The Necessity Of A Comprehensive Employment Contract In Light Of The High Attrition Rate Of Employees In The IT Industry
Articles / By Kurian K Jose
One of the major challenges faced by employers in the booming IT industry is the high attrition rate of employees. First and foremost, the most basic requirement for an employer, to avail any legal remedy in connection with employment is that there should be a valid and enforceable employment contract between the employer and the employee. The employment contract governs the relationship between the employer and the employee. Thus, the clauses of the employment contract should be drafted in such a way so as to legally restrict the employee from leaving his job effortlessly.
Nowadays IT employees leaving their job without serving their term of employment as per the employment contract have become a usual practice. This is a clear breach of their employment contracts. Usually, the aggrieved party in case of breach of contract resorts to two remedies legal remedies, i) specific performance of contract and ii) damages. Specific performance of contract means enforcing the contract as agreed by the parties by an order of the court. Damages mean compensation awarded by the court to the aggrieved party, in monetary terms, for the loss suffered by him, due to the breach of the contract. However, in case of breach of the employment contract, the remedy of specific performance of a contract is not ordinarily allowed by the court as per the decision of the Hon’ble Supreme Court in Nandganj Sihori Sugar vs. Badi Nath Dixit [1]. In other words, even if an employee leaves the job without serving his term as per the employment contract, he cannot be forced to work by the order of a court.
As per the above-said decision of the Supreme Court, the remedy available for an employer when an employee commits a breach of an employment contract is to sue him for damages, i.e. compensation for the loss suffered by the employer due to the employee’s breach of the employment contract. Hence, the clauses in the employment contract should be comprehensive so as to make the employee liable for all the damages that the employer would suffer in case the employee leaves the job before the term of employment. Clauses regarding the following aspects may be incorporated for the said purpose:
- Training bonds- Employers in the IT industry usually incur considerable expenditure in imparting training to fresh employees. However, there are instances when such employees leave their employment soon after their training for better salaries and incentives. In order to check these practices, a clause of training bond may be incorporated in the employment contract, which requires the employee to serve the employer compulsorily for a specific period else refund the amount specified as bond value.
- Notice period- This is a usual clause in employment contracts, whereby the employee is required to give a notice in writing to the employer before a certain period of leaving the job (known as notice period). In case the employee leaves the job without service such notice or before the notice period, he shall be liable to pay a certain amount as compensation to the employer.
- Exceptional compensation for deserting amidst a project – There are instances where employees leave the job in between an ongoing project. This exposes the employer not only to financial losses but also delays in completing the ongoing projects thereby directly impacting their goodwill & reputation in the market. In order to safeguard the interest of the employer from this practice, a clause stating that the employee shall be liable to pay exceptional compensation, in case he leaves the job in between an ongoing project, may be incorporated in the employment contract.
- Withholding experience certificate- Although there is a practice of employers withholding experience certificates of employees who leave before the term of employment, it is usually not incorporated into the employment contract. In order to obtain a legal sanctity, it is advisable to incorporate a clause in the employment contract stating that, the employer shall not issue experience certificate to employees who leaves the job without abiding by the employment contract.
The Madras High Court in Toshnial Brothers (Pvt.) Ltd. v. E. Eswarprasad & Ors [2] and the Telengana High Court in Satyam Computer Services Limited v. Ladella Ravichander[3] have awarded compensation to the employers for the losses suffered by them where their employees left their job before their term of employment. Thus a comprehensive employment contract could check the high attrition rate of employees in the IT industry and also would entitle the employer to receive compensation for the loss he would suffer in case the employee leaves the job before the term of employment.
[1] Nandganj Sihori Sugar vs. Badi Nath Dixit AIR 1991 SC 1525
[2] Toshnial Brothers (Pvt.) Ltd. v. E. Eswarprasad & Ors. 40. 1997 LLR 500
[3] Satyam Computer Services Limited v. Ladella Ravichander MANU/AP/0416/2011
