Is the bond effective enough??

Bonds are one way to restrict the mobility of employees from one organization to another organization. But how effective it is in restricting employees movement is different question altogether. Because it is usually seen that employees pay the whole bond amount and move to another desired organization. As given in the original posting the bond amount is generally the training expenses incurred by the company, so it is obvious that the company is trying to ensure that employees spent particular time of their career with the organization in return of the resources, time and effort spent by the organization on the employee.

But is this explicit cost covering all the implicit expenses born by the company. It is a question to be asked. Because employees develop a lot of skills, on hand experience while working with the organization and is this cost covering that. And is this bond effective enough to do that. Moreover the organizations can ensure some amount of working time in return of this bond. But what about the commitment of the employees. Can the bond really ensure that? Because it is seen that some employees wait for the bond to expire to move ahead in the career. So there is lot of dynamics involved in the employment relationship and it is really a challenge on part of the organization to incorporate all this in few pages of the bond.

And it is against the very principle of freedom of mobility in a free market place economy as ensured by Indian jurisdiction as discussed in various sessions of our ER course. So no bond can really help the organization in retaining its employees. May be a healthy working environment, a prospective career plan, and other facilities like adequate salary, remunerations help in doing so.

And coming to the employees can they really do something about the bond. As seen in the various features of the bond it is generally for the entry level employees like the graduate engineer trainees and management trainees who can do nothing about the bond in starting of their career. It is just like standard non-negotiable company document which is to be signed and the employees can do the least to avoid that. So bargaining power of the employees is also an issue. May be because a more experienced and qualified person can command such a power in avoiding such a bond.

Bond or Bondage ??

Though i have never had an opportunity to sign a bond till date, i would like to share some of the experiences of people who are suffering bondage after signing a bond. About a month back, when we were returning back to campus from Chennai, we met a group of three girls who were carrying an unusually large amount of baggage and a television ! (For those who are not aware, all the people below poverty line in Tamil Nadu have been given free television sets !!) On further conversation, we found that they belonged to Chennai but were working for a top notch IT firm posted at Bhubaneshwar. For quite a long time, they kept cribbing about the location where they were posted and how life had become miserable for them after coming here. Over the entire conversation, they kept telling that if they did not get a transfer to Chennai, they would put their papers on August 1st this year. Their cribbing included the food, transport, accomodation, weather, entertainment, and nearly every single thing which could be cribbed about. I became rather inquisitive to know, what was holding them back here, Why dont they quit their job and go back home, rather than sitting and cribbing about everything here. There came the reply, they were held back by their BOND. If they quit their job, then they would have to pay a huge amount and their bond(age) ends on 1st August. So, if the company didnt give them a transfer then, they would quit immediately.

This made me think of the Bond's in another direction. The same bonds on the pretext of recovering money spent during training is being used as a tool to keep the employees bound to the company; at least in the short run. On talking to some more people in the industry regarding this, i came across an interesting piece of information. Irevna have found an innovative way to hold back their employees. They don't get money from the employees to hold on to them longer; they give money to the employees under the disguise of Joining Bonus. The people who receive join in bonus have to serve a minimum period of six months, failing which they had to pay up double the join in bonus.

So, are the employees actually signing a Bond, or a Bondage which is keeping them tied to a particular organization ? Comments welcome.

BOND- A NECESSITY…

Bonds have been a very important part of Employment Relations since ever. They become even more important as in today’s economy, companies are hiring specialized labour. So saving and using the using the expertise assumes paramount importance. Various reasons can be sited which can justify the existence of a bond such as-

1. The costs that companies bear makes it imperative to have a bond.
2. For ensuring that the organization has the required skills at disposal whenever it requires.

But from the employee point of view, many organizational bonds may appear to be unjust. Its mostly a way an organization ensures IPR(Intellectual Property Rights) inside the organization. They use it as a way to stop the passage of knowledge to the competitors. But nevertheless, the importance of employment bonds can never be undermined.

Sports and Bond

The wave of IPL fever is fast catching up all of India. It is back with all its glitz and glamour (not to mention the cheerleaders). Keeping this as the base I would like to bring a different angle to the bond issue. There was a time when cricket was game played by gentlemen in an elegant manner. Things have moved on and have moved quite fast; so fast that test matches have been converted into short T20s and the elegant gentlemanly game played for days together is now a fast paced thriller with edge of the seat excitement. But probably the biggest change is the ‘commoditization’ of players. Once upon a time Lisbon, Portugal was considered as the international capital of slave trade. In present scenario, the auctioning of players for the IPL is a disguised form of trading, with the buyers being rich corporate honchos and glitzy bollywood stars and the people being traded are the players who, in contrary to the old times, are happy to be auctioned. In fact players being auctioned for higher money are treated with great respect. There is a contract that keeps these players bound to the team and which effectively makes them slaves to the team. Adding to that, a bond that they sign would restrict them from playing in any other rival league (as explained below).
There was this fiasco between IPL and ICL over players playing in each of the leagues. There was a bond that was mandatory for players of each league to sign which effectively forbids them from playing for the other league. Even players signing the bond for the rebel league (ICL) were dumped by their cricket board. This just goes to show that signing a bond can be career ending move if it is not well thought out. This kind of restriction is not a good sign for players as well as sports as a whole. Thankfully, this edition of IPL has allowed the players from the rival league to be absorbed in the present league. There was again a tussle between ECB (English Cricket Board) and its players for participation in IPL. The ECB has set strict guidelines that any English cricketer having signed the contract with ECB is not eligible to play in the IPL. If any player does not heed to the warning, he would not only face monetary sanction but he might as well be banned from wearing the England jersey ever again. So the only player playing in IPL, Dmitry Mascarenhas did one intelligent thing by not signing the contract from ECB.
Another facet of bond is seen in the field of football. Recently the transfer of Cristiano Ronaldo from Manchester United to Real Madrid caused great furore. Cristiano Ronaldo and Sepp Blatter( FIFA President) went on to say that modern ways of restricting player movement through bonds and contractual obligations is an innovative way of ‘enslaving’ players to the respective teams. The ‘slave’ allegation eventually led to Manchester United giving away their prized possession to Real Madrid. It is also seen that many young players being nurtured by clubs have a release clause on their contract which asks the teams to pay an extra amount just because the player has signed a bond when he was a teenager, hardly knowing the nuances of a contract. So when he grows up, he realizes that he cannot play for the club of his choice just because he signed some paper (bond paper) when he was a kid.
The same analogy exists in the corporate field. When a person joins as a freshman (teenager in a football field), he has hardly any idea about corporate world and unquestioningly signs in every piece of paper that the organization asks him to, only to realize that one year down the line when he contemplates moving out of the company he is bound by the chains of bond which becomes an extra burden for employees who do not come from a well to do family (in a lot of cases, their sole earner). Employers definitely have an obligation of recovering the money that they spend on an employee’s training, and with that sense they are probably right in getting the bond signed. But restricting the movement of employees to the places of their choice does not help the company as an employee might as well become rebellious and become a non performing asset(NPA).
In case there is a situation where the immediate superior of an employee develops some kind of animosity towards him/her. So the superior tries to create an environment where employee can be constructively discharged. Now the employee, given the circumstances wants to leave the organization because of the hostile work environment. But then the issue of bond crops up. So in such case the employee is in a lose-lose situation. This is just one perspective of dark side of bond. A lot of other issues regarding bonds have been extensively discussed by friends here.

u109041

Satya Swaroop Sahoo

Bonds - From a different angle

Bonds, as has already been discussed and debated in a number of previous posts, are an essential tool for the employers to either restrict the employee from leaving the organization before a specific time or extract the amount which it had invested in the development of the employee if he/she chooses to do so.

However, I would like to look at it from a different perspective. In my opinion, in today’s world all that matters is talent and the rest follows. Consider an employee with immense talent, who is not satisfied with his current employer due to monetary/other issues and is looking for other opportunities. He is bound by a contract which prevents him from leaving his current employer or imposes a penalty otherwise. Given the talent he has got, any employer who requires resources in the concerned field would, in today’s competitive environment, be willing to pay the contract breaching amount associated with the employee because it is the talent that matters in the long run. What the employees need to be careful about is other terms and conditions which often go unnoticed until they finally come into contention demanding penalties or even leading to termination. Conditions relating to intellectual property rights fall in the above category. But as we already discussed it in detail in previous forums, so I won’t go any deeper into it. While I was working in the software division of a mutual fund company, my employment contract required that I don’t invest in IPO’s as it believed that I would be competing against the organization by doing so. Further it required me to give details of my demat account and also restricted my trading activities to a maximum of four transactions per month. Non-adherence to these conditions led to penalties and other severe actions. Further, there are policies which restrict the employees from extending the relationships with clients/other employees beyond the work that they do as their obligation towards the organization. Getting engaged into any sort of business activity is prohibited. Even giving gifts to one another might make one liable to penalties and other strict actions. Employment bonds, in strict sense, are just like the tip of an iceberg which is visible to everyone and hence can be manoeuvred with, based on one’s talent but it is the covert conditions which form the rest of the iceberg that one should have cognizance of.

Employment Bond: An edge for the Employer.

These days all the companies ask the new joinees to sign the employment bond at the time of joining. The employees have no way out other than signing the bond. The language stated in the bond may differ, but in all cases they act as obstacles to search for jobs. Some of the typical clauses in a common employment bond are:

a.If one leaves a job, he/she has to give a notice beforehand.

b.One cannot join a company that is into a similar line of business, which in itself is very strange because one will only join a company that he/she has experience of working in.

c.One has to pay to the company a particular sum if he/she is leaving the organization.

Now some of the reasons ,why it becomes difficult to leave a job because of the bond are:

1. The companies, that one goes for an interview , will want the candidate to join office immediately. But if one would say that he/she has to serve a notice period,then they would seldom consider the candidature. This in itself is contradictory because at one hand they will not allow their own employees to leave without notice but on the other hand they would lure employees from other companies to break the bond.

2. Even if one thinks of quitting by giving the notice without a job in hand, there will not be any guarantee that the employee will secure a job after the notice period expires.

After having worked with TCS for 4 years , I have seen that ,on many instances the employee simply leaves without informing the organization. This has its share of problems:

The organization sues the employee in the court for breaching the employee contract. All relations with the employer are broken. Employment with the organization gets closed for ever. One doesn’t even get dues from the organization.

Also in addition to the normal bond which one signs at the time of joining , in TCS one also needed to sign a bond (called MODA) before leaving for an onsite assignment. According to this bond one would have to serve TCS for 6 months after returning to India, else one would have to pay a required sum for breaking the bond.

Thus we can clearly see that resigning from a job is much more difficult than even finding one. One has nothing nothing to lose while finding a job.

BOND: employer vs employee!!

The first thing which we studied in employment relationship was “Employment at will” – the principle which is used to describe the smooth relationship between the employees and the employer. Under this “Employment at will”, employer is free to hire and fire any employee at any time. It also allows the employee to decide whether he wants to continue with the same job or want to leave. It allows them to switch jobs and leave any job at any time. But as time progressed, the term “contract” and “bond” evolved out which converted “employment at will” into a plain deal. As stated by the various bonds, they strike a deal between the employer and employee where employer wants to get the return on the investment (the investment employer made, by training the employee).

Now days, employer just want the employee to stick to their company. There are various reasons. The employing company spends lots of money during the training period, also while working, the employee is given access to many confidential data. So the employer does not want any of it employee to leave as soon as it finishes its training. Also it will again require lots of investment to hire and train new employees, so it’s best to retain the employees. “Employment at will” necessarily does not agree with what companies want and thus to retain the employees it’s necessary to introduce the term “Bond”. Bond is basically the agreement between the employee and the employer which forces the employee to stay in the company and also make sure that if the employee leaves (after training) then he does that by paying some penalty.

Going through the employer’s point of view, I feel it’s necessary to have a contract/deal/bond with the employees so that the company does not have to face the situation of employee shortage (because of employees quitting job as soon as they finish the training). It sounds completely logical as the company should get some returns in return for all the resources it spent in the training of the employees. But when going through the employee point of view, it’s very bad on them. Many employee who are not happy with the company’s policy, can not leave the company just because they can not afford to pay the money as stated in the bond. Even if they wish to go for higher education, they can not leave so easily (if serving under the mentioned bond period). Now a day every company comes with a bond, with different terms and conditions. But how ethical is it to keep your employees in your company against their will?? By signing the bond, the employees enter a deal which clearly is in favour of the employer. The bond indirectly states that it gives right to the employer to fire any of the employees at any time, but under the bond period if the employee leaves, it will make the employee pay for it. Related to what I said, I got reminded of a statement, which was said by many of my friends “love your job, but never love your company, because you may never know, when the company stops loving you!!” and no wonder, after going through the terms and conditions of the bonds, it looks quite logical.

Why have an employment bond?

My brother had two Job offers in hand after completing his Engineering. One had an Employment Bond while the other didn’t have. My brother decided to go for the latter job. That is because for young job hoppers, Employment bond can often be detrimental. IT companies hire students in large numbers from engineering colleges and hence are not necessarily hiring the best brains. In such a situation, in order to get the best brains to work for you, the employment bond is again a barrier.

It is legitimate for a company to recover the cost incurred in training but is the value of the bond based only on this cost and perhaps an additional cost of training when new recruits will have to be trained? If it were so, then why does the value of the employment bonds differ from company to company in the same sector? Talking along similar lines many suggestions have come up, that since the government is spending so much on institutes like IITs and IIMs, the students there should be bound by a bond to work for the country before moving out. But again that is restriction and forcing people to work in a particular organization or in a particular frame of time cannot bring out the best in them.

Now if someone breaks an Employment bond and does not pay the amount, what action is taken? Most often legal action is not taken. Measures like not giving the experience certificates or any payment due are followed. Thus, employment bonds do not serve the purpose rightly either for the employees or for the employers.

Building new bonds..

Just as it is said - “Beauty lies in the eyes of the beholder”, everything has a meaning which can be construed on the basis of your attitude towards it. For instance, if you look at the dictionary meaning of the word “Bond” it means - “A connection based on kinship or marriage or common interest" or "A restraint that confines or restricts freedom”. Just one word and it has both positive and negative connotations. In this discussion, our understanding of the term "Employment bond" is in terms of limitations or restraints in movement of the employee to any other company within the contracted term in the Employment bond.

Having personally experienced the situation of having signed an employment bond, and aware of what an employee undergoes throughout in this process, I feel it would be quite useful for HR professionals to understand the emotional effects of the bond on an employee, and not just focus on the legal and logical perspective of the employment relation.

Human beings are emotional creatures, and respond to incentives like rewards and punishments. Punishments can be construed as negative incentives, while rewards can be summarized as positive ones. For example, payment of bonuses after completion of certain period in the company is a positive incentive in an Employment bond.

Some negative incentives or construed punishments for violating the relation can be listed as:

- Forfeiture of joining bonus for leaving the company before certain period

- Payment of bond money by employee before joining the company which is subject to forfeiture if the employee leaves the company before completion of bond

- Bond signed before going onsite, attracting penalty if employee breaks the bond.

- Employee signing bond before joing some specific training or when company pays for employee’s certification

Considering the high rates of attrition in many industries, it is only practical and commonsense to have a contract that safeguards the interests of both the employer and the employee. And in this case, since the employer is the one who prepares the bond, the equation is slightly tilted in its favor.. But in the end, it is basically a power game which is not necessarily pro-employer, and the balance may shift in the favor of the person with greater bargaining power. Who you are and what you bring to the table will decide what kind of treatment you will get, and how much you can be arm-twisted to contract in the company’s favor. For example, it is much easier to make freshers sign an employment bond before joining the company. Experienced employees however would be quite reluctant to sign such bonds, unless they have very few job options or the economy is in a recession.

Power game it is in the short run, but if you look at it from a long term perspective, it is a zero sum game. In the mind of the employees, the mention of an "Employment bond" in the beginning of the relationship puts them on the defensive, and keeps them on guard. The difference is between compulsion and one's own volition. You can force the employee to remain in your company, but you cannot force the employee to be productive, and loyal to you.

In the words of Ayn Rand - "Force and mind are opposites; morality ends where a gun begins."

I am putting forth this perspective because I have also been a part of this system. My first job at Wipro Technologies came with a 15 month bond collateralized with Rs 75,000 loan taken from SBI. Enthusiastic about my first job, any concern for my independence was brushed aside as I felt 15 months would just fly past. After joining the job however, most of us went through these stages in the lifecycle of an Employment bond.

Motivated optimism gave way to disillusionment, and the realization that we had no freedom to change jobs resulted in anxiety, panic and finally resigned acceptance. By the time we finished the 15 month period, everyone was raring to gain their liberty, and resignations flew - a dime a dozen!

Hence, it is not sufficient to just get the bond signed, because that is not what will motivate the employee to work better. Rather, it would be much better if we create an environment which will generate the other type of "Bond" in the workplace. Building connections based on common interests, and integrating the employees’ desires with the long term strategic direction of the company will help build the Employment bonds that are not based on legalities but mutual faith and trust.

Just wondering:

Can we replace the old "Employment bond" with these “new” ones?!!

"Bond" - Expression of Attachment, Insecurity or Just Another Cost Recovery Policy?

“Bonds” – this option has been primarily exercised as an expression of their bargaining power. Strict enforcement and mandatory signatories among all fresher recruits, while discretionary exercising for the lateral entrants to an organisation – reflects on the bargaining power balance in employment patterns. As quoted earlier by Shruti, bonds amply reflect the Stockholm syndrome. For fresh recruits bonds have mandatory signatories perhaps reflecting the insecurity of organisations with respect to talent retention due to the limited growth opportunities presented. Bonds are in this case a measure of cost retrieval – specialised training and induction costs for the recruit are ensured to be recovered during the course of bond period. However for recruits with considerable experience, there is polar shift – where the bargaining power resides with the employee (there are even multiple instances where employees are instigated, lured with better opportunities and thus deliberately asked to break the bonds – bond amounts being paid by the prospective organisation). Thus such a bond implementation scenario reflects that bonds are being used to authorise bargaining power and a subtle reflection of organisation’s insecurity with limited growth opportunities that it provides. Several other instances of bond enforcement probes to speculate whether bonds are just about ‘an attachment token’ or ‘an expression of bargaining power’ or ‘cost retrieval financial measures’.

Several other manifestations of the bond are also evident across the industry. For example, an employee opts for a sponsored academic program enrolment – in this case he is a signatory to a bond which mandates serving a predefined period in organization upon completion of the academic program. (Case in point would be the PGDM-PT program by XIMB, where executives have been sponsored by corporate). Such a scenario poses bonds as obligatory commitment on employees’ part (for providing the finances as well as employment guarantee along with commensurate compensation post the program completion). There have been instances when sponsored students have returned to their previous employer as a mark of their obligation to organization (in spite of the absence of any mandatory enforced bonds). This is reflection of the higher level of satisfaction that the employee enjoys with the policies and culture. This reflects on the emotional connect in the employment relations rather than a legal one (there are no prizes for guessing the superiority of one over other).

There are also instances with certain organizations which pay retention bonuses to fresh recruits for completing bond periods (my prior organization Wipro had this policy of retention bonus payout upon bond period completion -15 months in this case, while Jindal Steel pays a bonus of 1 lakh – bond period in this case being 4 years). It leads to speculate that organisation values loyalty – while the same policy isn’t applicable for experienced recruits, thus reflecting the inconsistencies in employment relations with regards to the hierarchy of an employee.

At a personal level, during my initial days at Wipro (after completion of bond formalities, of course), I was made to forcibly avail a bank loan (interest amount for the loan for each month being deducted from my month’s salary). It is the bargaining power balance and the lack of alternatives for me initially that kept the scales in favour of my employer (although monetary constraints due to forcible imposition of bond can be reason for potential legal hassles – which of course I had to avoid to keep myself clean of all such mess).

IPL or IBL (Indian Bondage League)

The current case involved in IPL 3 throws a lot off light on the severity of implementation of the bond. When the IPL teams were formed in 2008, the franchisee owners and the team player whom they brought in auction signed a bond for 3 years. The conditions of the bond were that no player can leave a franchisee without the permission of the owner for at least three years.

But what happened with Ravindra Jadeja was really disheartening. Way back in 2008 no one knew much about Ravindra Jadeja. He was brought at a base price of Rs 2 million. But over the time the stature of Ravindra Jadeja has grown. Being treated as an all rounder he has carved a permanent place for himself in the Indian One day squad and Twenty Twenty squad. But his price was never increased by the Rajasthan Royals. Recently in IPL 3 he was approached by Mumbai Indians to join their team, and he was negotiating with them. This was not in the knowledge of the owners of Rajasthan Royals. As this came into light of the IPL governing body Ravindra Jadeja was banned from IPL 3.

So whose fault it was? There are various culprits to it

1. Mumbai Indians team for illegally poaching a player.

2. Ravindra Jadeja for not informing his franchisee owners.

3. Rajasthan Royals for not giving increment to it’s star players.

In the end we as a viewer has to suffer for not being able to watch him perform. This is a very harsh case of employment bond being employed because even next there will be few takers for Ravindra Jadeja. This case represents bonds are very severe at the highest level. A bizarre case where both the employer and the employee are punished but the poacher is let free.

The Buddha Way

Employment Bond is a form of surety bond for Employers who use it to hedge the risk of an employee leaving the company after undergoing an expensive training. As has been pointed out by many friends of mine, there have been numerous cases where a new joinee has actually left the company just after getting trained by the company, then is it not fair, if the organisation makes the employee sign an Employee bond? Employers actually spend lakhs on training and development but what is the guarantee that the employee will stay in the company after the training period. They might use their new found skills to get a better paying job. A company spends huge amounts of rupees to recruit and train people and so it is unfair if we expect them to let go of their employees easily. Our company never had any bond and because of this some new employees left as soon as they were trained and the company could do nothing as the concept of Employment bond was not encouraged in the company, with the senior management holding the opinion that the company should have employees who stay on their own and not through force. This sort of view has to be complemented by creation of a work environment which attracts and retains talent.

In simpler logic, it makes sense to use an Employment bond to reap the benefits of the training imparted. Employment bonds do have a darker side and that is basically from an employee perspective. An employee feels tied down as he is unable to utilise better opportunities. The bond binds him to the company in case he is not able to pay the amount. In India many people take a sabbatical from work to study and in case the bond duration is not over, then the employee has to pay his way out. In such cases Employment bond does prove a hindrance. Another case might be if a person needs to shift to a place where his current employees do not have presence due to some unavoidable circumstances and then in case he falls short of the bond free duration, then again he has to pay up. Thus, such kinds of bonds do curb the freedom of employees’ right to choose his employer. So the best approach is to adopt a middle path.

An employment bond should exist but for a minimum duration possible which can help the employers get returns of the investment in training and development. It should not be for a term like 3 years which some companies enforce. Employment bonds should only be enforced on new employees fresh out of college and on new employees who have undergone some special unique and expensive training. Such bonds are, as I said before ways, to ensure return on investment for the companies.

For security or Checking attrition

It’s true that many firms invest a lot in training freshers. They not

only impart technical trainings, but also trainings on leadership,

communication, cross cultural sensitivity, etc which helps employee’s

develop their personal skills as well. So it is justified for this

kind of bond to exist, because any such training outside the corporate

would definitely cost more. Whether it is for security of the company

or in lieu of checking attrition, in both the case it sounds apt. But

should it hold good for other cases as mentioned?

Let’s consider the case of ‘Overseas bond’ for some companies. Company

invests on an employee’s overseas opportunity based on his/her

performance. If the candidate was not good, he should not have been

identified for the opportunity. Then why should he abide by any bond,

if he is already performing well, and this is kind of an incentive.

Also, the employee, in this case, represents the company in the highly

competitive industry using his knowledge and skills. If there is a new

business, as a result of his performance abroad, then the company

profit outweighs its cost incurred for the employee’s visa.

I personally feel, these bonds are worth if it helps you in career

progression. Else, it would be wiser to find for other options rather

being in a cage with restrictions.

Bond – A Stockholm Syndrome?

“Stockholm syndrome is a term used to describe a paradoxical psychological phenomenon where hostages express positive feelings towards captors that appear irrational in light of danger endured by them” [1]

There are cases where Stockholm syndrome has been reported where the captor strips all forms of independence from the captive and gain control of their lives. Are companies trying to infuse such a forced spirit of loyalty through employment bonds? If bonds are being signed at the time of inception of employment it clearly outlines the insecurity of the company with respect to the new recruits. The companies are probably expecting the employees to leave during the period of training or soon after that. Companies should instead try to foster loyalty by way of organisational culture and workplace environment rather than through legal instruments.

Every employee comes to an organisation with a hope of building on his/her current strengths and exploring new avenues that might come his/her way. If these avenues are curtailed through bonds during the early years of an employee’s career, effective learning and knowledge transfer would not occur, and thus contradicting the idea of ‘Knowledge Economy’. The fact that companies are levying a particular sum of money against training for a stipulated period of time should give them more of a university status which charges fees for education!

It is true that companies generally spend a lot on training and development of the employees and thus try to make sure that the employees stay loyal to the organization but this may prove otherwise when employees start quitting the organization after the bond period is over. That might just be worse when the company realises that the loyalty was not in the actual and after two years the company has lost out on not a 1-year trained employee but a 3-year seasoned employee.

Standing by Anuj’s point that an “emotional bond” may work better than a legal one, it’s important to note that talent is neither bred nor retained by force, rather than through a strong sense of commitment and dedication towards the organization bred over time through genuine efforts of the Company and this may yield true returns to the company over the tenure of the employees career with it.

Another fact worth noting may be the applicability of the bond in the light of any unacceptable occurrences during the 2-3 years bond period or ‘Constructive Discharge’. Would the bond still be validated and the employee not allowed exit in the event of a case of Sexual Harassment or made to pay a fine of 2 Lakhs? This could be a case well eligible to be fought in the Court of Law but same may not be the case for an employee who is unhappy with the work culture or his colleagues and wants to leave. Such a cause may not even be considered by the management as reasonable while the employee might be way underproductive due to the same.

Recovery of the training costs might be important to the company but employees should not be considered as a source to cover those costs. Employee attrition is a sure-shot cost to the company which should be recovered from the operations of the company by creating a provision in the Accounts, not by extracting payments from the employees. This definitely does not breed Loyalty!

---

[1] http://en.wikipedia.org/wiki/Stockholm_syndrome

It’s a Bond not Bondage!

Sameer Srivastav quit 3i infotech limited after 3 months of training and joined Oracle and is currently settled in US (need I mention the salary?)
Poonam Goyal quit Infosys after 4 months of joining Infosys and joined IBM and is in London now.
Ashok Kumar Nayak quit BPCL after 6 months of joining and joined Shell as he was offered a fat salary package.
These may be some startling facts for some but definitely eye openers for quite a lot of companies which shell out huge sums of their capital on providing the best quality training to their trainees.
Though it is their business requirement because they heavily rely on human capital but this also has a large contribution to the employees who join these organizations initially and build and grow their career from the initial company.
One big question that comes to my mind is why somebody should join a company if he wants to leave the company after 3/4 months to latch upon a better offer. Joining a company, utilizing the resources of the company through high quality training provided by the company and leaving the company before even contributing to any productive process of the company seems nothing better than a farce!
Another good piece of analysis would be why at all these companies are coming up with funny and weird kind of bond agreements day by day when some years ago there were no such offerings.
Perhaps it is because of the behavior displayed by the employees which has forced them to come up with some sort of restrictive measures which would prevent the new joinees to leave so early without contributing anything to the company. Undergoing training and getting paid for it does not add any value to the companies. It’s only when the employees utilize the knowledge and skill sets acquired during the training and apply them to the core business activities that the company gains. Let us not forget that a company runs the businesses to churn profit and add value to the shareholders. In the process whatever training and other skill building processes are required the company invests and seeks for the results.
To throw some more light on the real life examples that I have taken, in case of Sameer Oracle valued the rigorous and thorough training that 3i infotech renders to its trainees and therefore selected him and offered him double the salary he used to draw from 3i infotech. Similar is the case with Poonam as Infosys also provides one of the best training programmes of the world. Then why should the parent company(makes sense) be punished instead of getting rewarded for providing the best possible foundation for the career of a trainee? Why should somebody else reap the benefits of somebody else’s labor?
Industry stalwarts are of the view that frequent job hopping in the initial stages of the employment is in fact detrimental to the career growth and development of an employee(A rolling stone gathers no moss!). Now the even more pertinent question in the light of this discussion would be is there any harm in having such restrictive mechanisms to avoid these sorts of behavior of the employees which is beneficial even for their own career? I know this logic is highly debatable. But my gut feeling says that the initial years of our career should be focused on understanding the various processes in the organization and spend some considerable time(at least one or two years) which would go a long way for building the career if one is not in a spree of hopping across sectors.
Moreover even if we consider the amount of the bond (1 or 2 lacs) it’s pretty justifiable given the quality of the training provided by the employer, the opportunity cost of the employer and the opportunity gain of the employee! (Most of the times the new job offers at least a 70 % hike in the pay)
Now when we consider the other facet of the discussion which involves the employee’s side I think there could be one issue as far as the clauses of the bond is considered. Most of the times if the trainees are not confirmed as employees and their employment (read traineeship) is cancelled for reasons of underperformance or otherwise they land into trouble. For all other cases where the trainee gets a highly lucrative offer and quits the current company the bond amount should not be a problem.

BONDS: An analysis

From the instances cited in the original post, it is easy to gather that the general reasons for imposing the bond are:

· To recover cost of training

· As compensation to the organization/employer by the employee for using the data/knowledge generated at work or the insider information for his/her own benefit

· To ensure that the employee once sent abroad for work continues to stay in employment and does not resign because of being given the chance to go abroad

· To ensure that the employee after coming back from a project abroad, continues to stay in employment. This is mainly to ensure that the employee does not make new employment relations abroad at the expense of his/her current employer

Some characteristics of Employment bonds that have been highlighted in the original post are as follows:

· The bonds are flexible in terms of the fact they can be relaxed if the employee wants to take up exercises for personal development such as pursuing higher studies

· The amount of bond levied varies from company to company. Some companies may not levy any bond whereas some companies levy light to heavy bonds

· The bond is levied for a fixed period of time

· The bond is generally decided on category to category basis – it may vary on the basis of training imparted, the post, the background of the employee like qualifications etc., tendency of the employee to leave the job etc.

· Compensation is generally provided after completion of bond period

· Consequence of breaking the bond can be in terms of levying of legal charges or being forced to pay the amount as due for breaking the bond

From the above mentioned information, some general conclusions follow:

· Although there are multiple reasons for levying the employment bonds, as cited above, when analysed for weightage, they are all justified in their reasons. These reasons provide valid grounds for an organization to levy a bond on the employee.

o Considering a few of them, we see that in the case of cost recovery, it makes sense for the employer who has invested a huge amount in training the employee, to restrict his movement in order to reap benefits from this investment. It will be unfair for the employer to incur the costs of training the employee, adding to his skill set and then losing the employee to some other organization without receiving any return from the investment in training.

o Considering the other reason of levying a bond in order to gain compensation for letting the employee use the insider information, it is again justified on the grounds that the employee is benefitting from the knowledge via the organization’s database so the employer should also be benefitted in return. Even if the data has been compiled by the employee himself, it has been done by using the organization’s resources and during the working hours. In either case, the organization can’t allow any employee to join the organization, use its data for free, make profitable investments by using that data and then leave as and when they so wish.

o Considering the bond to contain the employee in the organization when given a project involving travel abroad, the situation itself creates a requirement for a bond. This is so because the organization has given the employee the opportunity to travel abroad and gain experience in a different environment. This would lead to the personal development of the employee. In return, the employer expects the employee to work on the project to further the interests of the organization. If the employee tries to leverage this opportunity to further his own personal interest in terms of leaving the job and continuing to stay abroad to gain access to a better lifestyle or to leaving the current job and seeking other job opportunities abroad, the employer has a clear incentive to ensure that the employee is bound by the bond to return back to the domestic organization rather than taking the company for a ride.

· As like most of the other things in the world, the Employment bonds also have their pros and cons.

o The good things about the bonds are that they provide the necessary safety to the organizations in terms of reaping results on their investments in their most important assets-their employees. In order to make them fair to both the stakeholders in the bond – the organization and the employee, the bonds are made flexible in terms of the stated conditions under which they can be relaxed. They are also somewhat custom made in the sense that they are designed keeping in mind the amount spent on training the employee, his/her qualifications etc. On successful completion of the bond, the employee is compensated for the amount bound by the bond as well. However, in order to ensure adherence to the bond, the consequences for breaking the bond are also stated.

o In terms of its disadvantages, they restrict employee mobility. The employee is bound by the bond and is thus, not at the liberty to change jobs at his will; even in the case he/she receives a more lucrative job offer. The employee is legally bound by the bond to serve the entire period as stated or pay the fine as defined per the bond. The bond which fixes a certain time frame or an amount, sometimes acts as a deterrent for a potential candidate to join the firm as he/she might not want to be come under the purview of the bond. This will result in the organization losing a worthy talent.

Therefore, given the above analysis of the original post, it is clear that the bonds are necessary for the organization to equitably reap its investment in its human resources. However, they can restrict employee mobility and act as deterrents for new talent to join the organization.