WHY WE NEED LEGALLY CORRECT RESIGNATION &TERMINATION DOCUMENTS

Indian laws classify employees in ‘workmen’ and ‘employee’ categories. A workman is provided various protective remedies under law and is entitled to certain statutory benefits which an employee may not be entitled to (depending on the terms of his contract of employment). Accordingly, an employee can usually be terminated on the basis of the terms of his employment contract (also known as a hire and fire rule). However, termination of a workman requires more compliance, adherence to processes and payment of retrenchment compensation to the terminated employee. It is therefore necessary to have legally correct termination / resignation procedures before firing employees. You address the following issues: a) termination without notice and its consequences; b) termination due to misconduct and how to go about it; c) terminating workmen in a legally correct manner; d) unfair dismal and what it means for an employer.
ADVANTAGE OF SUCH DOCUMENTS:
• Prevents employer-employee disputes.
• Categorizes an employee from a workman since majority lower-level IT personnel are workmen in India.
• Brings clarity from an employer – employee perspective.
• Prevents frivolous legal disputes.
Termination In cases where the employee voluntarily resigns or retires from employment, it is unlikely that there will be a dispute (unless there are elements of a breach being committed by the employee). In contrast, termination of employment by the employer often leads to a stand-off between an employee and employer which has all the ingredients for baking a potential dispute. Termination of employment due to misconduct, breach of the employment agreement including violation of restrictive covenants therein, is often escalated and settled through resort to courts. An important factor to be considered in a dispute relating to termination of employment by the employer is whether the employee being so terminated enjoys statutory protection of employment such as a “workman” as defined in the Industrial Disputes Act, 1947 (“IDA”) and/or protection under the state-specific labour laws such as the Shops and Establishments Act. The IDA also contains unfair labour practices on the part of the employer. If the employee does enjoy such protection, then before terminating the employment of such an employee for any of the above reasons, the employer would have to serve the employee with at least a 30 days’ notice or pay salary in lieu thereof. The procedure to be followed for termination due to ‘misconduct’ would involve framing of charges and issuance of a charge sheet, conducting an internal (domestic) enquiry by an unbiased inquiry officer, followed by issuance of a show cause notice. The process needs to be followed as per the principles of natural justice and the employee should be given an opportunity to submit his defence and call upon witnesses. Decision to terminate employment should be taken depending on the gravity of the misconduct on the part of the employee.

EMPLOYEE STANDARD OPERATING PROCEDURES (SOP) AND WHY YOUR ORGANIZATION NEEDS IT

Internal rules and regulations formalize and present a broad overview of standard operating policies and procedures for an organization. These are essential documents that provide structure and establishes consistency and discipline in decision-making and employee behaviour. These indispensable documents set-out a set of guidelines by way of which the HR department shall manage the company’s employees. Each and every aspect of employer-employee relation, employee benefits, employee behaviour, rules, etc is analysed and comprehensively commented upon.

Following are advantage of legally correct internal company policies:

  1. Employees know exactly what rules govern their conduct within the organization.
  2. Sets-out clear grievance redressal mechanism.
  3. Helps set and meet employee expectations.
  4. Gets employees to behave in a certain way.
  5. Treats employees consistently.
  6. Helps employers avoid employment claims and lawsuits.

Here are some of the tips that are recommended to improve your SOPs or even your induction and training manuals:

  1. Get an outsider to read your standard operating procedures. This is a great litmus test, as to how well a lay-person understands the information.  Often, when you’re an expert in your field you have “The Curse of Knowledge”.  This means the more you know in a certain field the harder it is to break the information down, so that a new person to the field can understand it.  Either you give more information than a person needs to understand or too little.  Give your SOPs to your kids, friends, family or external business colleagues to read.  If it’s written well, a child should be able to understand it. Ask Why – Go through every procedure and ask why do we do that?  You’ll be surprised about how much redundant information you have that can be deleted.  I regularly do this with clients (yes, I ring people up and annoy them by asking “Why do you this?” and “Why do you do that?”) and it’s amazing to discover how much information I can delete.
  2. Go out and do the procedures according to the SOPs – This is a great way to test if they’re still relevant and whether they make sense. Use this time to take clear photos, that you can add into your documents. Our clients get a lot of benefit from us querying why they do a procedure out in the field and getting the process documented and filmed correctly.
  3. Use marketing and communication techniques to really lift the readability of your employee-related documents. Try different ideas and techniques.

Having consistent and up-to-date employee documentation is a legal requirement. Ensuring that your standard operating procedures are correct is important for business safety and productivity.  Start improving your procedures now and ensure all employees are doing the right procedure every time, everywhere.

HR for startups has always been a headache!

Fund-raising may have come easy for start-ups. It’s the people matters that appear to be rather tricky. For some, establishing a unique culture is proving to be tough, while for others it’s about ensuring new hires remain as engaged as those who began their careers at the start of the company’s journey. To measure engagement of teams on a regular basis, mobile payments platform Paytm has developed a tool called `Pulse’. It’s an anonymous survey which is looked upon as an important mechanism by the manager and the team to get honest reviews. The objective is to deep dive and resolve issues wherever the scores are below organizational average. Amit Sinha, VP-business planning and people, Paytm, said given the chaos in which startups operate putting in 10-12 hours of work daily the too is essential to gauge employee engagement levels. With a staff strength of 4,000 and growing, Sinha said while the older employees are in sync with the company’s culture, it’s for the new hires that such tools are more useful. The tool has helped in identifying some gaps in the induction process which the company is working to fix. B Mohan Kumar, founder director & chief evangelizing officer of iAccept Softwares, uses special training imparted to its employees as a tool to make them feel valued. “This makes them feel privileged for getting a chance to get trained in areas where even their peers have not got an exposure,” said Kumar. Vinaya Bansal, co-founder, The Predictive Strategy Group, who has worked in a startup for six years, said early employees can also be the ones who are most likely to become to become disengaged after the company enters a growth phase. “With VC funding coming, a startup tends to grow overnight from a toddler to adolescence and then to middle age,” said Bansal. Processes and structures give rise to hierarchy. Soon, formal appraisal processes are put in place and suddenly, the early joiners find that the very reasons of joining a startup don’t exist. But it’s a phase all startups must go through if they wish to grow.

HR POLICY MANUAL AND EMPLOYEE HANDBOOK

Clear and concise HR policies are essential for several reasons. A company can face legal challenges grievances and lawsuits if it fails to implement these policies. Every organization requires professional HR policies to run the company effectively and efficiently. Human resource policies and procedures ensure that staffs are treated equally across a variety of employment issues. It also provides help if any legal situation arises.
Policies serve a number of essential functions, namely to communicate values and expectations for the things that is done in the organization, empowers the company in compliance with laws and provides protection against employment claims documents and implements best practices appropriate to the organization.

A comprehensive HR policy manual includes the following: Sexual

  • Sexual harassment policy;
  • Legally correct leave policy, including all forms etc that come with it. This will include components like casual, sick, short leave and earned leave
  • Absence or overstay during leave policy
  • Maternity policy for women employees
  • Night shift policy
  • Email and internet use policy
  • Technology resource use policy
  • Personal relationships at workplace policy
  • Visitors at work place policy
  • Policy relating to access to personal files of the employee which may be with HR
  • Grievance redressal mechanism
  • Performance appraisal timelines
  • Time keeping and pay roll policy
  • Work from home policy; and
  • Time off to vote policy.

Some pointers to keep in mind while establishing an HR are, working conditions, hours of operations, overtime. It is important for companies to frame few basic rules and regulations. Employers should determine the number of working hours an employee works per day although it’s specific to departments and roles. Compensatory offs on a weekday should be given to employees who had to work on the weekends.
Termination Recruitment and Compensation:

Policies under this category explain the procedures relating to the induction of a new candidate and resignation of a current employee. Policies like background checks, verification of educational details, relieving details from previous employers, and resignation procedures such as handing over of responsibilities, notice period and others should be clear and straight forward.

Leave & attendance:

Every employee should be entitled to sick leaves and maternity leave for female employees. Employees are also entitled to paid maternity leave. However, this is subjected to the number of working days of an employee in the organization. Maternity leave is paid and mandatorily offered to women employees as per a legislation known as the Maternity Act.

Salary, compensation, Performance Management, Benefits and Eligibility:

This includes framing of guidelines for salary compensation, bonus, annual increments, and loans against salary, PF and gratuity. Benefits like HRA, monthly medical allowance, TA and health insurance should be offered depending on the ability of the business and size of the organization.

Work culture Discrimination and Harassment:

This HR policy must not be ignored. It includes dress code, confidentiality, customer misbehavior, discrimination and sexual harassment. They should be formed with utmost care, empathy and keeping work culture in mind.

We at HRDrop recommend that an organization ought to have a comprehensive HR policy manual which is in consonance with the employment agreement. For more details please refer to Company Policies section on www.hrdrop.com.

Difference Between an Appointment Letter and Employment Contract in India

Appointment Letter

In today’s economy, most people are so happy when they get a job they sometimes overlook the paperwork they’re signing and don’t actually read the fine print. You may think you’re signing a contract, but really you’re accepting a job with a specific title, job description and salary. When is an employment agreement different from an appointment letter.

It’s common practice in India that potential employers provide candidates with an appointment letter when offering them a job. This letter typically includes some basic information about the position, such as, company name, job title, starting date, salary, salary package, schedule and whether the position is permanent or probationary. Depending on whether lawyers were involved, the letter may also contain some legal terms like workman, employee and the like. It might include disclaimers that the job and terms spelled out are subject to change when the company decides they want changes. It might say that final employment is subject to certain background checks or other conditions being met. Finally, the letter often includes a deadline by which the potential employee has to accept the offer, and a line for your signature indicating your acceptance of the job.

Because these letters appear very official or, let’s just say it, legal in nature, they often lead to confusion because people mistake them with employment contracts. That serious tone is somewhat deliberate. After all, the company wants the prospect to commit to the position. In other words, the company wants to reduce the risk that a candidate will sign the letter then back out of the job at the last minute.

 

Employment Contracts

Companies will use employment contracts for some employees, particularly top management, as well as sales reps and independent contractors. An employment contract typically contains information discussing, compensation and severance pay (if any), length of the contract, if it’s for a specific time, and any specific grounds for termination. A non-disclosure clause preventing the employee from giving away trade secrets or using confidential data like customer lists for a competitor’s benefit. A non-compete clause preventing the employee from working for a competitor after leaving the company. A detailed description of any stock options or other ownership interests the employee receives. What happens when the employee leaves the company? An arbitration provision in the event of future disputes between employee and employer. A list of the job’s duties.

The Difference

Is this an appointment letter or and employment contract? Some of the most commonly asked questions on www.HRdrop.com’s legal forum relates to appointment letters and employment contracts. It’s important to realize that the vast majority of appointment letters are not employment contracts. That means your employer is free to terminate your job at any time including before you officially start the job. In most cases, you’ll be owed no compensation for any time other than the actual time you worked. But it also means you are free to walk away from the job at any time. Employment contracts are relatively uncommon. If you weren’t a top corporate executive or an independent contractor or in a commission-based sales position, you probably don’t have a legally enforceable employment contract. If you are at all uncertain about whether you have an employment contract or an appointment letter, talk to an employment lawyer. Ideally, you should have this conversation before signing any legal documents with an organization.

LEGALLY CORRECT EMPLOYMENT CONTRACT AND WHY YOUR COMPANY NEEDS IT

A written employment contract is a document that you and your employee sign setting forth the terms of your relationship. The contract can address many aspects of the employment relationship, such as: duration of the job; information about the employee’s responsibilities; what the employee will receive; grounds for termination; limitations on the employee’s ability to compete with your business during employment; protection of company’s trade secrets and client lists; your ownership of the employee’s work product (for example, if the employee invents gadgets for you), or a method for resolving any disputes that arise about the agreement. Following are some well known advantage of an employment contract:

Outlines employer – employee relationship:

Can be very useful if you want control over the employee’s ability to leave your business. For example, if finding or training a replacement will be very costly or time-consuming for your company, you might want a written contract. It can lock the employee into a specific term (for example, two years) or require the employee to give you enough notice to find and train a suitable replacement (for example, 90 days’ notice). While you can’t force someone to keep working for you, an employee is likely to comply with the agreement’s terms if there’s a penalty for not doing so

Protects employer’s trade secrets:

Employment contracts might also make sense if the employee will be learning confidential and sensitive information about your business. You can insert confidentiality clauses that prevent the employee from disclosing the information or using it for personal gain. Similarly, a contract can protect you by preventing an employee from competing against you after leaving your company.

Double employment:

Many time employees tend to work while they are in their present job leading to a double employment situation. This is especially prevalent in IT companies where everything is online and not much physical contact is required. This also leads to poaching company’s clients. An employment agreement with adequate preventive clauses can restrict an employee from such behaviour.

Non-solicitation:

A well defined non-solicitation clause in an employment agreement  prevents an  employee agrees to solicit company’s clients or customers, for his or her own benefit or for the benefit of a competitor, after leaving the company.

Non-compete clause

A non-compete clause in an employment agreement prevents an employee from entering into or starting a similar profession or trade in competition against the employer.

The above are some of the important clauses that are included in an employment agreement and how a legally correct employment agreement can go a long way benefiting a company. For more about employment contracts please feel free to send us an email and we will be happy to answer your queries.

Things start-up founders need to know about HR

Ask any start-up founder to rank their greatest challenges and inevitably human resources makes the list. For new ventures, a little preparation can mean the difference between creating a culture of success, or becoming completely bogged down by people problems at a time when you can least afford to make mistakes. Unfortunately, simply recognizing HR challenges isn’t enough. Prioritizing is vital: there are too many to tackle on your own. Doing a good job at any one challenge costs you precious time and resources. Doing a good job at every challenge means sacrificing other core business operations with potentially catastrophic consequences. Time is your greatest asset and you should value it that way. Think carefully about how to spend it. Before you attack a problem, ask yourself: Would I pay someone Rs 1,50,000 per month to solve this for me?

For common HR challenges like recruiting, development and project management, the answer should be a resounding “No.”  These are tactical issues that can be easily solved at a lower cost.

There are, however, three strategic HR issues that require your attention. If you fail to solve them, your business will fail. These challenges deserve the big bucks.

Personality Matters

Creating the right ‘mix’ of employees within your organization from Day 1 is key. Your staff needs to reflect the diversity of your customer base, rather than simply mirroring the personality type of the business founders. To build a successful business, begin by understanding the personalities and personas of your customers. Marketing, customer support, sales and product management plans should be designed with total focus on your diverse customer base. Companies that lack diversity – both in the traditional sense, and in a diversity of personalities – will find it very difficult to accomplish this task. Corporate culture needs to value respectful debate, conflicting voices and differing perspectives. Groupthink, a form of decision-making that involves little discussion or disagreement, can destroy you. Founders need to self-examine; to learn about their own preferences and peculiarities; and to balance them by hiring a diversity of perspectives.

Be Transparent

Most start-up founders we have encountered wonder how much information they should share with staff. They want employees to be informed about the business and have all of the information they need to work effectively, but are reluctant to share confidential information or to burden employees with excessive communication. Employees want clarity from their leaders, but sharing for the sake of sharing is not productive. Be sure you are sharing information with intent – being transparent with irrelevant information leads to ambiguity and uncertainty. Timing is equally important; be deliberate in the time you choose to share information. Information shared too early may cause employees to shift priorities too soon, and information shared too late may undermine employee confidence. When employees have enough of the right information from the right source, the time and support they need to put the information into context, and the freedom to express their reactions and ask questions of their managers, only then are you properly leveraging transparency. Effective managers put careful thought and consideration into determining the right level of sharing for their environment. And they follow up with a conscious, disciplined effort to sustain it as the company grows and changes.

In the small, close-knit environment of a start-up, internal disruption can be disastrous. Startup founders can’t afford to dwell on tactical HR issues. But they can’t afford to ignore strategic HR problems either. The time to build a culture of success is now.

EPFO to invest your provident contribution in stocks. But will that benefit you ?

Union Labour Minister Bandaru Dattatreya has said the Employees Provident Fund Organisation (EPFO) may invest more than Rs 6,000 crore in equity market during the current financial year. Last year, EPFO had invested about Rs 6,000 crore through SBI Mutual Fund’s two index-linked ETFs (exchange-traded funds)- one to BSE’s Sensex and the other NSE’s Nifty. It (investments into ETFs) may increase over last year because it will yield benefits in the long run even if there is no benefit in the short term. There was discussion with bankers and investment managers and officials from BSE and NSE regarding contours of the investment. The Finance Ministry had last year notified a new investment pattern for EPFO, allowing the body to invest a minimum of 5 per cent and up to 15 per cent of its funds in equity or equity-related schemes. However, the EPFO management decided to invest 5 per cent of its incremental deposits in ETFs only during the last year, the minister added. Our ministry has prepared a report on the investment performance. According to Mr Dattatreya, the pension body has so far invested Rs 5,800 crore in shares of state-owned oil company shares.

Changes in Gujarat Labour Laws that you need to know.

A bill aimed at reforming labour laws in Gujarat has received Presidential approval. The Labour Laws (Gujarat Amendment) Bill, 2015 aims to amend certain provisions in labour laws applicable in Gujarat, including the Industrial Disputes Act 1947, Minimum Wages Act 1948, Factories Act, Contract Labour Act and Employees’ Compensation Act, among others. However, there are a few provisions in the Law that makes it controversial. Let’s have a look at 5 most important changes:

  1. A provision in the law seeks to mediate for litigations. Thus, a provision has been introduced where labourers can arrive at compromise with the employer without approaching court. This can be done by paying a certain payment/penalty to the government.
  2. Another provision in the law allows the management to change the nature of employee’s job without serving prior information or notice.
  3. The new act seeks to give powers to the government to prohibit strikes in public utility services in the first instance for one year. This can subsequently be increased by upto two years any number of times.
  4. A provision in the law has amended the definition of “contractor” to include “outsourcing agencies”, which in some cases, is the government itself. This will attest more power to the government.
  5. The new law has eased “hire and fire” by proposing to lift restriction on sacking of workers and payment of compensation in special investment regions, National Investment and Manufacturing Zone and some other economic zones.

If you’re doing business in Gujarat you must refer to the Labour Laws (Gujarat Amendment) Bill, 2015 for details. You could also ask experts at HR Drop for more details.

All you need to know about a non-compete agreement and how it will benefit your organization.

An non-compete agreement under which an employee agrees that he will serve a particular employer for certain duration, and that he will not serve anybody else during that period, is a valid agreement. During the period of employment, the employer has an exclusive right to avail the services of his employee, and therefore a restraint on the employee to serve somebody else at the same is reasonable. Such an agreement is not hit by doctrine of restraint of trade.  However, an agreement to restrain an employee from competing with his employer after termination of employment is not allowed in the eyes of law.

Agreement Restraining Legal Proceedings, Void

Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings, is void.  In other words, if an agreement restricts a party from enforcing his contractual rights by bringing usual legal proceedings, the same is void.

 Agreement in Restraint of Trade

 According to section 27 of the Contract Act, 1872 (the “Contract Act”), “Every agreement by which anyone is restrained from exercising a lawful profession, trade or business, is to that extent void.” An agreement which unnecessarily curtails the freedom of a person to trade is against public policy. Restraining a person from carrying on a trade generally aims at avoiding competition and has monopolistic tendency and this is both against individual’s interest as well as the interest of the society and on that ground such restraint is discouraged by law.  The aforesaid section which declares an agreement in restraint of trade as void, does not allow any distinction between a total restraint or a partial restraint. Thus, whether an agreement imposes a total restraint example it stipulates that A shall not carry on business anywhere in the country during his lifetime, or it imposes only a partial restraint, requiring A not to do business within a certain area, or for a certain duration, the agreement is void.

Exceptions to an Agreement in Restraint of Trade

Sale of Goodwill

When there is sale of business by a person along with its goodwill, the seller of the business may make an arrangement with the buyer not to carry out business in competition with the buyer. Such an arrangement, if imposes a reasonable restriction on the seller’s right to carry on the business, is valid. When a person purchases goodwill of the business, he pays for the right to carry on a certain type of business, in exchange for an express or an implied promise by the seller not to carry on that type of business. If the object of the agreement is to protect the rights of the buyer of the goodwill, the restraint is valid. If however, the agreement in essence is a covenant against competition rather than that of sale of goodwill, it would be void. The only exception to the above rule, lies in the Indian Partnership Act, 1932 (the “Partnership Act”) under the following four situations:

  1. The Partnership Act, permits the partners of a partnership firm to make a contract which provides that a partner shall not carry on any business other than that of the partnership firm while he is a partner.
  2. Another exemption states that a partner may make an agreement with his partners that on ceasing to be a partner he will not carry on any business similar to that of the firm within a specified period or within specified local limits; such agreement shall be valid if the restrictions imposed are reasonable. Generally an outgoing partner is paid his share of the goodwill of the firm, and it is reasonable that he agrees that he will not carry on a business similar to that of the firm.
  3. The Partnership act contains another exception to the rule and permits such an agreement to be made upon or in anticipation of the dissolution of the firm. Partners may, upon or in anticipation of the dissolution of the firm, make an agreement that some or all of them will not carry on a business similar to that of the firm within a specified period or within specified local limits. Such agreement shall be valid if the restrictions imposed are reasonable.

HR pactices in India 10-15 years behind the curve: Pai

Human Resources practices in India are 10-15 years behind the curve and it is imperative to remodel them to suit the changing needs, aspirations and behaviour patterns of the skilled workforce, Member of the Infosys Board T V Mohandas Pai said. Addressing CII Karnataka Annual H R Conference 2016, H R for Emergent India, said, “India is producing talent and intellectual capital that is world class. HR practices need to reflect the reality.” He, however, added, “Human Resources in India is 10-15 years behind curve.” “There is lack of research and case studies on career development framework. There is no career architecture,” he said. Besides there is also lack of structured process to handle business in a way that is not people dependant. There is a lack of experienced and expert HR manpower, he added. Those who exist are largely those who have been pushed up and sometimes are in positions far beyond their capabilities. “Many of them come in with problems rather than solutions,” he said, adding that the management is more keen on HR coming up with options for solutions rather than problems. HR in the next five years would see a globalised demand and a skilled work force. Those who were not happy with a company would shift jobs as there would be demand for skills. Companies need to “create and monetise on this intellectual competence”, he said. The next five years would also see the millennial or the young work force on march. They would comprise a skilled force that would communicate differently, work differently and has different aspirations and HR would have to understand this. “Expectations from HR is high,” he said. “Managing a global work force, bridging cultural gaps and creating common goals” would be the challenges that HR would have to deal with. “Communication is going to be the key,” he said. HR would also need to “speak the language of business, manage costs of talent and drive efficiency”. “HR leaders of future would need to be strategic partners to business, understand business,” he said. They would be called to be “change agents”. Pai said it is imperative that HRs become “employee champions” by understanding employee’s need and enabling them to grow at their space and enable career development.

Employmnt Bond – Need and Enforceability

The increasing rate of attrition subjects the employers not only to financial losses but also delays in completing the on-going projects.  In order to safeguard their interests, the employers have of late started to obtain an employment bond from their employees. The question that arises is, whether such a method to retain employees is enforceable under the law. The simple answer is yes. Such employment agreements with negative a covenant is valid and legally enforceable. In order to execute a valid employment bond, the parties have to ensure that the following requisites have been complied: a) it is signed with free consent of the employee; b) the conditions stipulated must be reasonable; and c) the conditions imposed on the employee must be proved to be necessary to safeguard the interests of the employer.

Courts in India have held in its various judgments that in the event of breach of bond by the employee, employer shall be entitled to recover damages if a considerable amount of money was spent on providing training or incurring other expenses of the employee. An employment bond however will not be enforceable if it is either one sided in favor of the employer. Therefore it is pertinent to be cautious while drafting an employment bond. In general, conditions stipulated in the bond should justify that it is necessary to safeguard the interest of the employer and to compensate the loss in the event of its breach. Further, the penalty or compulsory employment period stipulated in the contract should not be exorbitant to be considered as valid. Further, the employment bond stipulating conditions such as to serve the employer compulsorily for a specific time period or penalty for incurring the expenses is in the nature of the indemnity bond must to be executed on a stamp paper of appropriate value in order to be valid and enforceable.[1]

Remedies Available to Employer and Employee

In the event of breach of employment bond, the employer might incur a loss and, therefore, may be entitled for compensation. However, the compensation stipulated should be reasonable to compensate the loss incurred and should not exceed the penalty, if any, stipulated in the bond.5 Usually, the court determines the reasonable compensation amount by computing the actual loss incurred by the employer having regard to all circumstances of the case. Even if the bond stipulates payment of any penalty amount in the event of breach, it does not mean that the employer shall be entitled to receive the stipulated amount in full as compensation on the occurrence of such default; rather the employer shall be entitled only for reasonable compensation as determined by the court. Courts normally consider the actual expense incurred by the employer, the period of service by employee, conditions stipulated in the bond to determine the loss incurred by the employer to arrive at the reasonable compensation amount. For instance, in the case of Sicpa India Limited v Shri Manas Pratim Deb[2], the plaintiff had incurred expenses of Rs 67,595 (sixty seven thousand five hundred ninety five) towards imparting training to the defendant for which an employment bond was executed under which the defendant had agreed to serve the plaintiff company for a period of three years or to make a payment of Rs 2,00,000 (two lakh). The employee left the employment within a period of two years. To enforce the agreement the employer went to the court, which awarded a sum of Rs 22,532 (twenty two thousand five hundred thirty two) as compensation for breach of contract by the employee. It is crucial to note that though the bond stipulates a payment of Rs 2,00,000 (two lakh) as compensation for breach of contract, the court had considered the total expenses incurred by the employer and the employee’s period of service while deciding the compensation amount. Since the defendant had already completed two years of service out of the agreed three year period, the court divided the total expenses of Rs 67,595 (sixty seven thousand five hundred ninety five) incurred by the plaintiff into three equal parts for three years period and awarded a sum of Rs 22,532 (twenty two thousand five hundred thirty two) as reasonable compensation for leaving the employment a year before the agreed time period.

The compensation amount awarded shall be based upon the actual loss incurred by the employer by such breach.

[1] IBS Software Services Group vs. Leo Thomas, 2009 (4)KLT 797

[2] MANU/DE/6554/2011