New Delhi: In the early battles against attrition, some companies resorted to bonds to keep people around, and departing employees would pay a fine for breaking contract.
But as churn rates still crawl upward, employers are rethinking that strategy. Now, they are linking overseas travel, education leaves and training opportunities with the amount of time a worker owes a company.
“Bonds will get tied not to employment, but the nature of on-the-job training provided to employees,” says Ashutosh Sinha, recruitment director at business process outsourcing (BPO) giant Convergys Corp.
Rethinking strategy: Gurgaon office of Convergys. The business process outsourcing firm after cutting six-month bond for anyone with at least one year of experience is considering getting rid of bond all together.
Also known as “service agreements” in the outsourcing and information technology (IT) industries, bonds generally require an employee to agree to stay with a company for a year or two, and pay the company several thousand rupees if they decide to leave.
In the 1990s and early 2000s, companies such as Tata Consultancy Services Ltd (TCS) and Wipro Ltd were notorious for demanding up to a few lakhs from employees who left before their contract was up, and TCS even fought a lawsuit over the practice in a California court.
The industry’s shift away from the practice, observers say, is partly a legal move. Third-party trainings or trips abroad may be the only types of bond contracts that an employer can legally enforce, according to Sanjay Kamlani, a co-chief executive officer of Pangea3, a legal outsourcing company in Mumbai.
A bond contract in any other instance is “nothing more than a scare tactic,” he says.
Observers also say contracts with strings attached can be win-win for both employer and employee; BPO and technology workers can now join companies and pledge to stick around, in exchange for getting a bump up the skills ladder or the opportunity to learn new skills abroad.
The exchange of training for commitment has become more common at mid-size companies. Globerian India Pvt. Ltd , an outsourcing company that handles medical billing for clients in the US, for example, got burnt after it covered several employees to get certified in the Six Sigma method of problem-solving—the employees left the company as soon as they finished the course. The Six Sigma process, created by the communications company Motorola Inc., is a data-driven approach to management.
“They get certified, and their value goes up,” says Thenny Mejia, a senior vice-president at Globerian, as she explained the company’s decision to institute bonds. “Everybody wants to hire that person.”
Now the company uses bonds for both Six Sigma trainees and for its medical coders, who have to go to the US to get certified before they can start working with medical records.
Pangea3 also asks for a bond to be signed on occasion, if it spends a lot of money to send an employee abroad. It has sent about 10 lawyers to the US and Europe over the past few years to train with clients or get advanced degrees, says Kamlani. The company asked two of them to sign a bond agreeing that, if they quit within a year, they would pay back the company for their trip.
The effort to tie bond contracts not just to training courses and overseas exposure but also to full degree programmes is led by Genpact Ltd. Officials in the recruitment and BPO space say Genpact recently instituted a five-year bond tied to partial tuition reimbursement for in-house MBA and other certificate programmes, but the firm said it “would not be in a position to talk about the contract.”
But even the use of specialized bond contracts is growing rare, according to recruiters in the field. “They’re trying to safeguard themselves,” says Vinod Meghrajani, who heads the IT and related services vertical at the human resources consulting group MaFoi Management Consultants Ltd, when asked about the use of bonds in the industry. “But companies are more focusing on other hiring factors. What are the softer aspects that makes a person stick around?”
Especially at large companies, the war for talent and the struggle to retain it is forcing recruitment directors to think along those lines. At Convergys, for example, after cutting its six-month bond for anyone with at least one year of call centre experience (and seeing a 10% jump in the applicant pool), the company is now considering getting rid of its bond all together.
TCS, too, experimented with getting rid of some of its stringent bond requirements, according to sources at the company, but a “training agreement” for fresh recruits on the company’s website includes a provision for a Rs50,000 deposit, refunded after the two-year contract is up. When asked for comment, a TCS spokesperson said the company was “not very keen” to comment.
Wipro did not respond to calls or emails for comment, but one worker, on condition of anonymity, said a fine is still levied on some exiting staffers.
But the rationale for bonds in the BPO world is still a sound one, Convergys’ Sinha says. “In the IT industry, for example, people pay for certain training to get into jobs. Here it is free for them,” Sinha says, but it’s making them “much more employable.”