Employment Clawbacks

September 08, 2017


Employment Clawbacks

When an employer uses a recruitment agency for the purposes of finding new staff, a fee will be payable once a new employee has started work.  

Almost always, that fee will be payable in full unless the employer brings the employment to an end within a short time period – possibly no more than 6 weeks.

The fee can be of an eye-watering sum.  From a  commercial point of view, it only becomes a good bet for the employer if the new person remains in post for at least a year and probably much longer.

So what happens if the employee hands in his or her notice after, say, 3 months?  Or if the employee commits an offence of gross misconduct and the employer then has to dismiss him/her?

One option is to have a term in the employment contract that provides for a scaled reimbursement of costs if the employee leaves within, say, 6 – 9 months.  Provided that the scale is such that it reasonably reflects the actual losses suffered by the employer, then it is likely that it will be treated as a liquidated damages clause (lawful) rather than a penalty clause (unlawful).


The probability is that the employer will not have sufficient unpaid salary in the bank to cover the totality of entitlement under the clawback provision - but it might be better than a slap in the face. 

However, such a clause in a contract requires some thought and care in its drafting.  That’s where we come in.

If you need help or advice on any matter related to employment, please Julian Freeland on 01869 252244.

posted by Julian Freeland | September 08 2017