Are employee bonds a good way to retain talent? You be the judge

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March 9, 2023
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5 min read
Employee bond

In 2019 and 2021, Techpoint Africa recruited journalists through the second and third cohorts of its Writers Bootcamp. At the end of a rigorous selection process, five people were selected for a six-month paid internship programme and tutored by editors and senior reporters as they began their journey to becoming tech journalists.

Those who were retained eventually became full staff, despite having no prior journalistic experience — a requirement for being selected for the bootcamp. This proved the company was ready to invest in experience and competence development.

Companies that invest in capacity development via training to grow employee expertise and improve on-the-job performances are not wrong to expect some return on their investments. Consequently, they introduce an employee bond which, when signed, stops employees from leaving the company before a stipulated time post-training/certification. Any employee who decides to leave before the expiration of the bond would have to meet certain conditions, most of which are monetary.  

Damilola Mumuni, Employment Lawyer and Team Lead, The Dream Practice, explains an employee bond as a "contractual agreement that speaks to committing an employee to the service of a company or organisation, for a specific period of time in return for certain benefits, allowance, travel opportunities, sponsorship, etc. And in return, such an employee would serve the company for a number of years, where such a person would be expected to expend their energy and time in favour of the company."

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Unlike Techpoint Africa, which had a capacity development plan from the get-go, some companies expect new hires to agree to a two to five-year — more in some cases — bond when signing their contracts without a clearly defined professional development plan.

A concerned worker at a financial institution said employee bonds are now used as employee retention measures, particularly following Nigeria's recent massive labour migration. And sometimes, this is forced on employees already equipped with the required expertise to do their jobs.

Confirming this, Mumuni says bonds are sometimes used to keep talent in competitive roles with the promise of a "free hand to rise" and possible exposure.

"Companies consider it because they want to keep their talents far longer than usual. And they don't want them leaving the company, especially at times that might be critical for them, or when it might not be convenient for them to manage the issue."

Are employee bonds necessary? 

Employee bonds are not new. A retired officer from a state civil service confirmed that it was reasonable to have them in the 1970s when they were mainly recruited as undergraduates and afforded benefits like official cars and accommodation.

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Mumuni, however, notes that the trend lost steam with most skills becoming less specialised and talent already possessing requisite experience before joining the companies.

With job-hopping common in the tech space, Mumuni argues that startups should adopt employee bonds because of their volatile nature but they should be reasonable with their offers. Still, labour migration is a natural phenomenon in the talent market.

While keeping an employee for an extended period might limit the exchange of expertise, Mumuni believes this contractual agreement has a promising outlook for the labour market.

"The job market will be stabilised. There'll be job security, to some extent. What this means is that we will have a standard. Employees will be compensated based on what the company can afford, and they can negotiate preferable models that work for them."

Are employee bonds legal? 

Generally, restrictive clauses/covenants are often considered binding on all grounds unless the terms are deemed unreasonable, exploitative, and discriminatory. Conversely, keeping an employee at a workplace without their consent can be synonymous with forced labour, which is unacceptable under Nigerian law (Section 34 (1) (c)).

As discussed in a previous piece about non-compete clauses, employers take certain precautions to protect the business' interests while getting the best talent available. Ordinarily, employee or training bonds should only be introduced when an employer is certain to invest in their employees' growth.

If an employee chooses to leave before the agreed-upon period, they are to refund the total bond value, typically estimated to be the amount spent on training(s).

Introducing employee bonds can encourage employers to invest in their employees without fear of losing their investments. But the clause might violate labour laws if employers fail to meet their training obligations.

Given the goal of training bonds, the legal issues that arise are around the reasonability of the duration and value of the bond, if the company executed the bond's terms, and whether the agreement was reached before or after the training.

While employees might not know how the company would react if they leave, they are scared to move because of the contract they signed. In some cases, the employee may engage in silent quitting or some misbehaviour to expedite the termination of their employment. 

What can employers do in the case of violation?  

According to Mumuni, agreements reached by consenting adults, where none of the parties is under duress, are considered valid. However, if there's any unreasonable clause, the court will review the severity of the offence.

Based on past cases, Nigerian courts seem to hold that restrictive covenants are largely acceptable and enforceable with only a few exemptions where some features invalidate the bond.

Despite the legality, companies are unlikely to take legal action in cases of bond violation.

The case of Overland Airways Limited v. Captain Raymond Jam, for instance, stretched for about three before a judgment was given.

Aside from how time-consuming the judicial process can be, companies would likely forgo such violations for the sake of their brand image, especially with subsequent hires.

So, what can an employee do if they must leave after signing a bond, considering all the features of the bond are reasonable and there's the possibility of a court case?

  • Negotiate a settlement of the bond with the previous employer. If the bond value is ₦3 million for three years, and the employee has exceeded two years, they can negotiate to pay ₦1 million for the unused year.
  • Depending on how valuable the talent is, the new employer can provide a signing bonus for the employee. This incentive serves as a reimbursement to cover the cost of the employee bond in the previous job.

Ultimately, Mumuni advises employees to engage a lawyer to examine the terms of a contract before signing.


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Human enthusiast | Writer | Senior reporter | Podcaster. Find me on Twitter @Nifemeah.
Human enthusiast | Writer | Senior reporter | Podcaster. Find me on Twitter @Nifemeah.
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Human enthusiast | Writer | Senior reporter | Podcaster. Find me on Twitter @Nifemeah.

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