Pros and Cons

Employment Bond is a signed agreement between the employer and the employee stating the terms and conditions during the duration of the job period, it may also be enforceable in the event of a merger of an acquisition and in some cases it may also include certain clauses with are expected to be followed even after the completion of the specified time period. Bonds are viewed by most companies to be a security net in preventing high attrition rates. According to the organizations they are simply protecting their interests. The legality of an Employment Bond in India is however condition to its validity under the Indian Contract Act 1872. If the Bond meets all the requirements of the Act, it is considered to be legally binding.

From the point of view of the organization, one of the most beneficial uses of the employment bond is to protect itself from a high employee turnover rate. With an employment bond, the costs of finding or training new employees are significantly reduced. Employment bonds are used as tools by a company to “lock” an employee within a specified term. Moreover, these bonds play a prime role in enticing new talent to the company by offering them security within the market. On analyzing the other side of the argument, one of the biggest disadvantage of a bond is that it limits the flexibility of the company. Just as the bond compels the employee to serve the organization for a specified duration, it also compels the organization to employ the worker for the same.

Looking at the situation from the employee standpoint, we see that the scenario is not quite as rosy. There exists a decent amount a confusion regarding the enforceability of a bond. With the companies “looking out” for themselves, it comes as no surprise that sometimes the clauses in these signed contracts are at best unfair. For example an employee who wants to resign may have a negligible amount of time left for the legal period to end, say one month. It may be of vital importance for the employee to leave the company at this time. The limitation of the agreement is highlighted by the fact that the organization will not consider the amount of hard work the employee put into the company (sometimes even working nights). The company can choose to withhold the reliving letter and the recommendation letter unless the employee can cough up the charges for breaking the contract. This charge can be and is most probably an exorbitant amount, compelling the employee to continue working in the organization against his/her wishes. How is this situation fair when the Constitution of India clearly states that any man is entitled to exercise any lawful trade as and when he wishes?? Another example that can be cited here is a case of a merger or an acquisition. In most cases the contract signed with the old management is enforceable by new management. This is all well and good if the duties, responsibilities and the opportunities given to an employee remain unchanged under the new rule. What happens when the career advancements promised to the employee at the time of joining are not fulfilled??

So we see that the concept of an employment bond has a lot of gray areas, each with a significant number of implications. While drafting as well as signing a bond, both the employer and the employee should give careful consideration to all the clauses in order to protect their interests. It is also equally important to keep on renegotiating the terms and conditions when the bond expires.