**How to Compute a Training Bond for Employees

A Philippine Legal Primer (2025)**

1. What a “training bond” is

A training bond (also called a “retention or scholarship agreement”) is a written undertaking by which an employee:

receives employer-funded training, and
promises to stay with the company for a specified bond period or refund the prorated cost of the training if he or she leaves early.

The arrangement is not a separate employment contract; it is a civil agreement accessory to employment. Its validity therefore turns on ordinary contract rules (Civil Code arts. 1305–1319, 1159) as tempered by constitutional protections (Art. III, §3 & §18 on liberty to work), the Labor Code, and public-policy jurisprudence on restraints of trade.

2. Statutory and regulatory backdrop

There is no single “Training Bond Act.” Instead, four clusters of rules govern:

Cluster	Key provisions	Relevance to bonds
Labor Code	Art. 113–118 (prohibited wage deductions); Art. 97-f (definition of “wage”); Art. 300 (defenses in money claims)	Bonds may not be collected by unilateral paycheck deduction unless the employee signs the bond and the deduction complies with DOLE rules (≤ 50 % of disposable pay per cut-off).
DOLE issuances	Labor Advisories on final pay (2019-13, 2024-02) and DO 174-17 on contracting	Confirm that legitimate advances and training costs may be offset against separation pay/final pay, subject to proof and reasonableness.
BIR rulings	RMC 50-18; BIR Ruling 217-14	Reimbursements collected under a bond are not income to the company; they are merely a return of capital outlay.
POEA rules (for seafarers/OFWs)	Sec. 10, Standard Employment Contract	Allows bonding for specialized courses (e.g., LNG tanker type-rating) if approved by POEA and capped at actual cost.

3. Supreme Court guidance

While the Court has never struck down the concept of training bonds, it insists on reasonableness:

Alcantara v. PhilWeb (G.R. No. 180980, 6 Jan 2009) Two-year, ₱250 k bond on six-week Singapore training upheld.

“The restraint is incidental to a legitimate business interest and is strictly proportionate to the investment.”
Ace Navigation v. Fernandez (G.R. No. 162308, 3 Dec 2009) Bond voided where the employer charged “lost revenue” and imposed eight years of lock-in.
Abbott Laboratories v. Alcaraz (G.R. No. 192571, 23 Jul 2013) Clarified that the employee’s consent need not be notarized but must be informed, voluntary, and prior to training.
Mitsubishi Motors PH v. Garcia (G.R. No. 195597, 15 Aug 2012) Affirmed that prorating is the correct method: only the unserved portion may be recovered.

Rule distilled: a bond is valid iff it is voluntary, time-bound, cost-based, and non-oppressive.

4. Elements you may lawfully charge

Direct training fees – tuition, registration, exam charges
Travel & per-diem – airfare, visas, hotel, meals
Training-specific materials – manuals, licenses, simulator time
Statutory training‐period wages – only if the employee was paid while exclusively in training and rendered no productive work

You may NOT include: lost profits, recruiting expenses, in-house trainer salaries (unless the trainee paid an external rate), or penalties/liquidated damages beyond the actual, documented cost. Charging these risks the bond being declared in terrorem and void.

5. Computing the bond amount

5.1 Determine the Base Cost (BC)

Sum all admissible costs net of VAT input credits or government subsidies. Example (international certification program):

Item	Peso cost (VAT-net)
Tuition & lab fees	₱120 000
Round-trip airfare	₱35 000
Lodging (45 days × ₱2 500)	₱112 500
Allowance (45 days × ₱800)	₱36 000
Exam & license fee	₱20 000
Base Cost (BC)	₱323 500

5.2 Fix a Bond Period (BP)

Philippine jurisprudence treats 12–36 months as presumptively reasonable. Anything longer must be justified in writing.

Suppose: BP = 24 months.

5.3 Set the Proration Formula

If the employee leaves after n fully served months:

Refund Due (R) = BC × (BP − n) ⁄ BP

Interest may be charged only if:

(a) expressly stipulated, and
(b) not > the prevailing legal rate (currently 6 % p.a. on money claims).

5.4 Illustrative computations

Month of resignation	Formula	Refund Due
6th month	₱323 500 × (24−6)⁄24	₱242 625
18th month	₱323 500 × (24−18)⁄24	₱80 875
24th month or later	–	₱0

The employer may offset the refund against final pay or 13th-month pay subject to the 50 % net-pay ceiling per payroll while the bond is being liquidated (Labor Advisory 2019-13).

6. Drafting tips for a defensible bond agreement

Structure as a separate addendum to the employment contract.
Itemize costs or attach a cost schedule.
Insert a proration table (see §5.4) so the employee knows the declining obligation.
Carve-out exceptions – no refund if the employee:
- is illegally dismissed;
- resigns for just causes (Art. 300); or
- leaves because the employer commits unfair labor practices.
Provide a cure period (e.g., 30 days) for the employee to settle after resignation before legal action.
Agree on venue & arbitration to curb litigation costs.
Observe data-privacy – keep passport, training records, and refund computations confidential.

7. Enforcement and collection

Wage deduction route – allowed only with written authorization and DOLE reporting if the deduction will extend beyond the final pay.
Civil suit for sum of money – filed in regular courts within 10-years (Art. 1144 Civil Code). Note that labor arbiters lack jurisdiction because the bond is a civil, not a labor, obligation (Abbott Labs case).
Small claims – if the amount ≤ ₱400 000, the employer may elect Rule SC 2020 small-claims procedure.

Remember: the bond is void if the employer withholds final Certificate of Employment or original school credentials to compel payment; that is constructive restraint of work.

8. Tax and accounting treatment

Scenario	Company tax	Employee tax
Company pays for training	Deductible ordinary expense (NIRC §34[A]).	None – fringe-benefit exclusion if training is job-related (RMC 50-18).
Employee repays bond	Merely a reimbursement; no VAT or income; record as Other income – cost recovery.	Not deductible by the employee (personal expense).
Employer forgives bond	Treated as additional compensation; subject to WTC and fringe-benefit tax (if managerial).	Employee pays income tax on the forgiven amount.

9. Special situations

Mandatory compliance training (e.g., DOLE-required safety, Anti-Sexual Harassment orientation) cannot be bonded; it is a statutory employer burden.
Scholarship grants under RA 10647 (UniFAST) and TESDA enterprise agreements are governed by government rules, not private bond formulas.
OFW upgrading courses: the POEA usually caps bond periods at 12 months and requires the stipulation to appear in the SEC.

10. Checklist: “Am I computing the bond correctly?”

□ Do I have official receipts for every cost?
□ Did I exclude “soft” items like opportunity loss?
□ Is my bond period within 12–36 months and proportionate to cost?
□ Is the proration clear and arithmetically sound?
□ Have I factored in DOLE’s 50 % deduction ceiling?
□ Have I listed events that waive repayment?
□ Have I ensured data privacy and proper venue clauses?

If you can tick all seven boxes, your computation – and the bond itself – is likely to hold up before auditors, DOLE inspectors, or a court.

Key take-aways

Training bonds are valid in the Philippines only if they are a fair pay-back for concrete, documented costs.
Compute first, bond second – never fix an arbitrary amount and “reverse-compute”.
Prorate, don’t penalize – collect only the unserved share.
Respect wage-deduction limits and due-process notices.
When in doubt, seek DOLE mediation – it is cheaper than litigating a defective bond.

Disclaimer – This primer is for informational purposes as of 27 June 2025 and is not formal legal advice. For case-specific guidance, consult competent Philippine counsel or the DOLE regional office.