Facing a 5-Year Bond for ERP Training: How Should We Navigate This Dilemma?

Hi, I am working in a pharma company for the last 16 years in the IT department. Now, our company is going to implement a new ERP system. Our HR manager advises all IT department staff to sign a bond for 5 years if we want to get trained for the new ERP system. He is saying that the cost of training is about Rs. 1 lakh per person, and the company will be paying the same for us.

Concerns About Signing the Bond

Now, the matter is, if we sign this bond, we will become puppets of our company. They can reduce our annual salary increment and other perks (the same has happened in the past with other employees). On the other hand, if we refuse to get trained on the new ERP system, we will become non-utilized staff for the company.

Kindly advise on what we can do in this situation.

Regards,
Mathur

The system of taking employment bonds from employees has been held as illegal by the Apex Court of India in several judgments. Employers are forbidden from obtaining bonds from employees as the contract of employment has to be based on the essence of equity, justice, and fair play. Both the employer and employee have equal rights to enter into the contract and also to terminate the same in terms of the agreement.

Employees cannot be made bonded labor.

Regards,
Dev

This is the usual practice followed by some companies during the implementation of ERP. You have not mentioned the amount for which your company is going to sign a bond. Is it the same for all employees in the IT department, or does the amount vary? What is your existing role in your department, and what is your basic qualification? If you would like, please clarify the above for me to provide suitable guidance.

Regards,
Vinay
[Email Removed For Privacy Reasons]

Understanding the Bond Requirement for Training

Having worked with the company for 16 long years and being a committed employee, I find your statement about becoming a puppet ridiculous.

Whenever new technology is introduced in the company and training costs are incurred, the company does not want trained employees to leave immediately after getting trained. Therefore, some companies ask for a bond for a set period.

In this case, your HR Manager has asked you to sign a bond of 5 years for getting updated and trained. In my view, as a committed employee, you should take the opportunity to serve the company.

Otherwise, if you enter the bond, also ask the HR Manager about the exit criteria in the following cases:

• If you find the training is not good and you wish to come out of the bond.

• If the training has not met the organizational requirements and you wish to come out of the bond.

• If the training is half done and you are not satisfied.

• If you wish to quit the company within these five years.

• What benefits you would receive after getting trained.

If you receive satisfactory answers from the HR Manager on the above, you may consider going ahead with signing. This is my view only.

What's the ERP being implemented? For the training costs to be around 1.0 Lac, it needs to be a very reputed one. There are umpteen numbers of ERPs all over the place. If it's something like SAP, Oracle, etc., then this would add value to your overall profile, which would be good for you in the long term.

@Dev—Bonds are legal if the company can prove that training was imparted to the employee, since they need to recover their training costs. This topic was discussed many times in this forum.

@J Kumar—I am not sure if discussing the points you mentioned with HR is advisable. There's every chance that they would view Mathur differently, even though his intent is different. While the points you mentioned are, no doubt, relevant, I would suggest Mathur get the replies discreetly rather than directly discussing with HR.

Please also respond to the queries raised by Vinay. More clear suggestions can emanate with such info. You mentioning about 'past experience of reducing increments & perks' does indicate that you need to be cautious.

All the best.

Regards,
TS

Signing Bonds for Training Programs

Even government departments ask employees to sign bonds while enrolling them in various training programs. It is not an illegal practice since the training provided to an individual is not intended for use elsewhere. Employers are well within their rights to have employees sign a bond with clearly defined exit options.

Understanding the Concept of Signing a Bond

The basic idea of signing the bond is like this: The company is investing a significant amount of money to impart new technology and advanced methods to its employees. After learning the technique and undergoing extensive training, if an employee decides to leave the company and utilize their knowledge elsewhere, it creates a challenging situation. The company has to identify new candidates and repeat the process, resulting in a loss of knowledge, money, and resources.

Before jumping to a conclusion, we should consider both perspectives. Similarly, employees are sometimes sent abroad for training with principals or technology partners, where a bond is also executed to ensure that the investment in acquiring knowledge is utilized within the same organization for a specified number of years.

It is a matter of morality and ethics, not a form of bonded labor control. I hope my learned HR friends will agree with this logic.

Regards.

I generally take the employer's side, but in this case, I don't agree with what they are trying to do. Today, ERP is a common feature, not something great and exclusive.

The company is training the employees not because they want to upgrade their skills, but because they can't get their work done without it. They are not doing the employee a favor. What the employee will gain will be a side effect of the exercise of implementing the ERP.

The company is training you to implement an ERP, but just on how to make entries and take reports. That's all. This knowledge is not of any use except in doing his work which he was doing before the ERP was put into effect. In another company, he will probably get a preference or a slightly higher pay only because he has worked in the SAP environment and not because of any training.

Rs. 100,000 would be the cost of the training if you were getting in-depth training that would enable you to work for SAP implementation, which is definitely not what you are getting.

In any case, a bond of 5 years makes no sense; it is too long. A year or so, I would accept as justified.

As you already know how the company would be treating you after you sign the bond (less increments, etc., since they know you can't leave), it makes no sense to sign it. You probably need to search for a new job.

Incidentally, ERP like SAP is easy to use once you understand which screen does what and how it is accessed. In SAP, you need to know the T-code for your functions and probably how to generate different reports and access and analyze the data by changing the layouts. It does not take more than a week's time to familiarize yourself with the system.

Incidentally, one of our clients had the same problem 5 years ago. They wanted to retain the employees who would be trained in SAP. They asked people to sign bonds, but most of them refused.

To sweeten the deal and assure the employees that they would benefit from staying on, they implemented a fixed KRA (Key Result Area) defined for each person and a guaranteed bonus if they worked for at least 4 years from the start of the training period. That made a lot of sense to people, and they signed, as there were definitely benefits on the table.

Training and Bond Requirement

There is no need for signing a bond because it is the company's requirement to train the employees in their respective modules related to their job profiles. Training will be provided to employees based on the requirements of the module. As you belong to the IT department, the company wants you to be involved in SAP implementation and administration. Therefore, training will be of importance as it costs the company to organize the training.

First, go through the overall details of the training and, based on its importance in the current market conditions, make a decision. Definitely discuss the bond in detail with HR.

Considerations on Training and Bonds

I see mixed views. Anyone who invests in you naturally expects some reward in return. In my opinion, one should either refuse training or willingly agree to serve a reasonable period of time after training, even without a bond.

Thanks.