Feature

Binding through bonds

Companies engage in signing bonds with employees as a retention method, but the question remains—is it worth it? Renuka Vembu does a reality check

IT companies are feeling the pressure of retaining their talent pool. With opportunities galore and competition stiffening up, attrition levels are riding high. Companies are spending enormous amount of time and resources investing in the recruitment and training process, and it becomes imperative for them to secure themselves. Signing bonds, thereby ensuring a long-term relationship with the employee, seems to give them a breather. But employees, on the other hand, are bound to feel that these bonds do not bind the individual and organization together; they are enforced upon the workforce from where the way out does not seem easy.

Significance of bonds

Bonds come in its various forms—either binding the employee to stay with the organization for a specific period of time, or paying up certain amount as damages if they plan to quit. These become necessary as IT organizations today invest in extensive training schedules and on overseas assignment. Also, since people are responsible for certain projects, and confidential data is being used, employee commitment to an organization and its clients becomes important for security and business continuity.

Employees giving notice period in case they wish to discontinue their service with the organization, or a vice-versa situation, if companies are dissatisfied with the employee performance or conduct and want them to quit, pay the equivalent amount, is widespread. Some of the other conditions arise when employees are sent on assignments abroad or given higher educational sanctions.

Shankar Velayudhan, Executive Vice-president (India, Europe), Mindteck, pointed out that there are different employment agreements that a company and its employees engage into. The agreement may contain various clauses like the period of stay, termination clause, liquidation damages in the event of breach of agreement by the employee, surety undertaking in the event employee breaches the terms and conditions of the agreement, etc.

Sanjay Mehta, CEO, MAIA Intelligence, stated, “It is critical to retain the employees who have honed the right technical expertise and exposure by working, which is an important business investment and like all investments companies expect considerable returns. These returns are sometimes measured in terms of successful implementation of the new skills that actually reflect on business results in terms of quality and productivity. Many companies measure returns in terms of the amount of time that the employee is able to utilize the new skill at work, hence companies require employees to enter into an agreement for the latter to return the investment through service tenure.”

Nina E Woodard, Executive Director, Strategic Human Resource Management, India, explained, “Today, a reality of the workplace is that organizations who are in need of certain talent are willing to pay high salaries and promise all sort of benefits to get the people they feel they need. So as a company, a bond is at least one ‘stop and think’ point that an employee ponders over before they jump to a more attractive salary. They think about what the company has invested in them too and there is a little pinch to their wallet either for them personally or for the organization acquiring them.”

The way out

Bonds do not seem to be the best alternative even for the employees. If companies charter out a feasible career path for its employees and provide conducive work environment, then they need not fear of high employee turnover. Likewise, if there is a cultural mismatch, between the employee and the employer then no amount of restriction to stay with the organization would actually help. There are diverse views on this even within the industry.

Not every organization endorses binding employees through bonds. Vivek Bhargava, MD, Communicate2, was of the view that a person would stay with the organization if his aspirations were fulfilled. He said, “Just because a few people were disloyal, does not mean that you change your entire measuring scale. Don’t change your basic faith in people. Companies need to motivate people to give their best rather than being insecure.”

On the other hand, Mehta said, “I don’t think the practice is any bit bad, as when the company is putting so much investment into training and developing an individual, and if the individual instead of being fruitful to the company uses the training imparted to him for his own professional growth; then it’s but natural and within the purview of professionalism to have him stay put to the company’s cause for a certain period of time.”

It’s that much more important to bind an employee when commitment, integrity and honesty are on the doldrums and people only want to take advantage of their increasing demand in the market place. For some jobs like in IT, continuity of operations is required; one can’t leave the company in the middle as it affects the efficiency of operations.

Woodard stated, “You have alluded to it in creating the right kinds of career growth and development opportunities as well as job content, vision about the company, total rewards and recognition tools but additionally an environment in which they feel safe and happy.” She remarked that this is the basis of the concept of having a ‘friend’ at work so that the experience of being at office isn’t just about working hard; it is about relationships that exist in the work place as well. Of course, essential in that relationship is the way that employees relate to their immediate manager/supervisor and that relationship. “If that is solid and meaningful it goes a long way to employee retention. Therefore, one important requirement for happy employees is well trained and skilled managers in an organization,” added Woodard.

Bhargava further stated that just wanting to be further associated with a brand makes employees sign bonds; there are no actual employee benefits of the same. Unfortunately, in India there is no legal recourse if the employee breaks the clause and does not pay up either. But all the same they do not get an experience letter from the company. The term ‘bond’ keeps away the employees who want to flee the company after a small tenure. This helps the company to recruit only serious employees.

The key aspect for nurturing a positive work environment for any business is constant employee motivation and commitment. In short, engaging employees in bonds is like a give and take relation. It is a co-relation between knowledge, skills, resources and money. The question still remains unanswered whether this bond proves to be fruitful to the company or not.

renuka.vembu@expressindia.com