Is It Legal for Companies to Hold Original Documents and Enforce a 2-Year Bond? Seeking Insights

One of my friends, who is a fresher, has secured a placement with a reputable IT firm. At the time of the offer, they are asking him to sign a 2-year bond with them. In case he leaves the organization before the 2-year period, he will have to pay the company an amount equivalent to 2 months' salary. The company has also requested his original documents; they want to retain them for the two-year period.

In my view, this is illegal. I believe the company is resorting to this tactic for hiring fresher talent.

I am looking forward to some insights from this forum for a better understanding of the subject.

Thank you in advance.

Regards

Hi,

First of all, it is unprofessional to keep original documents, but some small companies use this practice. In India, there is no legal obligation of an Employment bond unless it is on legal papers. Coming back to submitting original documents is a very risky affair. Think about the situation if they are not ready to provide the documents back on time; he would be in serious trouble.

My suggestion would be: Do not encourage this kind of practice. It's not the last company in the world.

Regards,
PD

"The company has asked for his original documents too." The requirement is illegal. Yes, they can ask to see original documents for verification, take Xerox copies, and RETURN the original immediately to the employee. A bond for two lakhs is also meaningless unless some special training is given to the employee and to secure training costs; the company wants a bond. After all, private companies are not like Air India, which spends tens of lakhs on training pilots without taking any bond. The company is taking a lot of extra steps to retain employees by some sort of compulsion, instead of being an employee-friendly company.

Employment Bonds and Termination Clauses

In case your friend is in dire need of employment, you can sign a two-year bond but ensure that there is a termination clause on either side so that he can leave in between if better opportunities arise. The company cannot make a one-sided agreement, and if one is made, it will not stand in the court of law, as confirmed by a number of judgments, including one in DLF.

Please do not provide original certificates; only give self-attested copies as they may be used against you if you attempt to leave midway.

Ethical HR Practices in IT Companies

In any case, it seems that the IT company in question does not adhere to ethical HR practices, so it might be advisable to advise your friend not to join. A bond of Rs 2 lakhs in the agreement is unwarranted and will not hold up in court due to the presumed employer-employee relationship.

These are tactics recently adopted by many IT companies due to widespread separations in the IT industry.

Regards

"In any case, it looks like the IT company in question doesn't have ethical HR practices, and it is better to tell your friend not to join.

Some of the practices in IT and other industries are not HR-friendly anyway. Look at this news item: Indian IT companies among the world's worst paymasters - The Times of India."

I am not sure of your definition of "reputed IT Firm"—no reputed company takes originals.

Bond and Legalities in the IT Industry

Coming to the bond, even though, like other members mentioned, any service bond not backed by specialized training is illegal, I guess it has become a catch-22 scenario now in the IT industry. If you go through the postings in this very forum, many employees try to take the first better offer that comes their way even though they would have worked in their present company for just a few months. So, I guess that leaves the companies to make their own set of rules to protect their interests.

Also, I think this company is better off than many as far as the cost of bond-breaking goes—it's only 2 months' salary vis-a-vis others where amounts run into 1-2 lakhs. I suggest looking for other openings rather than getting into a situation where the originals are with the company, giving scope for future problems.

Discussion on IT Salaries

@Nathrao—With regard to your TOI link about "Indian IT companies among world's worst paymasters - The Times of India"—

I think you have placed this news item in the wrong perspective in three ways. The very fact that India is among the global IT powers today is due to this very fact: low salaries. It's more of a business model of lower costs (which includes salaries) that catapulted Indian IT to where it is now. This aspect is more of a supply/demand issue than anything else. Similar would be the case of China in the manufacturing sector.

There are many other countries (like the Philippines, Indonesia, Vietnam, etc.) waiting for Indian salaries to shoot upwards so that they can take over from where India left. From another perspective, everyone knows that the average salary range of the IT sector is much higher than any other sector in India. From a third perspective, it's like comparing apples to oranges. Switzerland, which topped the list in a salary survey, is, incidentally, also among the highest cost-of-living lists in the world. One can't have it both ways.

Regards,
TS