Business Today

Bond-ed labour

IT companies are offering job contracts that bar employees from joining rivals, vendors or partners. Here's how you can steer clear of the tangle.

By Venkatesha Babu & Rahul Sachitanand | Print Edition: July 15, 2007

When Shruthi Menon (name changed on request), a 23-year-old telecom engineer, quit her job at an Indian it services giant to join an MNC competitor just nine months into her job, she never anticipated the shocker of a notice she received. She was asked to pay a sum of Rs 1.25 lakh, which, the Indian company said, it had spent on her "training". Otherwise, she would neither get the release letter nor have her dues cleared.

With her new employer insisting that she get a clearance certificate from her employer before joining her new role, she had no choice but to cough up the said sum. Four months into her new job, Menon says: "For all the opportunities in the industry, nobody wants an employee who is seen as troublesome. Had I stood my ground and challenged them, I could have legally won. But it's not worth the trouble."

Welcome to the brave new world of information technology where companies are trying every trick in the book to hang on to their employees. Retaining the best and the brightest is a challenge for these it players as the industry braces for a shortfall of 500,000 employees over the next two years.

At the receiving end are the code-jockeys and the others. While there do exist soft sops such as entertainment centres and crèches, it players are bringing into play a variety of bonds to hold on to flighty code-jocks in search of greener pastures.

While the first versions of the employee bonds were targeted at the globe-trotting sales and marketing personnel, several newer versions have come to the fore over the last couple of years. "it companies do not use bonds only for globe-trotters; senior managers, too, are being locked down along with techies who've been put on extended training programmes," says Kris Laxmikanth, CEO, The Headhunters, a Bangalore-based hr Consultancy.

Several it players, including Infosys and Wipro, use these bonds. Pratik Kumar, Corporate VP (HR), Wipro, which has a staff strength of 67,818, candidly says that high training cost and high attrition rates are making this necessary.

For instance, Wipro gets a legally enforceable bond signed by all fresh campus hires that says they will not quit in the first 15 months. In case they do, they have to pay the company a sum of Rs 75,000. Says Kumar: "Wipro puts in considerable money, time and effort on training its workforce. For several months while we pay them salaries, they are unbillable and generate no revenue for us. It's only fair that they compensate us if they want to quit after training."

Given the compulsions of these corporates, how justified are these bonds? Gautam Sinha, an xlrialumnus who runs TVA Infotech, a placement agency, says that such measures are reminiscent of the excesses of the early growth years of the industry. "While understandable from the companies' perspective, the measures are retrograde. You cannot force a person to work against his wishes. Attrition is a huge challenge affecting the whole industry, but bonds are not the answer."

For Perot Systems, reining in attrition is a key part of its strategy in India and it actively uses bonds during the training phase, according to Sheela Singh, hr Head of the company. "We invest in training employees and we need to make sure that we can retain them once they go live on a project," she contends. While employees sign a bond during their training stint at Perot, those who do leave during this time need to pay a "substantial amount".

At it bellwether Infosys, bonds are utilised to put a stop to employees' moving to competitors working on projects of their clients. "We decided to put these curbs in place after interacting with some clients and realising the need for confidentiality of customer data," says T.V. Mohandas Pai, Director (hr), Infosys. Infosys does not have a generic bond in place preventing techies from moving to competitors; the existing version bars employees from working on projects of its clients at another company for a period of six months.

Is there then a way out for the trapped code-jocks? Perhaps, yes. HR consultants and legal experts say that there are ways around these stumbling blocks if someone is really keen to change jobs. "These bonds aren't legally enforceable," says Laxmikanth, adding, "companies use these measures only to try and scare or intimidate employees and to try and keep their attrition rates low."

Others such as IP (Intellectual Property) and it law expert and Supreme Court advocate Pavan Duggal, however, believe that the law isn't taking a one-size-fits-all approach to this issue any longer, and now balances an employee's fundamental right to a livelihood, with the more recent stress on data privacy and protection of privileged company information. Citing the change in court's stance over the issue, Duggal explains: "Courts used to toss these bonds out stating they contravened Article 19 of the Constitution (Fundamental Rights), which gave people the basic right to work." However, in an ongoing case in the Delhi High Court, an employee has been asked to serve a four-year bond because he held confidential company data with him, which could have been misused. "Given the stress on data privacy and theft, in many cases it could favour employees if they're relatively junior and have no access to confidential data," says Duggal.

In such a scenario, the buzzword for techies is: exercise caution. Rather than signing your papers in haste while joining an IT company, negotiate the duration of a bond and the payout for breaking the same. Companies are usually open to negotiations, say hr consultants. "Rather than ink a deal for a six-month lock-in period, try and bargain for three months. Even financial penalties can be debated," says Venkat Shastry, Partner at Bangalore-based Stanton Chase.

However, negotiating with larger companies can be a formidable task. HR consultants explain that these large companies have iron-clad bonds in place to try and keep their highly-trained flock together. "Once you join these companies, you rarely have a choice about signing these bonds. Such companies can make life difficult for you if you try to find your way out of these bonds," warns The Headhunters' Laxmikanth.

Code-jocks, however, are known to use a multitude of ways to dodge the restrictions of bonds and other agreements. While persuasive skills always come in handy, some take a sabbatical and others lie low and refresh their technical skills or move to non-competitive clients.

The bottomline, however, is that people are at a premium. "It's in the companies' interest to make the contract-affected workforce productive at the earliest. Some firms are willing to cough up the penalty to get top talent aboard," says Shastry.

The other option is to hunt for companies that don't have any bond system in place and try to jump aboard. "The fact that our attrition is among the lowest in the industry proves that bonds aren't the only way to retain people," says Bhaskar Das, Vice President (HR), Cognizant, one of the few companies that do not rely on bonds to forcefully retain talent.

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