Lets Bond

Employment Bond is common tool used by many organizations to restrict the ‘freedom of mobility’ of an employee for a period of one or two years from the date of joining. The company usually invests a huge sum of money in the training of the employee and it is only after a period of approximately one year that the employer begins to reap the benefits of the investment made on the employee. In case of lateral recruitment, while the expense on training might not be as high but the cost of acquiring the employee is high. Employer’s prime motive is to make profits, so it is justifiable on their part to have an employment bond for a period of 1 yr.

But in certain cases like Asatyam, where the employee takes loan to pay the employer a sum of 2 lakh and also pays interest for it to the bank. At the end of 2 years, though he gets back the sum of 2 lakh that he had paid but not the interest, this is not justified on the part of the employer; it should also pay back the interest amount. Similarly, in case of Chutney computer, the prime purpose of employee going onsite is server the employer’s business and not personal interest, so it is not justified to have a bond.

In a country like India where Bonds are not legally enforceable, they are only used as a psychological tool. Employers take advantage of the information asymmetry that exists between them and the employee to serve its purpose. Many companies also take the Bond money in advance, so that the probability of employee breaking the bond is reduced and they would not want to lose their money.