Is Signing an Employee Bond Valid in India? Seeking Advice from Experienced Professionals

Dear Seniors,

Greetings for the day!  As always, I would like to convey my best regards to all seniors. Please let me know if a bond (employee commitment) is valid in India or not. I have consulted a few people, and they have informed me that the bond system is not valid in India, as companies cannot hold any employee for a long period of time.

I would greatly appreciate your precious suggestions on this matter.

Thanks & Regards,
Sowmya R

Hi Taj, the reason is I got an opportunity in a software company as HR, and they are asking me to sign a bond. Though I told them I am not fine with that, yet I would like to know if a bond is really valid in India because I heard there is no legal stand for bonds in India as no company can hold its employees. Hence, I want to seek your suggestion for this.

Regards,
Sowmya R

I suggest you don't mix up issues. How does it matter to you whether a bond is legal or not? This only indicates a possibility that you are interested in this job only because you don't have any other current options and want to jump the bond at the earliest opportunity. If you want to begin with this mental framework, do you think you will do justice to your job, even if you join?

Don't you think the company needs to protect its interest in some way? Being in the HR line, I am sure you would understand this better than many others—since you must have seen recruiting too and also seen employees jump the bond...which must be the reason why this company is insisting on a bond even for the HR person.

Focus on Other Aspects of the Opportunity

Suggest focusing on the other aspects of this opportunity—again, to repeat—without mixing up issues:
- What duration is the bond for?
- What is the value if you jump the bond?
- How good is the company, in terms of a long-term association, meaning growth prospects?
- Do you think your tenure in this company will lead to learning/enrichment of your professional knowledge base?
- What will be your possible role in this company—immediately and after probation? And do you think it will add to your overall profile, let's say, after 1-2 years?

Once you answer these questions for yourself, then I think deciding regarding the bond becomes easier. And, by the way, bonds—in general—are not legal in India, but there have been cases too that companies have argued successfully in courts that the bond in their case is valid. It all depends on how it's projected in the courts if and when it goes to that stage.

Regards,
TS

Apart from what TS suggested, here is what I would like to add:

- Do ponder about the compensation package and compare it with industry standards, as most of the time people want to break the bonds due to this particular factor—salary. Once you sign the bond, it won't be advisable to jump it.
- The total period of the bond—one to two years is a good period; beyond that, it becomes monotonous. Also, look at your growth chart during the bond period.
- Read the clauses in detail and seek guidance from a mentor before proceeding.

Bonds in India

Bonds are not legal in India; however, there are many ways companies utilize them for their benefits. For example, bonds for special training and the associated costs, retention bonds, etc.

Dear All, The viewpoints from Sateesh & Archana are more than perfect and give you a better idea to judge the issue raised.

Additional Aspects on Employee Bonds

When a company signs or insists on a bond with an employee, it must have planned for a considerable amount of investment in the employee in terms of major training initiatives, sending the employee for an official onsite or abroad visit, or having the employee responsible for heading a key project. Any delay or hindrance to the same will result in significant losses for the employer.

This practice is more prevalent in manufacturing, IT, and engineering-based industries that use specific skill sets like engineers, technicians, etc.

In the above cases, if an employee chooses to break a bond (a legally drafted one on bond paper, signed by both parties, surety, and witnesses), he or she can be challenged using the document in any court in India. If the costs incurred by the company are true, recorded, and have valid documentary proof, an employee is liable to pay the sum mentioned in the bond or service.

Concerns with Employee Bonds

On the other side of this issue: A company signs or insists on a bond with an employee if they don't have the confidence to retain the employee with their existing benefits (monetary & non-monetary) and working environment.

I would sincerely suggest not being a part of a company that insists on a bond. Firstly, being from the HR field, you don't require intensive training, and considering your future career (which is unpredictable to the core).

Thank you.