Companies battle high churn with commitment clauses for junior staff

Indian companies worried over junior employees quitting within a year of joining are devising ways to secure their commitment for longer, ensuring their efforts in training freshers do not go to waste. To stem the attrition of entry-level staff, several companies are weaving in bonds by another name in the employment contracts. These agreements specify that if exits occur in less than a year of joining, employees will have to pay for the training and career development costs borne by the company, lawyers and headhunters said.

Realizing that the word “bond”, or asking an employee not to join another firm during the specified period, may not be legally tenable, and to make the job offers more palatable to the candidates, employers are using terms like “commitment period”, and detailing out the costs incurred even for a remote workforce in their contracts.

“As one of the strategies to retain talent, they (firms) impose training bonds, which are more like service commitment on the part of the employee at the time of joining. The contracts impose conditions on the employee that if he were to resign within the commitment period after receiving training, a certain amount consisting primarily of the training costs will be deducted by the employer from the employee’s final payments,” said Vikram Shroff, partner at law firm AZB & Partners. Shroff specializes in employment and labour benefits laws.

The primary aim of service bonds is to retain talent, particularly at the junior level, where attrition rates remain high despite a sluggish job market.

For instance, in the IT sector, attrition rates are 16-22% at the junior level, compared to 14-20% at the mid-level and 12-18% at the senior level, indicating a slightly higher turnover among junior employees, according to data from staffing firm Careernet. Similarly, in the financial services sector, corporate side (those who sit in offices, doing desk jobs) attrition rate for senior and mid-level employees stands at 11-15%, which is marginally lower than their lower-level counterparts by 1-2%, largely due to smaller wage differences and less “sticky” job roles, said Anshuman Das, co-founder and CEO of Careernet.

Read more

admin

See Full Bio