Are Employment Bonds a Good Idea to Retain Senior IT Staff? Seeking Advice and Insights

I want to know that my company is in serious trouble because the senior employees are resigning from the company. So we decided to sign an employment bond with the employees after completing 6 months of continuous service with us. This bond is not compulsory for all employees; actually, we will give them an offer. If they want to continue with us, they can sign it, or vice versa. The one who accepts the employment bond will receive more benefits such as a salary hike or other perks. Can anyone help me prepare this type of bond and tell me whether it is applicable or not? What are the cons associated with it?

Dear Sapna, What is your designation? Are you from HR? My reply is more from a management science point of view rather than a legal point of view.

Understanding Employee Resignations

If senior employees are resigning from the company, then the malaise lies somewhere. What efforts have you or your management taken to find out the reasons for their exit? Signing a bond with the company will lock them to your organization, but will they be mentally engaged with your organization? You are dangling the carrot of a salary hike. Will this incentive motivate senior managers so that they can pass on this motivation to the lower levels?

It is a myth to believe that employees work only for the salary. To control their exit, an increase in salary is not the only solution. The fault could lie in the leadership style of the top management as well.

Company Culture and Leadership

Secondly, you need to find out what kind of culture your company has. Your management needs to make conscious efforts to give a specific shape to the company's culture.

Management Structure and Delegation

Thirdly, between the MD and senior managers, is there a GM? Has the MD delegated all the powers to this person? Is this person responsible for the cause of the managers' exit?

At this stage, you may try to calculate the cost of managerial attrition. Find out whether this exercise opens the eyes of the management.

Employment Bond Considerations

What type of managerial candidates are ready to sign the employment bond? Obviously, needy ones who do not have a job at hand. Their main intention is to maintain monthly cash flow in the form of a salary. For this, they may prefer to become yes-persons, giving short shrift to their professional pride. These types of candidates will have continuance commitment rather than affective commitment.

I have given a very straightforward view. Please do not take this personally.

Thanks,

Dinesh Divekar

Understanding Section 74 of the Contract Act

Under Section 74 of the Contract Act, only a reasonable amount proportionate to the expenditure incurred on the employee can be recovered. Please see my post on "Bond related" on this site. Merely signing a bond does not make one a bonded laborer; however, the expenditure proportionate to the bond amount has to be incurred. It is advisable to introspect, as suggested by Mr. Dinesh above.

Thanks,
Sushil

There can be various views on it, i.e., BOND!

Bondage and Bonded Labor

Bondage and bonded labor have long been abolished! The question arises: the BOND is to be created in lieu of what extraordinary favor to the employee, e.g., some certified training from a certified institution that can add to some qualifications or extraordinary skills, for which the employer shall have to incur some expenses?

If no such favor is to be granted, then the bond may not be even worth the paper on which it is written. The allurements, i.e., a percentage hike in salary, may not be of any use if the workplace and employer do not offer motivation, good HR practices, a better career, etc.

Instead, you should compile the reasons and analyze them to understand the attrition and keep succession plans ready. The size of the company does not matter. Employees do stay and do leave. It is the employer that retains good employees. The HR personnel can help the employer formulate policies that would help retention. The industry captains are not wary of attrition.

I believe you need to address the problem at its root. Bond only retains employees who are not fully committed to the company. Otherwise, it's akin to closing the stable door after the horses have already bolted.

Investigating Employee Departures

As an HR professional, you should investigate the reasons behind the departure of senior employees from the company. In addition to informal discussions and Town Hall meetings, conducting exit interviews may provide valuable insights into the company's existing policies, highlighting areas that may require revision.

Proactive Management of Employee Expectations

To proactively manage employee expectations from the outset, ensure clear communication of job profiles well in advance, be it in the job descriptions, during interviews, or while extending offers. For employees to fulfill their end of the agreement, it is crucial for the management to uphold their part, creating a sense of fairness in the bargain.

Regards,
Saj