Bond or Bondage

Getting placed is the primary concern of students like us, whether in B-Schools or at the graduate level. I can still vividly visualize the first job interview I had faced exactly four years ago. It was Wipro, the first company on campus for our batch. The HR had a couple of stock questions for each candidate, one of which was, “Are you ready to sign the bond”? Such was the desperation to land up a job that most of us including me answered in affirmative with no inkling regarding the modalities of the much hyped “Bond”.

However, I did get a taste of it later in the day when I had to join the organization. The agreement was on the lines of Asatyam, though a tad mellow.

A bond of Rs 75,000/- for the duration of 15 months in the form of a bank guarantee issued by SBI was executed on the date of joining. The bank guarantee could either be obtained by paying the whole amount to SBI or contributing Rs 5,000/- oneself and taking a loan for the remaining amount from the bank. The interest to be paid on this amount was the difference of the interest incurred on the loan amount and the savings rate of interest earned on the total amount deposited with Wipro. Much in the same way as in case of Asatyam employees, I ended up paying interest on an amount which I wasn’t using.

From having worked in the IT industry for a couple of years and as also is clear from the examples, the practice of having employment bonds is quite commonplace among the Indian software giants. Rather than questioning the practice of having such bonds, which I definitely shall, what I find interesting here is two aspects of these bonds. Firstly, the bonds can be categorized into two types, one where the company takes a deposit from the employee right at the beginning of the bond period and the second where the employee forfeiting the bond is required to make a payment. This discrimination takes us straight to the other aspect which is the legality of enforcing such a bond in country like ours.

A bit of study on the subject and some real examples make it evident that companies have had a tough time recovering the bond amount from forfeiting employees. The Indian law also imposes constraints on the enforcement of such bonds. Most of the employment contracts are one-sided (two-sided is when the company pays the bond amount to the employee if terminated within the bond period) and are not recognized by the law. The Supreme Court of India has clearly stated that no individual can be forcefully employed against his/her will, just because of a contract. Again bonds are strictly applicable only if the organization has spend money on the personal enhancement of the employee and not just technical training which helps in improving performance at work. Taking all such ambiguities into account it makes more sense for the employer to take the deposit in advance. Even in case of a deposit made by making a bank loan, the individual is legally liable to return the borrowed amount to the bank. Thus the employer has nothing to lose.

That employment bonds are used as a means of compensating for the cost the employer has incurred on training the employee does offer some legitimacy and acceptability to it. But unlike in case of Dalco, the amount does not depreciate with time, which it ideally should. Moreover since there is no exact monetary measure of the expenses that a company makes on training individual employees; the bond amounts are generally inflated. Another reason for an exceedingly large bond amount is the fact that higher the amount, greater are the stakes in forfeiting the bond.

The issue of bonds serving the interests of a company in the long run is, according to me, very trivial. Common sense suggests that forcibly retaining an individual as employee does not work in the best interests of the organization. The one and only way to retain employees is by making them feel connected. The class discussions, stories and illustrations have made it amply clear that bonds and contracts are not suitable means to retain talent. The only way I see this working is that the employees bound by a contract may want to avoid the hassle of forfeiting it and not look for opportunities beyond, during the term of the bond. This was exactly what happened in my case and many of my friends. Precisely the reason why I decided to work for a couple of years before pursuing higher studies and did not quit in the first year itself. On the other hand imposing heavy penalties on exiting employees might have negative bearing on its image and a hurdle in the way of attracting talent. It therefore becomes imperative that a fine balance is maintained by any organization that uses employment bonds as instruments to retain talent and cover up for its costs.

In an environment where the legal validity of employment bonds is questionable and where forfeiting of bonds has become commonplace, companies should rather focus on nurturing a positive work environment through constant employee motivation and commitment.