clauses, and just a 45 days notice was considered enough in this case