Jobs with Bonds - Not the best Bond

Savitha, a young techie was extremely happy to receive the offer letter from a global IT player in the U.S of A. She was all set to conquer a new world of success in both professional and financial terms. When she resigned from her present job, she was in for a rude shock. Her resignation was not accepted and she was asked to pay sum of Rs 300,000 if she wanted the relieving letter. This was as per the contract she has signed when she took up the present job. Now she is at home fighting a case in the court for her release from the contractual obligation.

Naveen got the first break of IT his career in a small company. He was placed in an IT major as an on site engineer. His hard work fructified as the IT major offered him a job with in three months. However, he could not take up the job, as he was not issued the relieving letter from the present employer based on the terms of the bond he had signed when he took up the present job. As per the bond, he had to serve the present company for a minimum of three years else, he had to compensate the company monetarily. He continues in his the present job.

Welcome to the world of a small blip in the great Indian IT saga. With global competition boiling, profit margins have dwindled and success is difficult to achieve by day. Such a scenario has led companies to adopt different techniques to get the best out of their resources namely money and men. One of the measures is the trend of companies asking the recruits to sign bonds with minimum period of compulsory service in the company and monetary penalty in case of breach this undertaking. Signing of bonds happens mostly at the entry levels recruitment for a period of 1-3 years. Some companies bring lateral movements and foreign travel assignments also under this policy.

What does the job seekers and employed feel about this practice? "I feel disappointed," says Ramesh a contract employee placed in an IT MNC from a small company. "The company can lock up the person for the specified period providing a meager package compared to the market standards," he continues to add.

Bhargav, an employee of IBM Global Services says, "Besides locking up the employee, this policy is about doubting the intentions of the employee from day 1 and is detrimental as it does not help to build the culture of "Trust" in the organisation." Bhavani Prasad, an employee of an India's largest IT MNC says, "I have to sign a bond each time I go out on foreign on site projects. It is sickening to say the least and makes any employee feel like an outsider to the company".

Company matters:

Quite evidently, no job aspirant wants to sign these bonds. Bhargav confirms that with a "Definite NO". Nevertheless, many have taken up jobs after signing bonds under various compulsions. Bhavani Prasad feels, "Though companies take up this policy to retain employee, more often than not it has the opposite effect. Many a times the candidates will not be aware of the complete legal ramifications of the breach of contract."

Nirupama V G, Associate Director of Team Lease Services, India's leading staffing solutions company says, " Companies adopt this policy to reduce attrition, in the booming IT market, as demand exceeds the supply of qualified professionals. On the converse side, "Many of the candidates especially from premier institutes are very reluctant to sign such bonds. The companies will only find people from Tier 2 & 3 organisations if employment bonds become mandatory", she adds.

However, can the companies demand for such a bond and do such bonds have the legal acceptance? Dr. S.G.Bhat, a professor of Law for 32 years and visiting professor at the famous University Law College in Bangalore says, "Yes. It is the company's prerogative to demand such bonds and such bonds have a valid legal standing also. However, such bonds should not contravene the basic fundamental rights (Mainly under article 19 of the Indian constitution) of the employee to move anywhere in India, take vocations of one's choice and earn better salary packages and promotions. Nevertheless, onus of justifying the threat to fundamental rights lies with the employee and not the management. So it is a bit dicey situation."

Short supply of quality work force:

Indian IT sector is highly vibrant and booming with opportunities. Armed with entrepreneurial ambitions coupled with soaring revenues, which are poised to move consistently northwards, more companies are setting shops. All the companies are scouting for experienced and well-trained workforce, which has definitely led to lot lateral movements with in the IT industry. With demand far exceeding the supply, such a work force is in short supply and there is an urgent need for sustained development of quality workforce. However developing such a work force needs a lot of infrastructure, huge investments {Starting from calling for interviews to recruitment to induction to training and placement on the job} and more importantly time. Not many SMB's (Small and Medium Businesses) have the capacity and intentions to take up this initiative. Generally, the big IT majors are the one's who have necessary elements to develop their employees. And companies have a fair argument when they are asking for a return on their investments. As Nirupama says, "It is also a matter of Return on investments for the companies"

"Companies are empowered by law to conduct their businesses profitably and adopt any methods sanctioned by the constitution to protect their business interests. In this context if a company has invested money on developing a specific skill set and training a particular employee it is empowered by law to demand monetary reimbursement and it is a legal obligation that has to be fulfilled by the candidate" Dr. Bhat, an advocate and expert in labour law issues adds. But generally, companies do not take it far but only black list the candidate from joining their parent company or subsidiary companies in future. The companies may also hold up the dues like PF, super annuation and gratuity.

In fact, legally an employee under the contract has to route all of his applications for new jobs through his present employer only, as bonds discourage the employee to take up the new jobs during the contract period. The employer has to forward all applications to the concerned. The employer cannot generally thwart the movement of the employee to another company, if the employee is moving out to earn better wages and better his prospects, which are the fundamental rights of the employee. But the employer can completely stop the employee from joining his competitor or hold up the employment on the ground that the official secrets and technology imparted are likely to be divulged by the said employee and the employer would suffer irreparable loss. Here again, the onus lies with the employee to prove that claims by the company are false.

Redressel Vistas:

The bonds have a slightly positive side also. Company is also legally committed to retain the employee on the rolls until the completion of the contract period and cannot terminate the contract for reasons other than gross act of indiscipline, causing loss to the company or the inability to continue business for economic reasons.

The employee affected by arbitrary termination of contract can approach the labour commissioner or the civil courts for redressel under the Industrial Disputes Act. The case can be fought in High court and Supreme Court also. For this, the person must be an "employee" as per the definition of law and should have been designated as an employee in the appointment letter. If employees are appointed as management representative or as one belonging to management category, they cannot form unions and go to courts. Many IT companies treat their employees as management representatives and hence they cannot avail the benefits of labour legislation as employees or work men.

There are two points for consideration here.
1. The company cannot arbitrarily treat all its work force as management representatives. The skill sets and responsibilities of a management representative have to be validated by the labour commissioner.
2. Even if the employees are treated as management employees, if the numbers of employees on any day is more than 100, normally that industry has to be brought within the purview of labour legislation. Employees to such industries can form an association, which has to be recognised by the management. The association has a legal standing and employees can channel all their grievances through that association.

Both Hands required for a clap:

The signing of bonds is a situation, caused by buoyant industry circumstances and requires soul searching from both employees and the companies.
The employees should understand the compulsions and challenges of running a business and strive to maintain a long and productive association with the company. {Some people change their jobs four times a year}.
From their side companies have to evaluate softer issues such as self-motivated commitment and dedication exhibited from employees towards the organisation in absence of such bonds. All efforts must be made by the companies to develop and provide quality, challenging, stable and satisfying working environment and remuneration to their employees.
Associate Director of Team Lease Services, the largest provider of staffing solutions in the country, Nirupama says pragmatically, "The companies might loose out on some real quality people if they make bonds mandatory".

Barring few cases, most young professionals feel responsible and understand the advantages of long-term association with the company. They realise that they should grow along with the company, and normally would not like to hop jobs frequently. As Bhargav sums it up, "Bond or No Bond, not many would like to quit a company, which provides vibrant, professionally challenging working environment with a decent remuneration".

By Venugopal S
(Venu_vinu@yahoo.com)

+++ Please feel free to express your views

*** Few names have been changed to maintain confidentiality

Email this article | Respond to this article