Corporate Training and Employment Bond: Safeguarding The Investment

By Oluwasegun Afolabi Ezra

( Corporate & Commercial Associate, G L Agbomoagan Legal Practitioners & Consultants)

Introduction

In today’s fast-evolving business environment, employee training and capacity development are critical investments for any forward-thinking organisation. Whether in the form of professional certifications, advanced degrees, workshops, or short-term technical programmes, training enhances employee productivity, fosters innovation, and drives long-term company growth. However, such developmental programmes often come with significant financial costs, especially when they involve specialised or international training. For employers, the challenge lies not only in providing these opportunities but also in safeguarding the company’s interests to ensure that the investment yields measurable returns. Without appropriate safeguards, companies risk losing both their monetary investment and the newly acquired expertise if trained staff exit prematurely. This essay would be exploring the most effective way a company can protect itself when sponsoring staff for expensive training primarily through the legal mechanism of an employment bond.

Employment Bond or Training Bond

Training typically refers to structured educational programmes designed to enhance the knowledge, skills, and competencies of employees. Training activities may include degree programmes, short courses (online or in-person), workshops, seminars, conferences, and hands-on practical exercises designed to support the company and the success and well-being of its staff. The aim is to support the vision and mission of the brand by fostering continuous learning, promoting excellence in teaching and research, ensuring compliance with policies and regulations, and enhancing the overall effectiveness and well-being of the workplace.

Employment bond, sometimes called training bond, is a device by which employers secure their investments in staff training and development. Training and capacity development are important business investments, and like all investments, employers expect returns on training investments. This is a legitimate expectation, and the same is recognised in law. The returns are basically in the form of optimal utilisation of the skills acquired from the training for the growth and development of the company and transfer of the acquired knowledge to the other workforce.  An employment bond is created where an employee agrees through an agreement to remain in the employment of his employer for a particular length of time in consideration of the training investment in the employee. It is a specie of contract of indemnity where an employee undertakes in writing, in consideration of a training opportunity to be funded by his employer, to remain in the employment of such employer for an agreed period or indemnify the employer of the training cost in the event of breach on the part of the employee.

Thus, by this agreement, the employee undertakes to refund the training cost (usually on a prorated basis) in the event that he chooses to leave the service of the employer before the agreed time.

In Dr Victor Balogun & Ors v Federal University of Technology, Akure & Anor[1], the Court defined a training bond in the following words:

“…. a training bond is an agreement that seeks to compel an employee who has been sponsored for a training by the employer to work for an agreed number of years for the benefit of the employer’s investment on the staff. Alternatively put, it is the service compulsorily rendered by an employee for training sponsored by his employer….”

Employment bonds are generally legitimate and enforceable, but subject to meeting some conditions[2]. It is a legitimate device by employers of labour to secure the benefits of their expenditure on staff training and development.

For an employment bond to be enforceable, it must satisfy the following conditions:

a.    The employment bond must be voluntary

b.   The terms of the bond must be reasonable, especially the duration of the bond

c.    The bond must have also been entered into prior to the training and not afterwards; otherwise, same amounts to a past consideration which is not enforceable in law[3]

d.   A bond agreement must state clearly all the material terms of the contract.

e.    The bond value must be a fair pre-estimate of the total cost of the training.

f.    The employer must not be guilty of a fundamental breach of the bond agreement or the contract of employment between the parties.

While training bond agreements are legitimate, and generally valid and enforceable in law, provided certain conditions need to be met, sufficient care must be taken by the employers of labour to avoid common mistakes that may vitiate the agreement. Below are some useful practice guides:

A training bond must be in writing, signed by both parties, and preferably witnessed by another party

a.    The employee must be advised of his right to seek legal advice before executing the agreement. It is a good practice to have the employee endorse this fact on the execution page

b.   The bond agreement must be executed prior to the training and not afterwards

c.    The employer must diligently keep to his own side of the deal

d.   Employers of labour are advised to consult their legal advisers in drafting employment bonds.

Although many small business owners have little in terms of funds available for training, and are keen to seek ideas for developing staff on a very low budget, some do have a bit more to invest and like to consider sponsoring employees through higher/further education, professional qualifications, or similar. But understandably, many are wary of doing so without wanting to protect their investment. Here are some things to think about if you’re considering supporting an employee in this way. When a company invests significant resources in staff training, especially expensive programs, it is natural to want to protect that investment and ensure a return.

The vast majority of employers only invest in this type of development where it will benefit them as well as the employee, and no employer, large or small, wants to spend a considerable amount of funds on training or education for staff only for them to leave shortly after completion and for the employer not to see the benefit.

Most organisations look to put in place some mechanism for them to recoup at least some of their investment in the event of the employee leaving, and this is perfectly normal and acceptable.

For an employment bond to be enforceable in an employer-employee relationship, certain things must be noted in the agreement. To mention but a few are:

a.                  Clarity

If you want to have a repayment clause enabling you to recoup funds if someone leaves, the single most important thing to do is to make sure that the terms of your investment are made 100% clear to staff hoping for funding beforehand. Sounds obvious, but don’t rely on clauses in a contract or policies in a handbook. Make sure terms are set out in a personal letter or agreement with the member of staff, and that they sign to confirm they understand what they are signing up to at the time the investment is agreed. Many companies require employees to sign a training agreement before attending costly training.

This agreement typically states that if the employee leaves the company within a specified period after completing the training (e.g., 12–24 months), they must repay all or part of the training costs. This is a standard and accepted practice to safeguard the company’s investment. The agreement should clearly outline repayment scales (e.g., 100% repayment if leaving within 6 months, 50% if leaving within a year) and specify the circumstances under which repayment is required

Considering Circumstances for Repayment

The normal circumstances under which an employer might look for repayment of fees after sponsoring an employee would be if that employee leaves during or soon after their course finishes. But think carefully about how you word this requirement and under exactly which circumstances you’d want to recover money. It might be reasonable, for example, not to try to recoup your investment if the employee leaves through compulsory redundancy. On the other hand, even if the employee doesn’t leave, you might want to be able to recover costs if they don’t complete the course, don’t attend sessions regularly, or fail all or part of it.        

b.                  Setting Clear Expectations and KPIs

Communicate the expected outcomes of the training to the employee, including how new skills should be applied in their role. Make training competency-based, with pre- and post-training assessments to measure knowledge gain and application, and set measurable performance indicators to track whether the training delivers the intended business impact.

Conclusion

In conclusion, while investing in employee training is golden, commendable and often necessary for the growth of a company, it must be approached carefully and with legal prudence. The use of employment bonds stands out as a practical and enforceable means for companies to safeguard their investment in staff development, and when properly structured with equity and fairness, it not only regulates the agreement but also protects both parties. By adopting clear training agreements, setting performance expectations, and seeking legal guidance where necessary, companies can strike a balance between empowering their workforce and preserving their operational sustainability. Ultimately, the goal is to ensure that training investments translate into tangible value for both the organisation and the individual employee.

[1] Suit No. NICN/AK/49/2015 Judgement delivered on 15th November, 2018.

[2] See Overland Airways Ltd v Oladeji Afolayan & Anor, unreported Suit No. NICN/LA/19/2011 Judgement delivered on the 2nd May, 2014.

[3] Northern Thunderbird Air Inc v Van Haren (2011) BCSC 837