It is understandable that companies use bond to discourage employees to leave the company soon after acquiring special skills at company's cost. Companies train the employees with special skills. In many cases the training cost is very high. It is natural that they would expect ROI on training by utilizing the resources after training. It would be against the interest of a company if an employee quits just after acquiring the skills and the worse if he joins a competitor. Thanks to employment bond which provides some protection to companies in this regard.
The given examples speak the same story that, the companies use employment bonds to protect their ROI on the employees. In some cases, bonds intend to protect the ROI on training and in few others they intend to protect ROI on employees when they get onsite opportunity. In the first case the companies invest in technology, in building training infrastructure, hiring expert trainers etc. In the second case the companies invest in training the employees on soft skills required in the work setup at onsite, travel expenses, the opportunity cost incurred by the company when the skills /experience which an employee gains at onsite goes unused and untapped. So, it is obvious that being a business organization they would take steps to protect their ROI; apparently they found bond as the right instrument to serve this purpose.
What I don’t find appropriate is the advance payment or bank guarantee for the employment bond. How can a company charge an employee for something which hasn’t occurred? How can they expect a fresher just out of college to pay the hefty amount before getting his first salary? This policy is adopted by some of the IT companies. They are taking the advantage of the liberty they have got from the regulators and are tweaking the policies to their advantage. Apart from Asatyam, Swipro also has the advance payment for bond policy. In Swipro’s case the interest accrued on the deposit would be given to the employee at the end of the bond period. But advance payment itself is unjustified and is very taxing for the employees. This is high time for the regulators to wake up and stop the IT companies from imposing this type irresponsible, opportunistic and anti employee policies.
The reason why the Indian IT companies have adopted the advance payment could be that, earlier employees used to just walk away without paying for breaking of the bond. They knew that it is very difficult for the companies to enforce it as the company would not be able to track them out and also they wouldn’t bother themselves for couple of lakhs. I have seen ample of such instances in Asatyam, Wisdomsys and Swipro earlier when the concept of advance payment for bond wasn’t there in Indian IT sector. Even then, the company should have tried to address the causes for attrition rather than simply trying to prevent the movement of the employees through monetary impositions. This would affect employee loyalty and motivation and would bring disrepute to the company.
Few questions to deliberate on, if employees are penalized for quitting just after/during training, what protection do they have when the company fires them during that period? One may argue that hiring & firing comes under employment contract (employment at will) and the other one comes under the bond contract. But keep aside the legality part; are these two situations so distinct and separated? Why can’t we have something for employees as well?; like if a company fires an employee without cause during the bond period then the company would pay certain amount to the employee as compensation, so that both the parties get a fair deal.
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Will it save your ROI??
I agree with Prabhash that employment bonds are usually made to benefit the employer but in his discussion, he has missed the existence of two sided bonds. Though two sided bonds are not as prevalent, but they are being used by a number of companies. Infosys Technologies pays a trainee a compensation amount if he/she is fired during the training period. That compensation is equal to the salary the employee would have got for the complete training period had he not been fired. More so, when a bond is two sided, its legal validity also increases and any party breaching the agreement can be taken to court. One sided bonds, however are considered null and void according to the Indian Contract Act.
Also, I agree with the fact that it is very difficult to enforce the bond if an employee quits the organization during the bond period. There are two reasons for this. First, no company likes to take the pain of tracking where the employee went and then going to court against him because it involves spending a lot of money. If the employee goes for higher studies after breaking the bond, it has been observed that the company usually ignores him/her. But if an employee joins a competitor, the firm may take him to court depending on whether the cost of fighting the case is less than the threat that he poses to the company if he works with the competitor.
Second, for a bond to be effective, the company must be able to legally demonstrate that significant training was imparted. This might be possible in case of companies like Infosys, Tech Mahindra and TCS which have a dedicated training program but for a company like CTS, where the formal training period is very short, and actual training happens on the job, it is a very tough task. This is one major reason companies consider when they are deciding whether they should go for an employment bond or not. This unenforceability of the bond makes companies like Asatyam and Swipro take an advance payment from the employee. Still, I believe that it is not the right thing to do, because it makes the bond one sided. Also, it acts as a deterrent to join the company especially in today’s competitive market where the employee has a lot of options to choose from.
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