Hi Seniors, Greetings! As a part of retention measures, some companies take a cheque as security for 2 years with a specific amount, e.g., 2 lakhs. If an employee leaves within 2 years, the employee is liable to pay the amount to the company as they hold the cheque.
Pros and Cons of Taking a Cheque as Security
Can you help me with the pros and cons of this issue?
Offer Letter Write-up
Also, in the offer letter, what's the write-up for the same? We wanted to implement the same in our company. Until now, we have been taking a training bond for 2 years for 2 lakh rupees, but that's not effective. Now, we want to switch to this. Can you please help me with your valuable inputs? Thank you so much :)
Regards,
Punna
From India, Hyderabad
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1Pros and Cons of Taking a Cheque as Security
Can you help me with the pros and cons of this issue?
Offer Letter Write-up
Also, in the offer letter, what's the write-up for the same? We wanted to implement the same in our company. Until now, we have been taking a training bond for 2 years for 2 lakh rupees, but that's not effective. Now, we want to switch to this. Can you please help me with your valuable inputs? Thank you so much :)
Regards,
Punna
From India, Hyderabad
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Recommendation for Security Deposit Agreement
Since this is a financial matter, I recommend that you create a separate agreement between the Managing Director and the employee on bond paper. In the appointment letter, just mention that the employee needs to deposit the security amount with the company, and a separate agreement will be made for this purpose.
You need to work on various clauses regarding the validity of the agreement. The agreement cannot be one-sided. Therefore, seek your lawyer's opinion before proceeding with this scheme.
Apart from legal requirements, have you studied the various pros and cons of this scheme? If you ask a candidate to pay INR Two Hundred Thousand, will you be able to attract quality people? Those who are confident in their careers may not agree to this scheme. Therefore, you might end up attracting candidates who have not been successful in securing a job anywhere else!
While this scheme may help in controlling attrition, you may end up retaining less intelligent people. Is this acceptable to you?
Additionally, you need to decide in advance how to handle issues of non-performance or underperformance. For instance, if an employee pays your company Rs. 200K and then decides to quit, he might start being absent or making job errors. If you are forced to terminate him before two years, will you refund this security amount?
I know of a few companies that held one month's salary of their employees as a security deposit. However, this approach never seemed to work, as employees accepted their fate and continued to quit as usual. In your case, you are requesting a security deposit equivalent to four to eight months' salary. How many candidates would be willing to agree to this? Have you conducted any market surveys? What will happen if you discontinue this scheme midway? Would you return the money to the employees from whom you had taken the amount?
It seems that you and your management may not fully understand the challenge of retention. Your primary challenge is to create an organizational culture conducive to growth. You need to establish a culture of values, fairness, learning, respect, welfare, change, and innovation. By focusing on these aspects, you will be better equipped to address the issue of attrition.
You could also consider conducting an Employee Satisfaction Survey (ESS) to understand what your employees want.
Since you requested it, I have provided my candid opinions. I urge you not to take it personally.
Regards,
Dinesh V Divekar
Beware of false knowledge; it is more dangerous than ignorance.
From India, Bangalore
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Since this is a financial matter, I recommend that you create a separate agreement between the Managing Director and the employee on bond paper. In the appointment letter, just mention that the employee needs to deposit the security amount with the company, and a separate agreement will be made for this purpose.
You need to work on various clauses regarding the validity of the agreement. The agreement cannot be one-sided. Therefore, seek your lawyer's opinion before proceeding with this scheme.
Apart from legal requirements, have you studied the various pros and cons of this scheme? If you ask a candidate to pay INR Two Hundred Thousand, will you be able to attract quality people? Those who are confident in their careers may not agree to this scheme. Therefore, you might end up attracting candidates who have not been successful in securing a job anywhere else!
While this scheme may help in controlling attrition, you may end up retaining less intelligent people. Is this acceptable to you?
Additionally, you need to decide in advance how to handle issues of non-performance or underperformance. For instance, if an employee pays your company Rs. 200K and then decides to quit, he might start being absent or making job errors. If you are forced to terminate him before two years, will you refund this security amount?
I know of a few companies that held one month's salary of their employees as a security deposit. However, this approach never seemed to work, as employees accepted their fate and continued to quit as usual. In your case, you are requesting a security deposit equivalent to four to eight months' salary. How many candidates would be willing to agree to this? Have you conducted any market surveys? What will happen if you discontinue this scheme midway? Would you return the money to the employees from whom you had taken the amount?
It seems that you and your management may not fully understand the challenge of retention. Your primary challenge is to create an organizational culture conducive to growth. You need to establish a culture of values, fairness, learning, respect, welfare, change, and innovation. By focusing on these aspects, you will be better equipped to address the issue of attrition.
You could also consider conducting an Employee Satisfaction Survey (ESS) to understand what your employees want.
Since you requested it, I have provided my candid opinions. I urge you not to take it personally.
Regards,
Dinesh V Divekar
Beware of false knowledge; it is more dangerous than ignorance.
From India, Bangalore
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Legal Implications of Security Deposits in Employment Contracts
Suppose a candidate agrees to pay 2 lakh as a security deposit and, after one year, gets a better opportunity and violates the agreement. Still, nothing can be done to him as the contract itself is not valid since bonded labor cannot be practiced in India.
Moreover, it's easy for the candidate to refuse the signature, claiming the company has forged it. Let the company appoint legal personnel and seek justice in court.
The candidate normally gives Post Dated Cheques (PDC) for actual money the company never receives, and the candidate can request the bank to make a Stop Payment of Cheque at any time.
If you appoint the candidate as an external consultant, then you can take legal actions. As an employer, under these circumstances, it does not work well.
Regards
From India, Mumbai
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Suppose a candidate agrees to pay 2 lakh as a security deposit and, after one year, gets a better opportunity and violates the agreement. Still, nothing can be done to him as the contract itself is not valid since bonded labor cannot be practiced in India.
Moreover, it's easy for the candidate to refuse the signature, claiming the company has forged it. Let the company appoint legal personnel and seek justice in court.
The candidate normally gives Post Dated Cheques (PDC) for actual money the company never receives, and the candidate can request the bank to make a Stop Payment of Cheque at any time.
If you appoint the candidate as an external consultant, then you can take legal actions. As an employer, under these circumstances, it does not work well.
Regards
From India, Mumbai
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