What is IR?

The term labor relations, also known as industrial relations, refer to the mechanism in which
employers, employees and their members and, directly or indirectly, the government
collaborate to set the ground rules for the regulation of work relationships. It also defines an
area of research devoted to investigating those relationships. "The phrases "labor relations"
and "industrial relations" are often used in view of various forms of engagement of workers;
under a specified or implied employment agreement, they can also encompass individual
employment relationships between an employer and a worker, although these are usually
referred to as "employment relationships.

About the case study-

This case study is based on Voluntary Retirement Scheme (VRS) story of State Bank of
India( SBI).The VRS got approved by SBI on Dec 2000. The bank has become saddled with
a large workforce and gigantic NPAs over the years. According to reports, staff costs
amounted to Rs 4.5 billion in 1999-2000, compared to Rs 4.1 billion in 1998-99. Increased
competition from new private sector banks (NPBs) has added further to the challenges of the
SBI. To make up for their size, the NPBs have effectively leveraged technology. To cut the
cost of such expenditure SBI approved VRS.

For each year of service, the VRS package offered 60 days' salary or the salary to be earned
by the employee for the remaining period of service, whichever was less. While 50 percent of
the payment was to be paid immediately, cash or bonds could be paid for the rest. As per the
option exercised by the employee, an employee could use the pension or provident fund. The
package was offered to the permanent staff who had put in 15 years of service or were 40
years old as of March 31, 2000.

Issues Faced-

1. The bank was surprised to see its employees protesting. The unions claimed that the
move would lead to a scarcity of the bank's labor force and that the bank's decision
was taken in haste without proper planning of the workforce being carried out.
2. Employees were worried about the fact that in Rural and Semi Urban areas there was
already shortage of employees. As the system was not computerized. In addition, the
unions argued that the management was pressuring workers to vote for the VRS. The
 possibility of reducing the retirement age from 60 to 58 years was placing a lot of
pressure on senior bank officials to select the scheme, they said.
3. Even with the protest, SBI received 35000 applications (mainly officers) of the
employees who were in favor of VRS. SBI laid down different conditions such as- If
an employee wished to continue a housing loan after accepting VRS, he was asked to
pay interest at the market rate. After these restrictions were introduced, only 13.4% of
the officers were left eligible for VRS instead of the earlier 33%.

4. The requirements laid down by the management faced heavy criticism from the
officers who had opted for the VRS, but who did not meet the specified criteria. They
claimed that in introducing the program, the bank practiced discrimination and that no
other banks had introduced such policies and refused VRS opportunities to officers
who were able to use the scheme.

5. Unions claimed that if the bank were so particular that just 10% of its employees left
the VRS, it would have been able to close the scheme immediately after the number
of applications submitted had been issued. The unions also protested that, compared
to the response obtained by other public sector banks, such as Syndicate Bank, 35,000
applications (14 percent of the total workforce) could not be considered large.

Challenges faced due to the issue

After the Covid-19 outbreak, many employees with co-morbidities and other disorder
had indicated they would prefer to stay home and avoid venturing out. Some weren't
inclined to move from one city to another. Such employees have expressed desire for
such scheme. The another driver behind such an offer was the plan to reduce the
average age of the organisation. That would help in renewal when people move up
ladder faster and fresh talent is absorbed.

But there were many challenges which SBI faced due to the proposal of VRS scheme.

This VRS was introduced keeping the Officers’ Federation completely in the dark.
The scheme had far reaching ramifications on the industrial relations climate of the
bank and a lasting impact on the officers’ community.

 There was an unprecedented outcry against the VRS from its employees. The
unions alleged that the management was compelling employees to opt for the
VRS. It was not feasible as there was an acute shortage of officers (estimated
at about 10000) in the rural and semi-urban areas where the branches were not
yet computerized.

 The unions were questioning the logic behind diversifying the business and
cutting down the staff strength. They argued that this move would
significantly increase workforce burden and, consequently, adversely affect
customer service.

 The clerical staff was reluctant to go for the VRS due to the low employment
opportunities for them in the NPBs

 There were very complex conditions laid down by the management which
faced strong criticism from the officers who had opted for the VRS, but who
could not meet the prescribed criteria. They alleged that the bank was
practicing discrimination in implementation of the scheme and that no other
banks had implemented such policies and denied the opportunity of VRS to
officers who were willing to avail the scheme.

Solution

This scheme will provide an option and a respectable exit route to employees who
have reached a level of saturation in their career, may not be at the peak of their
performance, have some personal issue or want to pursue their professional or
personal life outside the bank. The scheme will be opened to all permanent officers
and staff who have put in 25 years of service or completed 55 years of age on the cut-
off date and it is basically providing a congenial solution to employees who expressed
desire for making strategic shift in their vocations, either due to professional growth
limitations, mobility issues, physical health conditions or family situations.
The bank had announced VRS with an objective to optimise human resources.
However, the proposed VRS scheme is not finding favour with bank unions. Such a
move at a time when the country is in the grip of COVID-19 pandemic reflects anti-
worker attitude of management, but there is a bright side to it as well

 The staff member whose request for retirement under VRS is accepted will be
paid an ex-gratia amounting 50% of salary for the residual period of service.

 Other benefits like gratuity, pension, provident and medical benefits will be
given to employees seeking VRS.

 A staff member retired under the scheme will be eligible for engagement or re-
employment in the bank after a cooling-off period of two years from the date
of retirement.

Conclusion

SBI would have to take serious steps to reorient its HRD policy to restore employee
confidence and retain its talented personnel. SBI had many strong organizational
strengths and an excellent training system, but due to weak HR policies, it had lost its
experts to it competitors.

The employees of almost all the new generation private sector banks were former
employees of SBI. The bank’s well-defined promotion policy was systematically
flouted by the framers themselves and, as a result, employees with good track records
were frequently sidelined. Many analysts felt that SBI was not able to realize the
critical importance of recognizing inherent merit and rewarding the performers.
The above factors were cited as the major reasons for the success of VRS in the
officer cadres, who were reported to be demoralized and de-motivated. The
arbitrariness and insensitivity at the corporate level had dealt a severe blow to the
employees of the organization.