Look before you leave

High-tech office / Photo: Shutterstock, Shutterstock.com

Some Israeli tech companies hire and train inexperienced tech workers and then demand large payments, if they leave within a few years.

Israel's tech industry has become increasingly attractive, both in terms of salary and the career opportunities it offers employees. Each year, the tech sector attracts thousands of new employees without a technological background. They come with tech-adjacent or non-tech backgrounds, so, to get hired, they may choose to fast-track their adaption through courses offered by high-tech schools and sometimes even by the companies themselves. But new employees starting out at IT companies don’t always enjoy the perks for which the tech industry is famous. These jobs come with tough contracts that include strict conditions and high penalties for resignations. Is this a legitimate way for companies to protect human capital from the fierce competition in the industry over talent, or is it a seemingly successful method that is, in reality, an additional revenue stream on short-term employee training?

Two weeks of training for two month’s salary

Yaron (not his real name), age 26, who worked in operations and data entry at an investment house, wanted to try his luck in high-tech. He took a Java development training course at the Matrix Group's John Bryce School. After several months of not finding a job, he received call with a job offer from Matrix with a starting salary of NIS 8,240 that included a two-week course in operating the company’s own internal system.

After three months, he asked to leave, having realized the technology he was working with was internal, and would not be useful in developing his tech career. (Almost no other company uses Caché, a developer language used for operating the Matrix system). In response, Yaron received a payment request from Matrix's finance division for NIS 16,480 (double his monthly salary), because he chose to leave the job in the first year. If he had left after two years, he would have been asked to pay the equivalent of one month's salary - all for two weeks of training in the internal development language.

Matrix responded: "As part of the professional training options at Matrix, we allow employees without experience in the field, who wish to integrate into the high-tech industry, to undergo a significant training processes free-of-charge. The training processes take weeks to months, during which time those taking the course receive important professional tools that enable them to integrate into the high-tech sector at Matrix or at other companies. Naturally, Matrix would like to benefit from its investment in employee training, so we offer employees who have been trained with us to stay and work for our company. On the other hand, we believe that the beneficiaries of our investment who decide not to stay at Matrix, should refund the cost of the investment.

"Regarding the course in question and the technology taught there, Caché is produced by a large global US software developer with a great number of customers and software houses working with the technology, in Israel and around the world. The course takes many months and includes classroom studies, training with a tutor, as well as a variety of other subjects. As for this specific employee, it should be noted that he was offered a number of positions at Matrix in different employment tracks, he chose the track in question when signing his contract, and fully understood his commitment to our investment and position. Towards the end of August, an evaluation was held with the employee where he expressed his satisfaction with the training and the work. We understand that the candidate received an offer to work elsewhere and therefore requested to leave."

The Matrix case caused a stir this week on LinkedIn following a post by Ron Ozery, co-owner of placement firm JobHunt which, unlike most companies in this market, represents employees and not employers. Ozery and his partner Miriam Brainin were then contacted by employees with comparable stories. "I left after six months and was still fined NIS 20,000 for training," wrote one employee. "I worked at Matrix and my story is similar... I left after a year and was still fined for the training," wrote another employee. Additional evidence came from employees of other IT systems companies, including those with large government contracts.

According to the Wage Protection Law (5718-1958), an employee cannot be fined for leaving unless the employee is part of a special collective agreement, which is not the case. Therefore, companies requesting reimbursement of training from a resigning employee are required to prove that there is a reasonable link between the payment and the cost of the training. "On the face of it, this is a legally problematic payment because it looks more like a fine and not like a refund of the cost of training," labor law expert Adv. Dr. Amit Gurevich tells Globes. "There are several reasons for this: First, during the short training period, workers are paid a salary, so it’s impossible [to claim] that two weeks of training equals a fine amounting to one- or two-months’ salary. Second, this is internal training, the knowledge is local, and isn’t the kind can be used in another way. Therefore, this is training to replace someone, and not training in a profession."

It should be emphasized that companies which make use of this section of the law do not relate to the fine as a penalty, but as a return on investment for training beginners, and a measure to help ascertain employee commitment.

The hidden clause: Leaving? Give back the money

Matrix is not alone. This method, it seems, is prevalent among IT and other tech companies that employ newcomers to the industry, like G-Stat, which provides information systems and data analysis services to banks, insurance companies, and retailers in Israel.

Several G-Stat employees told Globes about a situation that includes both retention bonuses that must be refunded upon resignation, and reimbursement charges on the training participation cost. G-Stat gives its employees a retention payment of NIS 12,000 a year, but not as a bonus. Instead, it is part of the gross salary, on which employees pay partial or full tax as part of their first year of work. In addition, the company demands reimbursement from employees who resign within six to 12 months after completing a training course, albeit on a far more modest scale than Matrix: NIS 3,500 if the employee leaves within six months, or NIS 1,500 if the employee departs between a half year and a full year. It should be noted that courses at G-Stat are not compulsory and that the company trains employees in various disciplines, including some not directly related to their work at the company, so training is considered an employee benefit.

G-Stat owner and CEO Ephraim Goldin tells Globes there is a shortage of high-tech workers, in particular in his areas of operation: data mining and analysis: "The market is polarized. On the one hand, there’s very high demand for employees from high-tech companies, and on the other hand, there’s great demand from banks, insurance companies, and large organizations that require a high level of service. G-Stat essentially provides them with quality service but with employees who are just starting out. We invest in inexperienced workers, give them their first jobs in the industry, and we don’t expect them to stay with us for three years. But because of conditions within the industry, some are switching jobs after just a few months. "

"To deal with this phenomenon, we considered a range of measures," Goldin continues. "We’ve implemented retention bonuses, which have been proven to work, and their amounts are quite reasonable, can be negotiated before starting to work, and the period before receiving the bonus can be decided on. We do not always realize them, and ultimately, we operate transparently and fairly.

"Retention bonuses are problematic because they are defined as wages from which tax, social security and pensions are deducted, and social rights apply to it, and therefore it is even more illegal to demand this be repaid," says Gurevich.

Goldin states that he decided to grant retention bonuses after receiving a legal opinion.

Gurevich says most employees simply give in. "There are people in this small market who prefer to pay and close matters quietly. That doesn’t mean they have no chance of winning a lawsuit. After all, why shouldn’t an employer to put a clause like this in a contract, and then challenge the employee to determine its legality? After all, the method works."

Published by Globes, Israel business news - en.globes.co.il - on October 5, 2021

Copyright of Globes Publisher Itonut (1983) Ltd. 2021

High-tech office / Photo: Shutterstock, Shutterstock.com
High-tech office / Photo: Shutterstock, Shutterstock.com
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