Bonded - all the way!!

Employment Bond is a common tool used across industries through which employer tries to protect the investments made in making an employee productive for the company. The bonds are not only meant to recover investment made, but also discourage the employee from switching to another company immediately with the knowledge gained in current organization. Although the application of same may differ i.e. through bank-tie ups or directly with employee, the end goal remains the same.

I have worked in an IT company for around 3.5 years and was made to sign a service agreement for 2 years (including training period) on joining. The agreement seeks the employee’s reciprocation to company’s investment in training and its commitment to employee’s professional development. The employee in this duration has to stay with the organization and any breach of the undertaking would involve payment of Rs 50,000 towards damages to company. This service agreement was not applicable to lateral hiring made by the company thereby indicating that it was intended to act as a psychological pressure on fresh hiring and also to recover for cost of training provided.

For my onsite travel of 6 months (which started just near end of 2 year bond that I had initially), I was required to sign the Master Overseas Deputation Agreement (MODA) to serve the company in India on return from an overseas deputation. This was to ensure that knowledge and information gained by the employee during deputation is shared and available to the company and its employees in India. The employer conducted knowledge sharing sessions, documentation to facilitate this. The knowledge and information transfer is essential for company to continue to serve its clients and customers. By signing this agreement, I had to serve the company in India for a minimum period of 6 months on completion of every overseas deputation assignment having duration in excess of 30 days. The same agreement holds true in case of overseas training as well. In case of any breach of contract the I was required to pay Rs 5,00,000 as damages to the company. This amount has been revised lately (Rs 1,50,000). This bond was precisely the reason why I had to be part of the project at a not so cherished role that I would have not argued upon in absence of the bond. So for major part of my professional career so far, I had been bonded.

Further, there is also differential treatment for reimbursement of various certifications that an employee completes. Certain certifications (high cost) are reimbursed by the company on successful completion with a condition that employee signs a bond of staying for some period of time in the organization. Other certifications are reimbursed without any bond requirements.

Even for sabbatical (leave for higher studies), companies have bonds to ensure that employee joins back once leave is completed or pay out pre-specified amount. These are applicable mostly in cases of company sponsored studies.

The validity of employment bond is subject to amount and time that is mentioned in contract as it is reasonable indicator of extent of recovery that employer expects from the employee. With all calculations done by the employer side and things not so transparent to the employee, I opine that there’s always a possibility that employers take undue advantage of these contracts. As pointed out by Partho in his post, I also opine that 1 year is enough for company to recover its training costs on an employee, so one can easily figure out company’s intention and expectation from time and amount parameters of the contract.

Whether employer moves to court in case of employee breaching the contract completely depends on case to case basis. For eg. BPO industry has a high attrition rate and there are companies in this sector that require their employees to sign an employment bond. However, company doesn’t move to court for each and every individual who breaches the contract. For them, moving to court might be more costly then getting a new person and training the same. The work is highly standardized in this sector and employee is easily replaceable which can be main reasons for non enforcement

Companies often tend to stop / delay the relieving letter, experience certificate and character certificate for employees who breach the contract. In today’s scenario, new employer is at times willing to pay the bond requirements of the employee to current employer which makes the switching of job easier.

Although the rationale for having employment bonds (to recover training and development cost) seems to be in favour of employer, it is the implementation (time and amount) that employer uses which makes employee see the bond in reasonable or unreasonable way.

Thanks for reading what I had to share from my experience.