Bond Issue--pls Help - Doc Download - CiteHR
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Manager - Hr
Employee Engagement And Retention, Day To
V. Balaji
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Finance, Hr, Sectarial Practices, Law And
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Hi Seniors,
The Director of my company plans to get 10% of the salary of the new joinees to credited to a new a/c and it will get accumulated for 4 years. If the employee leaves within that 4 years then the amount will go to company's a/c otherwise it will go to the employee. Instead of having Bond which is against law,the management is planning to do this as a retention measure.
Please tell me whether the management can do this? Is this enforceable by law? If this is correct please help with an agreement format

Hi! Deepa
I dont know whether this is enforceable by law or not, but of course the company can do it. But the tenure decided is too long. You can not expect some one to stay with you company for 4 yrs. The tenure should be either 1 - 2 yrs.
Y dont you give your director a reverse idea. Instead of deducting the 10%, why dont you give that 10% as joining bonus to the new joinees with a condition that if they do not stay with the company for 2 yrs the 10% amount which was given as joining bonus will have to be returned or adjusted during the F&F.

Hi Chitra, Thank you so much for your valuable suggestion. But if the Employee absconds after getting the Joining bonus ? Please suggest Regards, Deepa
You can try giving contractual bonus which will be only payable at the end of contractual period.
Dear all,
1.few of the companies keep original documents, with them it is not legal, and our hr fraternity should oppose these kind of policies.
Do the company give in writing that we are keeping your original certificates, and are they responsible in case of lost,theft,or fire.
2. You can not deduct retention amount from salary it is illegal.
3. You just start a retention bonus for staff from(company/ self account and keep depositing in his/her account monthly or annually it depends on your policy. And after completing 4 years give him retention bonus.
Shish ram uniyal
compliance consultant

Except for the post of Shish, rest all is illegal and unethical.
No amount can be deducted or retained from the salary of an employee other than the statutory deductions and advances.
Nothing can be imposed on an employee to subscribe to any thing that is done without his/her implied consent of an employee, is punishable.
Retaining document on employee in forcing him/her to stay put against her wishes are despotic, unfair, dictatorial, overbearing, autocratic, authoritarian, high-handedness repressive, unjust, tyrannical, domineering, cruel and illegal. It is like going back to the slavery and keeping them as Bonded-Labour. It is meanest action.
Keep the employee happy with the good working conditions and better pay in the industry.

Dear Members,
In my company there was this policy of keeping the documents upto 1 year tenure. But HRs were keeping on changing and the documents passed from one HR to the other. Meanwhile some of the original documents started missing and the whole system became a big mess. So it is better to avoid such practices which is not practical nor feasible. As a HR myself do not suggest this type of document keeping system. And all HRs should appose this system.

Dear All,

Retention of Original documents, recovering 10% of the salary every month for 4 years will all be illegal.

May be you can suggest to your employer if he wishes, he can pay a higher rate of Gratuity for those employees who stay in the company for more than 5 years.

Instead of 15 days wages for every completed year of service he can pay 30 days wages.

The calculation will be

Basic + DA x 15/26 x 30 days (instead of 15 days as per law) X Nr of years of completed service or part thereof in excess of 6 months.

The other option is you can consider extending a Superannuation scheme promoted by LIC of India. If your employer wishes he can contribute a maximum of 15% of the employee's Basic Salary+DA to the Superannuation account that will be maintained by LIC with interest being paid declared by them from time to time. You can add a clause in the Superannuation scheme that the amount accruing will be payable only if the employee completes 5 years of service.

Upon completing 5 years and if the employee wishes to leave the employer can recommend to LIC to process his claim.

The employee has the option to commute 1/3 of the amount accrued (15% contribution paid each year by the employer with accrued interest) and choose to receive pension from the various options laid before him.

While you fix the employees salary you can include and show 15% of his Basic Salary + DA as Cost to Company CTC. Thereby you will eventually be paying 15% lesser to him on CTC as this amount will actually not reach the employee every month but will be deposited in his account in Superannuation fund at the end of each year. However, if the employee quits without completing the 5 year period, this amount can be adjusted by the employer while he makes the payment for the rest of the employees next year. Paying or withdrawing still rests with the employer. But having promoted the scheme it will not be permissible for you to make the schem admissible only to a few employees in a particular category (If you intend covering employees from the Assistant Manager's cadre then all employees from the Assistant Manager's cadre have to be covered. For example you cannot say 2 or 3 people have to be excluded though they fall into the category specified by you.

However, you have the option to restrict it to certain cadres alone. You can exclude employees below Assistant Manager's cadre.

The next option is, you can also suggest to him to ask the employees, provided they are willing to execute a bond with a surety for a specified period say 3 years. The bond will cease after expiry of the 3 year period. Let the bond amount be 12 times the monthly take home pay. By bond I do not mean deposit of money by the employee but a bond on a stamp paper for the equivalent amount.

We have been able to execute this successfully. But you need to clearly explain to him what the employee is likely to get as emoluments for the 3 year period before he signs the bond. Unless the increase offered by you each year is substantial the chances of his sigining the bond is bleak.




See Sec 7( 2) of the Payment of wages Act .Your Director"s direction does not come within the purview of Law .The Law is like this :

(2) Deductions from the wages of an employed person shall be made only in accordance with the provisions of this Act and may be of the following kinds only namely :

(a) fines;

(b) deductions for absence from duty;

(c) deductions for damage to or loss of goods expressly entrusted to the employed person for custody or for loss of money for which he is required to account where such damage or loss is directly attributable to his neglect or default;

(d) deductions for house-accommodation supplied by the employer or by government or any housing board set up under any law for the time being in force (whether the government or the board is the employer or not) or any other authority engaged in the business of subsidising house-accommodation which may be specified in this behalf by the State Government by notification in the Official Gazette;

(e) deductions for such amenities services supplied by the employer as the State Government or any officer specified by it in this behalf may by general or special order authorise.

Explanation : The word "services" in this clause does not include the supply of tools and raw materials required for the purposes of employment;

(f) deductions for recovery of advances of whatever nature (including advances for travelling allowance or conveyance allowance) and the interest due in respect thereof or for adjustment of over-payments of wages;

(ff) deductions for recovery of loans made from any fund constituted for the welfare of labour in accordance with the rules approved by the State Government and the interest due in respect thereof;

(fff) deductions for recovery of loans granted for house-building or other purposes approved by the State Government and the interest due in respect thereof;

(g) deductions of income-tax payable by the employed person;

(h) deductions required to be made by order of a court or other authority competent to make such order;

(i) deductions for subscriptions to and for repayment of advances from any provident fund to which the Provident Funds Act 1952 (19 of 1952) applies or any recognised provident funds as defined in section 58A of the Indian Income Tax Act 1922 (11 of 1922) or any provident fund approved in this behalf by the State Government during the continuance of such approval;

(j) deductions for payments to co-operative societies approved by the State Government or any officer specified by it in this behalf or to a scheme of insurance maintained by the Indian Post Office and

(k) deductions made with the written authorisation of the person employed for payment of any premium on his life insurance policy to the Life Insurance Corporation Act of India established under the Life Insurance Corporation 1956 (31 of 1956) or for the purchase of securities of the Government of India or of any State Government or for being deposited in any Post Office Saving Bank in furtherance of any savings scheme of any such government.

(kk) deductions made with the written authorisation of the employed person for the payment of his contribution to any fund constituted by the employer or a trade union registered under the Trade Union act 1926 (16 of 1926) for the welfare of the employed persons or the members of their families or both and approved by the State Government or any officer specified by it in this behalf during the continuance of such approval;

(kkk) deductions made with the written authorisation of the employed person for payment of the fees payable by him for the membership of any trade union registered under the Trade Union Act 1926 (16 of 1926);

(l) deductions for payment of insurance premia on Fidelity Guarantee Bonds;

(m) deductions for recovery of losses sustained by a railway administration on account of acceptance by the employed person of counterfeit or base coins or mutilated or forged currency notes;

(n) deductions for recovery of losses sustained by a railway administration on account of the failure of the employed person to invoice to bill to collect or to account for the appropriate charges due to that administration whether in respect of fares freight demurrage wharfage and cranage or in respect of sale of food in catering establishments or in respect of sale of commodities in grain shops or otherwise;

(o) deductions for recovery of losses sustained by a railway administration on account of any rebates or refunds incorrectly granted by the employed person where such loss is directly attributable to his neglect or default;

(p) deductions made with the written authorisation of the employed person for contribution to the Prime Minister's National Relief Fund or to such other Fund as the Central Government may by notification in the Official Gazette specify;

(q) deductions for contributions to any insurance scheme framed by the Central Government for the benefit of its employees.

(3) Notwithstanding anything contained in this Act the total amount of deductions which may be made under sub-section (2) in any wage-period from the wages of any employed person shall not exceed -

(i) in cases where such deductions are wholly or partly made for payments to co-operative societies under clause (j) of sub-section (2) seventy-five per cent of such wages and

(ii) in any other case fifty per cent of such wages :

Provided that where the total deductions authorised under sub-section (2) exceed seventy five per cent or as the case may be, fifty per cent of the wages the excess may be recovered in such manner as may be prescribed.

(4) Nothing contained in this section shall be construed as precluding the employer from recovering from the wages of the employed person or otherwise any amount payable by such person under any law for the time being in force other than the Indian Railways Act 1890 (9 of 1890).

Therefore such action will be construed as an unfair labour practice.

With Regards

Advocates & Notaries & Legal Consultants[HR]

E-mail : rajanassociates@eth,net,

Mobile : 9025792684.

No chitra,still there are big companies with bond tenure of 3 and more then 3 years and bond amount exceeding 3lacs+ like reliance, Morgan stanley, Citi inc

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