What is an Employment Bond | Employment Bond Format

Employment Bond is an employment agreements with the negative covenant. It is an agreement between the employee and the employer, which confirms that the employee shall work for an agreed period of time upon the joining of the business. Wherein, the employee pledges to pay a certain amount to the employer if he or she decides to leave the organization before that agreed period of time.

There have been cases when the employee leaves the company after honoring the skills and improving the knowledge of the business for better salary and incentives. In such type of cases, the employer not just faces financial losses but also gets delayed in completing the ongoing projects. Such situations affect the goodwill and reputation of the company in the market.

To prevent such safeguard and circumstances their interests, the company signs a bond with the employee, and if he or she leaves, then they are liable to pay that agreed amount to recover the damages and costs caused by the company in recruiting and training them. In some particular cases where the employee is not able to pay the amount, the company has a Guarantor that guarantees that they would take responsibility to make sure that the employee adheres to all the rules and terms of the bond.

Employment Bond

Enforceability of employment bond

  • An employment bond is a contract and is subjected to the provisions of the Indian Contract Act 1872. It will be invalid if it has been made by subjecting the other party to the fraud, duress, falsification, or undue influence. Moreover, the contract holds legal value and validity only if the agreement that is entered into is done with the free will and is without any of the invalidating criteria.
  • The Section 74 of the Contract Act provides that in the events of the infringement of a contract in which there was a proviso that a sum or penalty is to be paid in case of such breach, then the party complaining of the infringement is entitled to receive from the defaulting party such sum or penalty.
  • The infringement in case of the employment bonds will be called as the ‘termination of the contract’ by the employee if it is breached before the agreed time period. The party complaining of this infringement would be the employer, while the defaulting party would be the employee, which would have to pay the predetermined compensation settled in the contract.
  • The court has also witnessed that sometimes due to the presence of an explicit employment bond clause in the contract, the complainant that is the employer did not have to prove that he has suffered any damages or losses due to the untimely termination of the contract by the defaulter that is the employee. Thus, the employee was ordered to pay the compensation as agreed upon in the employment contract; this implicates the employment bonds as prima facie enforceable under law, provided the other prerequisites of a valid contract are adhered to.

Employment Bond

Employment Bond Format

THIS AGREEMENT is made on the (date)___________________ between (Name of the Organization) _________________, a company registered under the Companies Act, 1956 and having its registered office at. No. (Address) ____________________ (hereinafter called the “company”) of the one part and (Name of the appointee)_________________ residing at (Address of the employee) ____________________ (Hereinafter called the “Employee”) of the other part.


The company is desirous of appointing (Appointee Name)_________________ as its (Profile) ______________ and the Employee has  agreed to on the terms and conditions outlined here below.


  1. The said (Appointee Name) ________________________is hereby appointed as the (Profile) ____________________ of the company and he will hold the said office, subject to the provisions made hereinafter, for the term of (Duration with the organization) ______________________ from the date of this agreement. As a guarantee you are agreed to keep your all-original education certificates / Adhard Card / Mark sheets with the custody of (Organization) ________________________________.
  2. Your monthly salary package will according to the Annexure I. Based on the periodic reviews your compensation package may differ as per the compensation Policy applicable to other employees of your category in respective department.
  3. The Employee shall perform such duties and exercises such powers as may from time to time be assigned to or vested in him by the Board of Directors of the company.
  4. The Employee shall, unless prevented by any of the unusual health or any unavoidable cause, during the continuance of the term of his office devote his whole time, attention and abilities to the business of the company.
  5. The Employee shall obey the orders from time to time of the Board of Directors of the company and in all respect conform to and comply with the directions given and regulation made by the Board. He shall well and faithfully serve the company to the best of his abilities and shall make his utmost endeavors to promote interests of the company.
  6. The said Employee shall not resign his office of (Designation) till the end of this contract period with the organization.
  7. The company may terminate this agreement at any time before the expiry of the stipulated term by giving one month´s notice in writing to him. The company can terminate your contract any time if you-
  • Commit any material or persistent breach of any of the data or information.
  • Be guilty of any default, misconduct or neglect in the discharge of your duties affecting the business of the company.


(Appointee´s Name)

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