How Do I Create a Legal Employee Bond to Prevent Early Departures?

Hi all, I am working for a Software Development Center. I need to prepare a contract between an employee and the employer, some kind of bond that the employee can't leave the company before a given period wherein the employer has invested in the employee in terms of training, etc.

I request you to send me the format for this contract and how can this be legalized?

Regards, Tara

Dear Colleagues,

The issue of bonding in the workplace

The issue of bonding in the workplace should be seen as a very sensitive HR matter, as no average human being wants to be tied down or lose his/her freedom.

Contractual obligations for company-sponsored training

However, I think the major thing is to spell it out categorically from the onset in the letter of appointment/contract that, for example:

- For every company-sponsored course/workshop valued at a certain cost, an employee of a certain status is expected to spend a number of months/years with the company. Otherwise, such an employee must refund the cost of the funding to the company if the exit comes before the expiration of the bonding period.

- Another aspect is the withdrawal of such certification (original copy) from the benefiting employee at the point of departure from the company, or he/she must pay for the total cost of the training-course fees, transport, hotel accommodation, etc.

Encouraging knowledge sharing

Similarly, employees could be encouraged to share the knowledge acquired from such training as a matter of company policy by making presentations upon arrival from such training programs. These are then kept for corporate use and stored on company servers where everyone can access them, thus encouraging knowledge management.

Induction and understanding of contract terms

In summary, I would advise that the workforce should be properly inducted from the beginning to avoid the issue of litigation. If it suits individual employees, they would endorse or accept the offer made, having understood the content and interpretations of the appointment/contract papers.

At this point, the employer is free to go ahead with the implementation of the contents of the contract/appointment papers.

Thanks.

Hi Tara,

Ajayi has provided a fair outline for the contract between the employer and employee. For the draft, you can approach local lawyers who would assist in ensuring it contains the right and relevant clauses that are legally sound in case of litigation. The clauses should serve as a deterrent, as rightly mentioned by Ajayi, that knowledge management is key. The best contract is an emotional contract, which ensures that employees remain with your organization for an extended period.

Regards,
Rajat Joshi

Hi Tara, Further to my response, please refer to the article on innovative retention strategies by a major IT firm in India.

Innovative Retention Strategies by IT Company

A Bangalore-based firm has a novel way of keeping its employee attrition rate under control. While most infotech companies ask their prospective employees to sign bonds, this company requires new recruits to place a Rs 75,000 refundable deposit before they can collect their appointment letters.

Such a drastic measure was warranted by the fact that nearly 50 percent of new recruits were leaving after their training program. "The Rs 75,000 deposit discourages those who join us only for our training program," said the company’s vice-president and global human resources head.

The deposit system, which works through a tripartite agreement between the company, the candidate, and a bank, requires the employee to deposit the money in the bank directly. The deposit, along with the interest on it, is refundable when the engineering graduate completes 12 months with the company after the three-month training period. Science graduates, who undergo a six-month training period, have to wait 18 months to claim their refund.

Those unable to put down the deposit have the option of taking a Rs 75,000 loan from the bank, for which they will have to pay interest. At the end of the period, they can claim the deposit amount as well as a retention bonus as compensation for the money they lost by way of interest.

The agreement was introduced in April 2004 and has been used for two placement seasons now. The company claims it has had no impact on its campus recruitment. "All other companies in the industry get their employees to sign bonds and other agreements. So we are not doing something that nobody else is. The company’s placement has not suffered at all under this tripartite agreement."

Cheerio

Rajat

Hi all, thanks for your response. If you have any templates of appointment letters or contract agreements stating the following points, please send them across.

Rajat - I have gone through that article; it is a measure taken by Wipro recently.

Thanks again,

Tara