Breaking a 24-Month Contract: Is It Fair to Pay Full Compensation After 23 Months?

Hello all, I signed a 24-month contract with my current employer upon joining back in 2021. However, I have now received a better opportunity and would like to resign. Considering the 90-day notice period, there will be one month left to complete the bond period. By the end of the notice period, I would have served 23 months out of the 24-month contract.

My employer is requesting a compensation amount of 125,000 since I am breaking the bond. Shouldn't the compensation be calculated on a pro-rata basis? It does not seem reasonable to pay the full 125,000 after serving the company for 23 months. Is it legal for the company to charge the total amount? How can I exit without paying the full amount? Please advise.

Hi @Rkn61, I'm sorry, but I prefer not to reveal my identity. I work for an IT firm in Bangalore, and I'm facing the issue mentioned above. Can you please help me with that?

Thank you.

Hi, Wherever possible, try to complete the bond period. If you leave without completing the bond period:

1) Your employer may harass you by sending legal notices.
2) If they learn about your new employer, they might inform them that you were not properly relieved, indicating a case of dual employment, etc.
3) In future Background Verification (BGV), you may not receive positive feedback from them.
4) They will not consider you for future re-employment.

Talk to your new employer and ask for some time. When you are unsure of completing the fixed period, you shouldn't have signed the Bond/Agreement. Anyhow, now focus on how to get out of it.

Hi, In addition to the above, I am not sure if you have submitted security checks with your employer. If so, be cautious. If you leave without providing any information, they may deposit the check with the bank. In the event of non-payment, it could lead to a criminal case.

Hello Vmlakshminarayanan, I'm not thinking of absconding; I need a relieving letter from my existing employer as I'm on the notice period now. I am hoping that the compensation I need to pay will be on a pro-rata basis. Since it's only 34 days, I only want to pay an amount in proportion to the days. However, my HR is asking me to pay the total amount.

I have performed very well till now, and the employer would have recovered all the costs they spent on my training. Legally, it's not correct to pay the total amount, right?

Adding to the above comment, I have not signed any bond paper; it was just printouts of the agreement. I have not given any cheque or document.

Hi, in that case, make a request. Explain to them that you are not in a position to pay such a huge amount and, considering the fact that more or less the agreement period is completed, with only a shortfall of 34 days, request them to consider and negotiate. Most employers will accept and charge some nominal amount, say one month's gross or so. It all depends on how you present yourself humbly and request them.

As per Section 73 of the Contract Act 1872, the compensation for any loss or damage caused due to a breach of a contract has to be that amount which naturally arose in the usual course of things from such breach, or which the parties knew when they made the contract to be likely to result from the breach of it. So when you have served nearly 23 out of the 24 months you were required, the compensation has to be proportionately reduced unless the mutual agreement is to the contrary. So, please see the contract clause and make your submission accordingly.