Is It Legal for Companies to Hold Employee Certificates? Seeking Advice on HR Practices

I recently joined a private company, and I have been tasked with recruiting new employees from a college. I have reviewed the documents that are supposed to be signed by new employees. The issue is that I noticed new employees are required to hand over all their educational certificates and sign a 3-year agreement. This practice seems unethical to me, so I withdrew my post and cited another reason for not continuing.

Question on Employee Rights Regarding Certificates

My question is: do companies have the right to hold their employees' educational certificates? I have heard that this is considered an offense in India. I am unsure if the management has approved such a malpractice. I am uncertain how to escalate this to management. I seek advice from experts.

Regards

Not many companies practice this due to unfair business practices, which raise ethical concerns. There are only a few raising alarms about such discriminatory practices, which is a serious concern. Documents and certificates (in original) of an individual cannot be demanded by any employer, as the employee can protest such an act as an unfair procedure.

Despite the fact that an agreement, contract, or bond is illegal, I am surprised at how your company or management decided to enter a 3-year bond with the candidate. Is it a gag? Is your company a huge IT firm or in another industry? What candidates do you recruit, professionals with immense experience or those with higher compensation pay? If not, I am sure that your company provides a 3-6 month training for which the cost of the agreement has to be cited. Please clarify.

If none of the above, then it might just be a ploy to retain employees once hired. Unethical acts have a profound effect on employee morale, and being a responsible employee, you may speak to the concerned parties courteously and see what they have to say about this. Accordingly, you may understand the basics of their instincts on the matter.

Addressing Salary Concerns for Freshers

This is basically an auto ancillary part manufacturer, producing CI parts for OEMs. They have recently recruited six freshers at a salary of 9K CTC per month. I am currently working on how to escalate this issue to management and convey the seriousness of the situation. If you have any good ideas or legal statements to reference, please share them with me so I can use them as a starting point.

Thank you.

I am not sure if you did the right thing in resigning from your post, especially by giving the wrong reasons. Instead, you should have taken the matter up with your management and apprised them of how wrong and unethical it is, perhaps telling them that you cannot do it and will be forced to resign.

There is no legal provision preventing an employer from taking the original certificates. However, it's a bad practice.

Concerns About Certificate Safety

How do you keep the certificate safe? What happens if the same is lost or damaged? What happens if the employee files an FIR with the police alleging oppression and bonded labor or harassment?

Legal Implications of Withholding Certificates

If there is a complaint to the court about not returning the certificates, the effect will be severe. There are court decisions stating that a bond to work for a certain period in the absence of expenditure on training or in excess of the value of training is illegal.

Explain also to your management that one wrong act by a manager or HR in denying the return of certificates, or an illegal act, coercion, or arrogant behavior on the strength of having original certificates could lead to the arrest of the directors.

The practice is bad, but most IT companies hire freshers on bond. Even private banks or some public banks have similar policies. Nowadays, even the government is doing the same. In many states, doctors have to work in rural areas for a period of at least 2 years. Any company that hires a fresher provides some sort of training, which costs the company. What if the employee leaves the company in 6 months after learning the skills? The company will incur a loss if they don't have any proper agreement with the candidate. Let's take the example of this company; they hired 6 people. Now, after 6 months, all three or maybe all trainees leave, then the company will be at a loss, and they may never hire freshers.

In a bond, there has to be a specific amount mentioned, which the person has to pay to the company if he/she leaves before the bond period.

You should have discussed this with the management. It's the management's decision on what they want to do. Think from the company's perspective. Being in HR, you have to consider the company as well as the employees. Your resignation didn't help those people who were hired or will be hired.

Is your company doing yearly or half-yearly salary reviews for all employees, including those on bond? If they don't, then it's wrong and is considered purely bonded labor. But if they do, then it doesn't matter.

As far as I know, few companies follow this practice. Probably I am wrong, since I am not actively looking for jobs (and have not been a fresher for a long time). Personally, if someone asked me to hand over my original certificates, I would tell them to F*&@^*. However, I am also aware that freshers often do not have any leverage or negotiating power, especially if their families are not from a strong economic background.

People leave a company if they do not get what they want, be it training, satisfaction, or salary. True, you will pay less to an untrained fresher. But after they are trained, they must be given fair wages. Otherwise, they will leave for a place where they can get a proper salary. You can't continue paying them the salary of an untrained fresher for 3 years.

In the end, this is a controversial topic, for which each company and candidate has to make their own decision. There are dangers to the company, especially if some of the certificates get lost or damaged, or if someone uses them as leverage to exploit an employee.

Regards.

What Mr. Neeraj mentioned is practiced in many companies. Mostly, they do so to retain employees. Could you please suggest some ideas on how we can convince the employers (management) to retain employees without resorting to holding their certificates or any other unethical practices?

I was working six months ago with a company that followed the same practice. Basically, we had a strong documentation process there, and we had a special almirah for that which only admin/HR could access.

Regarding the bond, yes, they are following a 1-year bond, but they are spending around 6 to 7 lakh per month on every employee for training. You should consider that you cannot receive such training without the company's help, and why would the company pay if you are planning to leave in 3 to 6 months...

Discussion on Company Training and Bond Practices

Good discussion going on. I was working six months ago for a company that followed the same practice. Basically, we had a strong documentation process, and we had a special almirah for that which only admin/HR could access. Regarding the bond, yes, they have a 1-year bond, but they spend around 6 to 7 lakhs per month on every employee for training. You cannot receive such training without the company's help. Why would the company pay if you are going to leave in 3 to 6 months?

What training is it that costs the company 7 lakhs per employee per month? I would like to know the details.

Mostly all state that training freshers is a cost to the company, which is why they are made to sign bonds. It is just a means to create psychological fear among them, mainly because these bonds can't be legally enforced. However, there are many companies that even succeed in extracting money from employees who leave the company before the completion of the bond, although it is legally not right.

I would like to bring to your notice that Cognizant is one of the few companies that do not rely on bonds to forcefully retain talent. You will be surprised to know that the attrition rate is among the lowest in the industry, which proves that bonds aren't the only way to retain people. People don't mind working for big companies that pay a small amount of money during the training period, or there are others that don't pay at all, especially as most companies were affected by the recession. Still, they succeeded in retaining good, talented people.

If these companies can do so, then why not others? No human likes to be tied in a bond, as this will make them feel suffocated, and they will just wait to leave the firm at the very first opportunity and join some other organization that doesn't have the policy of bonds.

But in exceptional cases where employees are handling confidential matters, bonds should be made applicable.

Regards,
Anita

The problem goes beyond bonds. The issue is employers keeping original certificates so that the employee cannot leave or even protest. This is similar to companies in the Gulf who exploit and harass workers because they have kept their passports; you can't leave without that.

Even in earlier cases where the employee is being trained in oil drilling, keeping the training certificate until they complete the training is understandable. However, keeping original 10th certificates, etc., makes no sense to me at least.

Employment Practices in the Gulf vs. India

Companies in the Gulf pay attractive salaries, and in most cases, they allow employees to leave and will release their passports. I haven't heard of any stories about companies threatening employees to stay by keeping their passports, although there may be a few cases since it's possible. However, in my experience in the Gulf countries, 99% of employees are paid their rights on time.

The situation in India is different; employers often hold the original documents and force employees to stay, telling them they won't return the documents.

Regards

Absolutely! Most employers are fair, but you might encounter an unfair one. There was a case reported on cite.hr two weeks ago where a company from Singapore terminated someone without justification or notice pay and refused to provide a full and final settlement. I'm sure this wasn't the company's intention, but someone decided to act smart. When they received a warning of legal action, they promptly paid. In India, many managers think they are gods, and if they have leverage like this, they misuse it.

I have seen cases where someone in Wipro HR was harassing an employee unnecessarily due to an ego issue. The matter was quickly resolved by escalating it to one of the VPs. However, few companies have systems for escalation and grievance redressal. Furthermore, few employees have the courage to stand up to managers when threatened with the withholding of certificates.