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Exit fees impacting graduate careers

A new campaign has been launched to prevent companies charging graduates money to leave schemes early.

Tanya de Grunwald, founder of The Good And Fair Employers Club, launched the Stop Exit Fees Now campaign after finding that some graduates feel trapped in their jobs due to the high cost of exit fees accrued through their training.

The schemes in question are run by recruitment firms which train graduates then outsource them as contractors to large employers on demand.

Contracts attempt to lock the graduates in for a set period of time, e.g. two-four years, after their training so they effectively pay back their training through work. If graduates wish to leave the employer before this period is up they face exit fees running into the thousands which de Grunwald argues is holding graduates to ransom.

Speaking to HR magazine, she said: "Recruitment companies are still charging up to £20,000 for 15 weeks of training, and employers are still using these grads knowing that they can’t leave unless they pay the money. They wouldn’t treat their own graduates like that so why are they using contractors?"

"There’s a lot of hypocrisy going around. I don’t think employers can use any of these graduate suppliers and still claim to care about diversity and inclusion, or mental health. It raises lots of questions about whose responsibility contractors are - particularly on contractors who are not in a position to question these contracts when they find them. Ethically, the buck has to stop with the employer."

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However Ben Rosen, CEO of graduate job site Inspiring Interns, argues that exit fees are reasonable in some circumstances.

He told HR magazine: "I appreciate an exit fee seems on face value a little harsh, however it totally depends on the type of investment put into the candidate and the agreement made at the start of their employment.

"For example, if a candidate was lucky enough to be offered to do a masters alongside their job, this is a significant company investment over a one to two year period. If the candidate chose to leave early, the company would see no benefit from their study, so it seems appropriate for the candidate and company to share the cost of such an investment."

The Stop Exit Fees Now campaign successfully got some graduate training providers such as FDM and Sparta Global scrap their exit fee policies earlier this year. 

With companies chasing down graduates for money if they refuse to pay, de Grunwald suggested the likelihood of legal action increases. Although it might be a bluff to scare grads into completing their schemes, she highlighted potential ways for graduates to make a case for themselves.

She said: "If an employer were to take a graduate to court and demand the money for training, the graduate could challenge that in several ways. One of which is arguing that the training possible wasn’t worth the money.

"Another one is called restraint of trade, which is the fact that the contract stops you from working elsewhere. There's another argument that the contract was never because the power balance was always tipped heavily in favour of the person who drafted it."

The issues with such graduate schemes start at university added de Grunwald.

She said: "The universities know this is happening but they’re complicit. These companies employ their graduates so they still invite them onto campus for careers fairs and recruitment drives. Partly because they need the money from recruitment fairs, but mainly it makes their own stats look good. They care less about the wellbeing of their graduates than they do about making themselves look good."

Neil Morrison, director of HR at Severn Trent, told HR magazine graduate schemes from recruitment firms can affect graduates from under represented groups more negatively.

He said: "The worrying thing about these schemes is that they seem to disproportionately impact more vulnerable students and those from under represented groups who may not have the same level of support and advice from those around them.

"Even if the quality of the training was exceptional, and I think there’s evidence to suggest that isn’t always the case, locking in young people at the start of their careers through punitive exit clauses is immoral and inappropriate.

"As the economic situation worsens and graduates become more anxious about securing their first jobs it is even more important that we stamp out these practices by employers refusing to work with companies who use them."