Considering Breaking a Company Bond for a New Job: What Are the Real Consequences?

I have been with a company for the last year, bound by a two-year contract. I have recently received a good offer from another company which offers professional development opportunities as well. Could you please advise me on the implications of breaking the bond and joining a new company? Your guidance would be greatly appreciated.

Thank you.

The impact would be the same as mentioned in your bond.

In the bond, it is stated that I have to pay one year's salary if I break the bond, which amounts to 3.5 Lac. Do I need to pay the same? Please advise!

Hi5. A lot of things will go into this before answering this question.

Factors to Consider Before Breaking the Bond

1. What is the clause of the bond? Does it come into enforcement right from your joining date or from the date of your confirmation?
2. What is the clause of payment? Are you required to pay the bond amount if you break the bond and resign, or even if they terminate your services?
3. Have they provided you with any training?
4. What is the separation policy?

If you can share the exact details of the service agreement (you can hide the company's name and your name for your benefit) and provide us with the rest of the details, we'd be in a better position to understand the impact and hence give you solutions.

Regards

This is a really critical situation, and I know because we have a bond system. If you break the bond, then you are required to pay everything that is mentioned in the bond. Think over this, and only then take action.

According to me, if you have to pay that much for breaking the bond, then you should not do it. It will also create a negative impression in another organization. Let it go; you will find better opportunities. Best of luck.

Regards.

It is not desirable to break the bond once you have been offered a job with a condition of a service bond; you must fulfill the condition of the bond. If it is not possible to continue in your present job, then after fulfilling the condition of the service bond, pay the bond amount and be relieved from service. If the bond condition is one-way and the bond is like a contract between a Goat and a Lion, then breach the bond.

Regards, Bharat

Just ask yourself one question:

Why Was the Bond Signed?

- Did they commit to providing you with training that resulted in skill development or other benefits to you, which would cause material loss to the organization if you leave?

If yes, then pay up and move on. But if the answer is no, then just move on. If they have not added any value to your skill sets, then the bond is not enforceable. A contract is deemed to be in force when the terms of the agreement by both sides are fulfilled to the satisfaction of both parties. If one side does not honor the commitment, then the other person can walk away from the contract or seek damages.

So, if they have not delivered what they committed to, you can walk away or even seek compensation for the time you spent in the company assuming they would honor their training or skill enhancement commitment. A bond cannot be one-sided. If the above has not happened, you can write to your HR to honor the bond clauses, which should have included training or skill enhancement.

Just getting a bond signed without providing significant skill enhancement or training is considered bonded labor, which is banned in the country, and the employer's representative who signed it can face imprisonment.

Also, understand that the bond duration should be proportional to the value added to you. For instance, undergoing a $1,000 training and signing a two-year bond is not valid if the material loss is not significant compared to your earning. If they sent you abroad for specialized training not available in India, and you are required to return and transfer that learning, then the bond period should match the time needed for skills transfer post-training.

Similarly, if you attend a specialized training program at IIM or Harvard, or receive unique training, then a 2-year bond is valid.

If none of the above conditions are met, the bond is null and void. The court could reprimand the company for taking advantage of a person's helplessness, especially if the bond was signed after joining. In the case of a fresher, the timing of bond signing doesn't matter; exploiting the candidate's helplessness is unlawful.

Check the bond contents and assess if they fulfilled their commitments. If the company failed to provide the promised training or skill enhancement, the bond is unenforceable.

Two years is a substantial period in one's life, and per Supreme Court judgments, an employee cannot risk their career assuming that training or skills enhancement is being implemented. The specifics of training should be clearly outlined in a separate letter after you join, referencing the bond clause.

If these conditions are unmet, the bond is merely a piece of paper, and you can inform the employer that the contract has not been fulfilled, and you are leaving the organization.

Wishing you a successful future.

Cheers

Understanding Employment Contracts and Training Agreements

All companies do business, and your engagement is also a business transaction. You offer them services, and they return the favor by paying you a salary. If the job requires specialized training and the employer invests a significant amount in such training, it is fair for them to expect a return on their investment. The skills and knowledge acquired through training become invaluable and permanent assets in your career.

Therefore, an agreement is typically signed between the employee and the employer. The employee agrees to these terms and signs the agreement. If the employee decides to leave and work for another organization, the employer should be compensated for the training provided. It is reasonable for the employer to expect this compensation.

If you still choose to move to another company, it is advisable to fulfill the financial obligations as per the agreement you have signed.

Thank you.

Regards,
V. Balaji

Hi, this is Amith. I have signed a 1-year bond with a company, and they have taken a 1 lakh rupee check as security. If I break the bond, will the company deposit the check with the bank? Will this create a significant problem?

If the cheque bounces, then it will indeed be a significant issue.

Many IT companies practice bonds because they provide extensive training to their employees to enhance productivity. The bond amount or security deposit they require is typically linked to the training and opportunity costs involved in the process. I have seen many friends in similar situations, and usually, the company does encash the cheque and retains the amount.

As you complete each segment of your bond, they often refund the deposit in installments. You should discuss the specifics of the bond with your HR, including how they will handle the cheque and repay the deposit over time.

Bonded Employment vs. Service Agreements

Bonded employment is indeed illegal according to court judgments in India. However, this does not imply that service agreements are illegal.

A service agreement is a contract between two parties where they agree to a certain duration of service. It is essential to note that a proper service agreement applies to both the employer and the employee. In cases of termination by the company, the employee generally has a right to compensation unless the termination is due to misconduct or a serious offense.

The applicability and legality of service agreements vary based on individual circumstances.

I hope this revision helps clarify the information provided.

You may like to read the thread "Need to get a relieving or service certificate without paying bond money" referring to some relevant legal provisions. But as far as possible, comply with your terms.

Thanks,

Sushil