Of late, Bonds have become the most potent tool with organizations primarily to discourage the employees to look for other avenues and thereby control attrition. Though it is yet another HR policy that has underlying negative implications, it is being used in all organizations spanning across sectors. However, employment bonds have serious ramifications for organizations too.
Many potential candidates are deterred from joining the organization by these employment bonds and in the process employers lose out on hiring potentially good candidates. During my engineering days one of the companies for recruitment was a multinational chemical consultancy which offered a good profile and substantially good package. However, one of the downsides of joining the organization was a 3 years employment bond. An employee would be liable to pay 2 lakhs in case he/she do not oblige their contract. However, freshers who are looking to put their careers on fast track, consider it as a major roadblock. As such, many opted out of the recruitment process for that company.
However, even after that companies are making employment bonds stricter. With attrition rate going up in companies, particularly in IT sector, companies are making every move possible to prevent employees from leaving the organization. Some companies which earlier used to count the bond period from day 1 have started counting the bond period after completion of fresher’s training, in turn effectively increasing the bond period. Moreover companies which used to allow buyback of bond period by employees, have stopped that practice since their bond mentions that it is on the discretion of the company whether to allow buyback or not.
Not allowing the buyback of bond period is yet another arm twisting mechanism by organizations, wherein they force the employee to oblige long notice periods at any cost. If the employee wishes not to complete the notice period and leave the company in between, organizations blackout the employees name in database maintained companies wherein he won’t be employed by any of those organizations again. However, this is grave issue from two perspectives. Firstly, I believe even such strict policies do not deter employees from leaving the organizations if they are not satisfied with their jobs. The recent exodus of around 4000 employees from Infosys technologies last month only is a case in point.
Hence, to use employee bonds to control attrition might not be in the interests of organizations. Another issue is the length of the bonds. As being mentioned in earlier posts also employers need to determine the length of the employee bonds and their subsequent policies in the interest of both employer and the employee. If the company incurs huge costs and the training is very specialized in nature, employers may go for bonds only to the extent which covers their costs and other legitimate business risks. Though it would always involve subjectivity and some bias on part of the employer reaching to that figure would not be difficult for the companies since the components involved are known to them. However, companies should always bear in mind that such bonds are always a hurdle for an employee. Another important aspect is the notice period that these employment bonds cover. Many companies have as long as 3 months of notice period. Though such long notice period might be justified at top management positions, having long notice period at middle management and entry level positions would indicate the weakness of company to replace a resource at short notice. So notice period should be long enough only for knowledge transfer and resource replacement. However, employees must be given an alternative option to either buyback their bond/notice period.
Thought it involves lots of complex issues and interests of many shareholders like employers, employee, clients etc, but employment bonds definitely create distrust between employee and the employer.Many potential candidates are deterred from joining the organization by these employment bonds and in the process employers lose out on hiring potentially good candidates. During my engineering days one of the companies for recruitment was a multinational chemical consultancy which offered a good profile and substantially good package. However, one of the downsides of joining the organization was a 3 years employment bond. An employee would be liable to pay 2 lakhs in case he/she do not oblige their contract. However, freshers who are looking to put their careers on fast track, consider it as a major roadblock. As such, many opted out of the recruitment process for that company.
However, even after that companies are making employment bonds stricter. With attrition rate going up in companies, particularly in IT sector, companies are making every move possible to prevent employees from leaving the organization. Some companies which earlier used to count the bond period from day 1 have started counting the bond period after completion of fresher’s training, in turn effectively increasing the bond period. Moreover companies which used to allow buyback of bond period by employees, have stopped that practice since their bond mentions that it is on the discretion of the company whether to allow buyback or not.
Not allowing the buyback of bond period is yet another arm twisting mechanism by organizations, wherein they force the employee to oblige long notice periods at any cost. If the employee wishes not to complete the notice period and leave the company in between, organizations blackout the employees name in database maintained companies wherein he won’t be employed by any of those organizations again. However, this is grave issue from two perspectives. Firstly, I believe even such strict policies do not deter employees from leaving the organizations if they are not satisfied with their jobs. The recent exodus of around 4000 employees from Infosys technologies last month only is a case in point.
Hence, to use employee bonds to control attrition might not be in the interests of organizations. Another issue is the length of the bonds. As being mentioned in earlier posts also employers need to determine the length of the employee bonds and their subsequent policies in the interest of both employer and the employee. If the company incurs huge costs and the training is very specialized in nature, employers may go for bonds only to the extent which covers their costs and other legitimate business risks. Though it would always involve subjectivity and some bias on part of the employer reaching to that figure would not be difficult for the companies since the components involved are known to them. However, companies should always bear in mind that such bonds are always a hurdle for an employee. Another important aspect is the notice period that these employment bonds cover. Many companies have as long as 3 months of notice period. Though such long notice period might be justified at top management positions, having long notice period at middle management and entry level positions would indicate the weakness of company to replace a resource at short notice. So notice period should be long enough only for knowledge transfer and resource replacement. However, employees must be given an alternative option to either buyback their bond/notice period.
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