NFP Surety Bonds

What is an Employment Bond?

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What is an Employment Bond?

What are Employment Bonds?

What is an Employment Bond? As you might infer from the name, you can define employment bond as an agreement entered into by employer and employee for the purpose of ensuring that the employee upholds the standards and principles of the employer for an agreed period of time. A surety bond is entered into by three parties (employer, employee, and surety company), and is often used by companies to ensure that employees cause no damage to the company itself, or to customers whom the employee might come into direct contact with.

You could get an entirely different answer when asking ‘what is an employment bond?’, depending on who you ask. Some professionals might well define employment bond as a kind of protection against bad employee behavior. The language included in some bonds stipulates that dishonesty, theft, and other unacceptable behaviors, would all invoke some kind of penalty clause calling for monetary reimbursement to the employer. For this reason, bonds are often guaranteed by financial companies which provide ‘surety’, and agree to pay the amount stipulated in the penalty clause, should there be a breach of behavior.

It may sound like this employment bond definition is entirely slanted toward the employer, but the underlying benefit to the new hire candidate is employment with a desirable company, and that is of course, the reason why he/she would enter into the agreement in the first place.

NFP Surety is the leader in employment sureties, and are licensed in all 50 states.  Call us at(800) 863-3210 or visit our website to quickly get your employees bonded.  It only takes a few minutes.

Why Companies Bond Employees 

There are several reasons why companies would bond employees, some of which have been briefly mentioned above:

  • Compensation for losses – by including a bonding company in the agreement, a company can recover losses which might be incurred due to employee theft, property damage, or other kinds of harm inflicted upon the company by employee misbehavior.
  • Employee retention – in some industries, there is a known high turnover rate among company employees, especially those which call for highly specialized skills. Since a company often makes a considerable investment in the training and on-boarding of skilled personnel, it’s only natural they would want to protect that investment to whatever degree is possible. There is also considerable cost involved in the general search and hiring process, involving background checks, drug testing, interviewing, etc. For companies in this situation, employment bond definition would mean securing skilled personnel for a known period of time, so as to avoid the prohibitive costs of constant hiring.
  • Behavior guarantee – some companies which are in a position of needing to maintain a pristine reputation in the business world, must have some level of confidence that new employees will uphold that reputation, and not degrade it in any way. In such cases, language can be incorporated into the agreement that requires meticulous professional behavior, any deviation from which would trigger a penalty clause.

what is an employment bond

How to Bond Employees 

Running a background check on an employee is always a good first step in determining their character and suitability for employment, but it cannot guarantee good behavior. To have any kind of confidence about future behavior, bonding an employee can be one of the most useful steps to take. One way to go about bonding is to follow a procedure including these precautions:

  • Assess employee roles – determine which employees in your organization have access to funds or opportunity to commit fraud, which will help you to decide which kind of bond is necessary for your company.
  • Determine degree of vulnerability – when you’ve figured out how much cash could potentially be waylaid by a well-placed employee, you’ll have an idea of the dollar value your surety should carry.
  • Obtain a quote – contact NFP Surety and discuss the options available to you. Find out which kind of bond would work best for your circumstances, how much it would cost, and exactly what kinds of scenarios might be covered by it.
  • Individual or blanket – your discussion should include whether a blanket bond should be purchased to cover all employees, or whether a specific named individual should be focused on, as being the most likely to have critical access to company assets.
  • Call attention to the bonding – if yours is a business which is tightly associated with honest and integrity, you would want potential clients to know that employees are bonded as a protection against unauthorized behaviors or unintended damage.  Call NFP Surety today, and get a straight forward employment bond definition from the experts.

Types of Employment Bonds

Any employment bond definition must take into account that there are several different types of employment bonds, each with their own features and each with a specific usage or purpose.

  • Individual bonds – these sureties cover a single named person who is in a critical position at the company, and could potentially cause serious harm through criminal activity. The named person would have to be a signatory to the agreement in this case.
  • Blanket bonds – blanket surety bonds cover all employees at a company, as a guarantee against misbehavior.
  • Fidelity bonds – this kind of sureties is generally used to protect against employee theft, ensuring fidelity between employer and employee. Any kind of ‘infidelity’ would require repayment to the employer.
  • Surety bonds – a surety bond is something that a company would provide to a potential customer, as an assurance of goods or service delivery.

Examples of Bonded Employees 

A good example of one kind of individual bond is when a company ensures against misappropriation of funds for a Chief Accountant, who would have the opportunity to manipulate books, steal funds, and cause considerable mischief for a company. Another kind of E-bond might be an agreement between a company and a new hire being brought into its I.T. department.

Since the hiring process for such skilled personnel is long and costly, the company might want to guarantee that the new hire will stay on board for at least two years, to avoid having to repeat the process anytime soon. Some companies bond their skilled employees who have direct contact with customers, e.g. electricians, plumbers, etc. so that clients can be sure that any damage caused inadvertently by workers will be covered by insurance.


Bonding companies are similar to insurance companies, in that they provide some level of compensation for unexpected events. When you define employment bond, those specific unexpected events are comprised of inappropriate or criminal employee behavior. Just like with other kinds of insurance, the parties to an employment bond thus have some level of confidence that damage or harm will not be financially devastating, and that a company’s full recovery can ultimately be anticipated.  NFP Surety is the leader in surety bonds.  Call us to get an employment bond definition today, and let us shop your bond for you!

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