How Do I Draft a Fair Employee Bond to Retain Staff Without a Salary Increase?

Hi! All Preceptors there. My Senior asked me to draft a bond between the employee and the employer. One of our staff resigned last week; his salary is $24,000, and he got another job where they're paying $35,000. Now, our company wishes to retain him at the same salary, but the management wants to continue his employment with a bond.

Conditions:
1. We want to bond him for 2 years.
2. The upcoming appraisal month is April 2023 (No appraisal scheduled).

Can anyone please help me draft a bond so that I can present it to my senior?

Thanks & Regards,

Vishal Bhardwaj

Hi, It is good that you are retaining a good performer by offering a significant hike equivalent to the offer he received. However, you should take into consideration that this information will spread, and tomorrow many other good performers may come with resignations citing better offers. Will you be able to retain all of them by offering a substantial hike? Practically speaking, it won't be possible, will it?

Indemnity Bond

The bond you are referring to is an Indemnity Bond. If the employee has agreed to sign the Indemnity Bond, you may obtain it from him. Please refer to the following draft. You can edit it as per your requirements.

I, ________, S/o.______, residing permanently at ________, am employed with M/s. ________, a company incorporated under the provisions of the Companies Act, 1956, and having its registered office at __________ since _______ (Date of Joining) as a _______ (Designation).

I understand that during this two-year period of service, from _______ to ______, I am obligated to provide uninterrupted service to M/s ____________. I agree not to leave the company during this period or take leave longer than my entitlement.

I also undertake not to disclose any confidential information or knowledge acquired during this period to anyone outside the company, either on a non-competition basis or otherwise.

If I do not complete this two-year service period with the company, I agree to reimburse the company with a lump sum compensation of Rs. ________- (Rupees ______ Only) before leaving the company.

I hereby affirm, ratify, and declare that the above indemnity is given without any undue influence, pressure, or coercion of any kind and will be binding on me.

I accept,

(_____________)

Date:

Place:

Dear Vishal Bharadwaj, I recommend that you approach a professional lawyer to draft the legal agreement. This is because, when making a legal agreement, adherence to the proper legal terms is important. A poorly drafted agreement may defeat its exact purpose.

Please clarify from the lawyer, should it be a "bond" or "indemnity"? In legal parlance, the definition of a bond is *a written agreement in which someone receives the bond (monetary payment) and promises to engage in a specific act, i.e., performing under a contract or appearing in court. A failure to perform results in the party’s forfeiture of the money previously given, or a requirement of the party to pay a sum of money to cover the failure to act.*

We need to be absolutely clear about what will happen if either party violates the terms of the bond.

Now coming to using the word indemnity. The definition of indemnity is *security or protection against financial liability. It typically occurs in the form of a contractual agreement made between parties in which one party agrees to pay for losses or damages suffered by the other party.*

An employee gets remuneration for the work he/she does. Therefore, the wages paid to the employee are legitimate dues. Now if the employee breaks the bond, how will you prove that the employer has suffered the losses? To prove it, what legal provisions need to be inserted? All these questions are best answered by the lawyers.

*Lately, it is observed that the word indemnity has been used very loosely. All types of agreements with the employees or with their relatives upon receipt of death compensation have also become indemnities.* It is better to do due diligence before entering into an agreement with the employee(s).

This is an HR forum. Your query pertains to contracts governed by the Indian Contract Act, 1872. Not all HR professionals are well-versed in this law. What you would like to do is to lock the employee's career to the company by paying him some extra amount. However, are these lock-in agreements legally tenable? How to decide this?

One more point. What if the employee turns hostile later and says that he did not sign the agreement out of his volition but it was taken from him forcibly? How will you prove that the agreement was not forced upon him?

I have given the above suggestion because there are smart people who have turned the tables against their employers. Therefore, it is better to do sufficient homework rather than, in the future, wring your hands in despair.

Thanks,

Dinesh Divekar

You cannot have this kind of bond unless you have spent some money on training, etc. Then yes, you can have the clause that will be recovered in case you resign within a certain period. Bonds are illegal.