A contract requiring employees to work for a specific employer for a defined period in exchange for training or other benefits is recognized under Indian law. Such agreements typically involve financial penalties should the employee leave before the agreed-upon duration. For example, a company might invest in specialized training for a new hire and, in return, require a commitment to remain employed for a set number of years.
These arrangements offer advantages to both employers and employees. Companies can protect their investments in human capital and maintain workforce stability, especially in specialized sectors. Employees, conversely, may gain access to valuable skills and experience they might not otherwise receive. The enforceability of such agreements, however, hinges on factors like reasonableness of the bond’s duration and the penalty amount, as well as the presence of unfair or restrictive clauses. Historically, these agreements have been common tools for workforce retention, particularly in industries with high training costs or rapid employee turnover.
