Does the practice of employees having to sign bonds amount to maintaining continuity or forcibly retaining talent?
When I started working on this story about new hires signing bonds at their work- places, I was certain no or- ganisation would admit that it indulges in such a prac- tice, as it is by and large con- sidered ‘detrimental’ to an employee’s career. However, to my surprise — though the majority of companies did reply in the negative (as ex- pected) — some admitted to having asked their employ- ees to sign bonds especially in cases where the firm makes a substantial invest- ment in them. This also hap- pens when people are hired for specific projects. Says Arijit Sengupta, Vice President, Weber Shand- wick, “We introduced the concept of signing bonds in our Mumbai office as it en- sures stability of resources and we can even entrust em- ployees with larger responsi- bilities. This practice also nurtures their overall growth with the organisation.” Most companies adopt this route especially when they send employees abroad for specialised training. “This is perfectly fair since employ- ees gain from the training and use the expertise to fur- ther their own careers. Gen- erally if training is given for , a special assignment, the em- ployee is expected to com- plete the assignment and would possibly have to sign a bond for one to three years,” says Rashmi Rege, Manager, HR, Ashapura. Adds Vishal Mehra, VP- HR (Asia Pacific), Office Tiger, “We do enter into con- tracts with our employees, especially so when the firm makes a substantial invest- ment in helping an employ- ee acquire both contextual and functional knowledge. To ensure smooth knowl- edge transfer, more than any financial loss that can be made up, agreements are signed for a certain neces- sary period of time.” Now for the other point of view. When asked, most companies were against this practice. Says Chander Lall, Head of Operations, Motion Picture Association (MPA), “Being an employer of choice, we prefer ‘voluntary bonds’ over ‘involuntary bonds’. We would not keep anyone who wants to leave the organisation, as it would be a burden on the employee as well as the organisation. This practice is prevalent in the IT sector due to its high rate of attrition.” Adds Manoj Jain, CEO, Pi- pal Research, “We do not ask our employees to sign any bond as we do not believe in holding anyone back if they do not want to stay A person . who has decided to leave will do so or if he cannot, he will underperform. I do not know how some companies can, in this day and age, hold their employees through bonds.” But, what makes compa- nies ask employees to sign bonds? Does this not amount to forcibly retaining talent? Says Rajiv Phadke, ED-HR and Business Development, Angel Broking, “Companies want to enforce a certain continuity, particularly where projects or time- bound activities are in- volved. An employee, who resigns after a time, can up- set the whole scene. But yes, this definitely amounts to forcibly retaining talent.” Adds Kapil Kapoor, MD and VP Asia, Timex Watches Ltd., “Sometimes companies need to invest significantly in training employees and as a result look for some pay- back from them. However, a contract needs to be fair and equitable and an employee has the right to decide (prior to signing any agreement) if it is worth his while or not.” Does such a practice bode well for employees? Says Dougie Douglas, Area Man- ager Northern India and Nepal, Etihad Airways, “It depends on what benefits are for employees. If they in re- , turn, receive significant ben- efits such as training or a bet- ter package, then they may decide that it is to their ad- vantage in the longer run.” However, Anuj Kumar, VP-HR, Induslogic dis- agrees, “Employees simply hate this. They believe that they are being exploited. No- body benefits in the end. ” Nonetheless, one cannot conclude that this practice has no merits. “The compa- ny is at an advantage when it knows that come what may, the new recruit is bound to stay with it for a stipulated period,” says Surya Vir Singh, Official Spokesperson, Sahara Infra- structure and Housing. Adds Lall, “Companies re- sort to this exercise in order to retain talent, which they have built by putting in a clause of compulsory serv- ice. This could mean a one, two or more year ‘lock in’ pe- riod or paying back the mon- ey invested in the candidate. This helps the organisations control the attrition rate. But, if the employee turns out to be a misfit, then they have to bear the brunt for the entire bond period.” The employee, Lall says, never feels good about this clause. “It creates an element of distrust and a feeling of being ‘locked up’. It may help the employee in cases where companies fire people at their whims and fancies.” So, what is the best alternative? Says Rohit Kochhar, National Chairman and Managing Partner, Kochhar and Com- pany “Retention of talent de- , pends upon a well-planned HR strategy and execution of policies. This would need to be evolved in sync with the organisational goals.” Sums up Sengupta, “The trick lies in identifying star performers so that the or- ganisation also knows as to where and on whom invest- ments have to be made.