Asatyam:
• A bond of Rs 2,00,000/- for the duration of 2 years or 3 years in the form of a Bank Guarantee issued by SBI executed on the date of joining. The bank guarantee is obtained either through 100% payment at SBI or taking a loan of 2 lakhs from the bank and then the bank issues the guarantee. However the bank charges an interest for that.
• This means the employee is actually paying interest on the amount that he is not even using. The bank guarantee is to be deposited to Satyam and will be returned to the employee after his 2 years in the company is over.
• Bond can be relaxed if the employee is leaving for higher studies. However this is subjected to approval from the legal department. If a person resigns at onsite, the bond is subjected to law of the land.
Chutney Computers:
• The employee cannot leave before one year of joining and if he does so, he has to pay an amount of Rs 1.6 lakhs (which effectively is the cost of the training).
• If the employee is sent abroad, he cannot leave before 18 months, else he is liable for a payment of Rs 2.5 lakhs on termination.
WisdomSys:
• A bond of Rs 1,00,000/- for the duration of 1 year which includes the training period. The training period for the IT background trainees includes 3 months extensive training and for non IT background trainees the training period includes 2 months of general training and then 3 months extensive training.
Pity Group Financial Services:
• Overseas Bond – An agreement needs to be signed before a person goes onsite, specifying that the person have to serve the company one year after he return to India, or else will have to pay Rs 1 lakhs.
• Generally the sales and marketing of products in the financial services market do not attract employment bonds, but the research analysts are required to sign up a bond that they (including their parents and spouse) will not trade in the market for a period of one year from joining. However, if they get some insider information and purchase a particular instrument, they are not allowed to sell the same before a period of one year. Though the specific terms could differ from company to company, a general insight was gathered.
RumDal Steel:
• A bond of the value of Rs.2,00,000/- only is to be executed to remain in service of the company for a period of three years immediately after the successful completion of the training.
• After successful completion of three years of service after training, the trainee shall be paid a loyalty bonus of Rs.1,00,000 over and above his salary and allowances/perquisites, as he may be entitled to.
• In case, the employee wishes to leave the services of the company during the training period, he/she shall be liable to pay the expenses incurred by the company in connection with his/her training. If the employee is leaving within a period of 3 years, then he is liable to pay entire training expenses.
Dalco:
• The bond is in practice only for Graduate Trainee and Management Trainee
• The bond is for a period of 3 years after completion of training (which is for a year). In case of domestic training, the amount is Rs 1 lakhs and in case of foreign training, it is Rs 1.5 lakhs.
• If the employee leaves within one year, he is liable to pay the entire amount, beyond one year, proportionate payment has to be made.
Indian Made Foreign Liquor (IMFL) GROUP
• The bond is only applicable for Graduate trainees, Management Trainees and Diploma Trainees.
• For Management Trainees and Graduate Trainees, the bond requires payment of Rs 100,000 if the employee leaves within 2 years including the training period of 1 year. For Diploma Trainees, the amount is Rs 50000.
• There are also power plant trainees who are basically electrical engineers. Since the company spends more on them and they are very strategic to the company, so their bond requires them to a pay a sum of Rs 1.5 lakh for the same 2 years.
• The trainees have to pay the full bond amount even if they leave one day before the bond expiry. In that way the bond is very rigid.
• In the case of any bond violation the legal department of the company takes over and takes the necessary recourse.
Original POWER GENERATION CORPORATION
• The bond is only for Graduate Trainees (GT’s)
• The one thing which struck us in OPGC was the fact that there have been no recruitment of GT’s after 1993 so the bond laws are in fact very archaic. Though another insight which can be brought into this that the company is running in losses on account of management problems. So it just might be misconception by the management that the low attrition is on account of the bond but there could be other internal reasons.
• The bond is for a period of five years after the stipulated training period of one year. The bond amount is Rs 30000 only.
• The bond amount is very negligible and this was accepted by the HR manager. But as they had no recruitments so they never felt the need to change the law.
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7 comments:
Well going by the reports as given in the post, a bond is something that a company may want in lieu of the training and other expenses that it had incurred on an employee that too if he/she may leave before the stipulated period. From a company's point of view it is extremely necessary as it will check the attrition of the employees if the bond worth is sufficient. Again the company spends much on training an employee to reach to the functional standards of the company. So it has a right to ask for the bond amount if the employee resigns before the asked time.
Now from an employee's point of view it may not be necessary. As a person one always looks for better avenues and if possible to go for it. There is nothing wrong in quitting a job as long as one feels it is not the right one. An individual may be allowed to go for his/her betterment.
In India the bond may be seen as illegal until the company has enough proofs that it has spend enough money an employee in enhancing his/her personal skills and not just on training that help employees to perform better. So the company documents are well written and the language thus in the bond are well enough to bind the employee for the stipulated time period.
Said all these whatever may be bonds are there to exist and employees have to follow them until and unless they don't have a better prospect.
Factors
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Employers exercise the option of employee bond and try to restrict the behavior of the employees to the maximum extent possible. It gives the employer the security and idea regarding the behavior of the employee, based on which they can plan appropriately. For freshers it’s normally a general bond which they have to sign without any scope of modification. Many IT companies invest a lot of time and money in training the freshers, so make them sign a bond having details of the minimum working period expected in the company and in case they leave before that there’s a bond amount which has to be paid. Some of the other clauses are the notice period they have to serve in case they resign.
I worked in Infosys, during our time of joining there wasn’t any bond amount on which we signed. We were expected to stay in company for 1 year minimum as per the bond but it didn’t involve any bond amount to be paid in case we leave early. A few people left in our batch before the one year time without any required payment.
The exercising of the bond clauses or relaxations also depends on:
• Stage of the economic cycle
During recession the bonds are more strictly implemented.
• Rapport with the reporting manager
The strictness or leniency of bond depends on the feedback the manager provides. I have seen and personally experienced the notice period being relaxed in many cases if the manager gives the correct feedback
This is a harsh reality which we need to accept, though it leads to biasness and partiality, this is how it works in many cases.
• The attrition rate or other challenges the company is facing
If the company is experiencing policy changes or other effects such as high attrition it makes efforts to retain or dismiss employees pro actively or using bond in some cases
• The performance of the employees
The high performers and low performers are treated differently. While the lower performers are easily let off, there is a tendency to retain the high performers.
Is Employment Bond the right way to Bond?
Many firms have a policy of getting an employment bond signed by new joinees, usually having a specific time period for which the employee has to work with the organization. Most companies do it to cover the costs that they incur in training the employee. I’ll take the case of Infosys Technologies to understand the employment bond in a better way. Infosys made its employees sign a one year service agreement as soon as they joined the company, and the employee had to pay 1 lakh rupees in case he/she failed to stick with the company for a year after joining. Infosys recruits from all streams of engineering and on recruitment, makes the employees go through an extensive training program for which it has established dedicated infrastructure and has dedicated staff. It imparts technical training as well as Leadership training with a view to transform employees into leaders in software technology. Since the company invests significantly in physical and knowledge infrastructure, processes, systems and leadership programmes, it expects the new joinees to come in with a long term commitment, which is quite justified I feel. A company investing so much in an employee would like the employee to use the knowledge and skills acquired for its own growth and development to have a competitive advantage in the industry.
An employment bond is largely imposed only on trainees or fresh recruits, and not on senior employees or lateral hires. Having the employees sign a bond at the time of joining may even prove to be a deterrent and the employee may choose other options at hand if he/she does not want to be restricted. Infosys now has changed its policy slightly and has a service agreement which says the employee has to work with the company for a period of 1 year after the training program, i.e., when he starts working on live projects. This step has probably been taken in lieu of the rising investment in training programs, but more so because of the increasing attrition rate, which is one of the highest in the industry now. Many employees have been leaving the organization after their 1 year service agreement comes to an end. But is an employment bond just to cover the costs incurred to impart training or should it be used as an anti-attrition measure? I believe using the bond as an anti attrition measure will prove to be counter-productive and might even develop negative feelings towards the organization. The fact that the attrition rate of CTS is among the lowest in the industry and it does not use an employment bond goes to show that bonds need not be the only way to retain people. A change in the working culture is required to counter attrition, and the pull has to come from incentives in working with the organization. Restrictive policies will not work well in this regard.
Also, the compulsion of working under a bond may also make the employee more than eager to quit the firm. It can so happen that though the firm may have very good working environment and HR policies, the presence of this on employment bond may ruin and jeopardize everything, and may make the employee want to quit the place, because, as humans, we do not want others to dictate on how we should lead our lives! And when you sign a bond, though you may like the firm a lot, you may still feel that it is being forced on to you.
Using an employment bond is usually justified by the employer as recouping the money spent by the company on an employee's training and other expenses. However, it is important to see how effective it actually is in real life in preventing an employee from leaving the job before the stipulated bond period if he feels it is not the right job for him, or if he gets a better job offer. Especially in the latter case, and particularly for management professionals, job offers cannot be deferred, and have to be availed of more or less immediately. In such a case, the choice of paying the bond money in exchange for higher growth opportunities and/or higher salary seems the more logical choice. most people, while evaluating two different choices, think of not just the present benefits, but also the medium to long term results of their actions, and changing jobs makes more sense. In such a case, the meaning of employment bonds is diminished.
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