VOLUNTARY RETIREMENT SCHEME.
WHAT IS VRS?
The Voluntary Retirement Scheme (VRS) is the latest mantra of many a corporate and Public sector units. VRS is a scheme whereby the employee is offered to voluntarily retire from his services before his retirement date. Subject to certain conditions the company offers VRS to its employees It is the golden route to cut the excess flab.
Ashish Jain, firstname.lastname@example.org
The scheme which is formally permitted by the Department of Public Enterprises and which provides the lucrative way for the employees to terminate their services and accept VRS.
Ashish Jain.THE GOLDEN HANDSHAKE
The most humane technique to retrench the employees in the company today is the voluntary retirement scheme. email@example.com
. It is the golden handshake for the employees and the only option today for the companies to downsize their headcount.
Ashish Jain. units and age groups among whom one wants to offer VRS.THE GOLDEN HANDSHAKE
As the name suggests the VRS is strictly voluntary i. The company can always accept or reject the application for the VRS. But usually this is not done in practical circumstances as it sends wrong signals to the employees. One can however choose the levels. ashishsjc@gmail. one can neither compel the workers to accept it nor apply it selectively to certain individuals. It might imply that the VRS is not actually voluntary but a selective procedure of downsizing.e.com
Very recently. and Siemens have also been able to successfully reduce their workforce through the introduction of VRS. ashishsjc@gmail. Sometimes without the consent of the trade unions.com
.400 workers) has accepted VRS while the major union opposed the scheme tooth and nail. they opt for the scheme.TRADE UNIONS & VRS
Trade unions play a crucial role in introducing the VRS in any organized sector firm. the entire workforce of Sri Ram Mills (1. SKF Bearings. workers legalize the VRS by accepting it en masse. When the workers are convinced that the scheme is sufficiently attractive monetarily and/or the company is in deep crisis. the tacit approval of the representative union. Other companies such as Ind Auto. at least.
Ashish Jain. Novartis. The scheme cannot be implemented without. Biddle Sawyer.
.TRADE UNIONS & VRS
When workers find the company's performance good. they refuse to accept the scheme. In such situations. clearance of debt. A study by Shri Ram Center for Industrial Relations and Human Resources in 14 industrial centers of various states revealed that workers opted for VRS due to apprehension of closure of firms or personal reasons such as poor health. ashishsjc@gmail. by exposing the status of those workers who have accepted VRS) persuade workers not to accept the scheme. education of children. etc. marriage. trade unions through various strategies (for instance.
.TRADE UNIONS & VRS
Another study observed that complaints were recorded by some of the VRS workers who came for retraining under NRF that invisible discrimination affected their prospects for promotion in the organization where they were working.
Ashish Jain. the atmosphere of discrimination and apathy towards the socially disadvantaged groups is also forcing most of the workers belonging to these groups to opt for VRS.
MORE ON VRS
Employers refer to VRS as 'golden handshake'. VRS is one of the strategies introduced in the early 1980s in central public sector undertakings (PSUs) to reduce the so-called surplus or redundant workforce. it is 'unstated exit policy' which means that an exit policy which may not exist on paper. It gained publicity after the introduction of new economic policy in 1991. It is envisaged in the new economic policy that VRS can provide minimum sustenance security to the retired individual and his family.com
Ashish Jain. the government employs more than 70 per cent of the organized workforce. it uses all its channels to reduce the organized sector of the workforce without antagonizing the trade unions. and for the government. In India. ashishsjc@gmail. trade unions call it 'voluntary retrenchment scheme'.
ashishsjc@gmail.MORE ON VRS
MAINSTREAM economists perceive voluntary retirement as a measure to shed the workforce whose marginal productivity is zero. Technological modernization improves the productivity of existing workforce so much so that a section of the existing workforce becomes again redundant even as modernization enhances the installed capacity of the technology. voluntary retirement is accompanied by technological modernization that warrants the replacement of labor with capital. Further.
The rationale behind the introduction of voluntary retirement scheme (VRS) in India is that any organized industrial organization has to operate within the existing legislative framework.com
. Moreover. which does not allow the organization to shed the redundant workforce without adequate compensation
Ashish Jain. it is argued that this could be introduced in an industrial organization for maintaining its cost effectiveness in an increasingly competitive world. The workforce that becomes redundant in this process has to retire or be retrenched.
5 lacs lumpsum.
Ashish Jain. The VRS candidates must have worked for the organization for minimum of 10 years and also the age of the worker must be minimum of 40. Thus these employees won't be able to avail the benefit of tax exemption.com
. The employees receiving VRS can get the tax exemption for the amount of Rs. Employees not complying with these conditions still can apply for the early separation but it would not be counted as the VRS legally.TECHNICALITIES
The Voluntary Retirement Scheme is a legal way to down size and thus it involves certain technicalities. ashishsjc@gmail.
000 Whichever is least
Ashish Jain. firstname.lastname@example.org
The Voluntary Retirement Scheme is given tax exemption as per the following limits:
Three months salary per completed year of service Remaining salary Rs.
5 lacs would be charged under Income Tax Act
Ashish Jain. 5 lacs lumpsum. Thus these employees won't be able to avail the benefit of tax exemption. ashishsjc@gmail. The employees receiving VRS can get the tax exemption for the amount of Rs.TECHNICALITIES
Employees not complying with these conditions still can apply for the early separation but it would not be counted as the VRS legally. Anyone receiving more than Rs.com
Thus an employee opting for early separation and not fulfilling the age or experience criteria would be taxed on the whole amount he receives.
Ashish Jain. The monthly salary at the time of applying for the VRS multiplied by the number of months left before retirement. However the lump sum amount could be lower of the following: Three months' salary for each completed year of service. email@example.com
. ashishsjc@gmail. 5.BENEFITS
The normal benefits that an employee gets: Provident fund Encashed accumulated leave Gratuity Salary for the notice period Cost of transfer to the hometown
Ashish Jain. 3. 4.com
1. ashishsjc@gmail. 2. etc.com
Also to make the scheme very attractive for the employees the severance package as it is called can include other benefits like Medical insurance Housing loans Subsidies on children's education loans. 3.
Organizational adjustment at all levels has become extremely imperative. Over manning has crept into almost all industrial units on account of the inability of the enterprises to reduce or adjust workforce as per the business needs. It's time for the organizations to realign and focus on the core competencies
Ashish Jain.VRS IS JUSTIFIED BECAUSE….. The sort of cuts that only happened in heavy industries has now become widespread. The days of nibbling away deadwood have long gone. ashishsjc@gmail.
It deals with the lives of people who are offered to end the careers abruptly and probably do nothing for the rest of their lives.Hurdles in execution
The Voluntary Retirement Scheme is not as easy as eating the cake.acceptance of the VRS Over-acceptance of the VRS Operational problems Post-VRS blues
Ashish Jain. It deals with actual human beings. Some of the problems which could be anticipated and for which appropriate action plan could be drawn are: Non. ashishsjc@gmail. Thus a lot many problems can arise during the actual execution of the scheme.com
company specific or any other unexpected problems. These problems may be industry sector specific. And if the company does not provide for the downsizing the company must be prepared to face the post-VRS blues. there could be many more problems.
Also due to ongoing retrenchment in the company. At the same time over-acceptance can cause a lot of problems.com
. which could arise during the execution of the scheme. the company is vulnerable to all sorts of operational problems.
The major hurdle in the acceptance of any scheme is trade union. industry specific.HURDLES
Over and above these anticipated problems. ashishsjc@gmail. The trade union does not easily accept such changes even if these changes are made for the genuine reasons. as it is visible in the PSU banks.
There are certain aspects. The company must be having some genuine reasons to offer the VRS and this is the first step in getting the things right.com
. which have to be kept in mind before offering the scheme. The company must have a genuine reason for the downsizing.MEASURES
The company can avoid or reduce the magnitude of any problem occurring due to the VRS scheme. technology upgradation. ashishsjc@gmail. It should not be a 'slogan of the week ' nor should it be to oblige blindly the conditions of the global partner. total quality management. The company must conduct its manpower planning to analyze the manpower inventory it has in terms of number and skills and also the manpower inventory it requires to operate at the optimal level. new working methods like optimization of resources. This planning should be done considering all the aspects like automation.
Ashish Jain. etc.
. The company should make an explicit announcement of the scheme all over the organization at the same time so as to prevent the spreading of any rumors
The trade union also should be taken into confidence and the all the facts of the scheme should be explained to them. Keeping these figures in mind the company must move towards offering VRS scheme.
Communication is the most important phase of execution of any VRS scheme.
Depending upon the manpower planning the company should boil down to a number to be downsized and the period over which downsizing should be done.
Ashish Jain. ashishsjc@gmail. The logic given behind this concept is that the people with higher skills retain their productivity for the longer time.com
In the actual implementation of the scheme the different age limits are suggested for different levels and this concept has been extremely successful. This issue is debatable but it has worked wonders for many companies. Also since the qualified personnel are less in number than that of unqualified ones the model is designed in that manner. But this theory has received criticism of being biased for the upper class or being Brahminist.
the company should implement two-pronged strategy of identifying the VRS candidates and also identify the key performers. Also offer the option of receiving the package in lumpsum or in the pension form or in combination.com
Once the scheme is designed. which would help employees to accept the scheme. Include in the severance package different benefits. Keep the promises you made. This can be done by empowering line managers and also through the system of performance appraisal. ashishsjc@gmail.
Ashish Jain. these employees should be counseled accordingly either to accept the VRS or to stay in the company. Once these candidates are identified. so as to implement the scheme smoothly.
Also the employees who stay in the company have to be motivated enough so as to keep going. For this key performers have to be individually counseled and also the retraining and redeployment program has to be drawn so as to keep the managers motivated and so as to adjust to the change in the organization.
Making the employees accept the scheme is not the only objective.
are: Outplacement Help of placement agency Counseling
Ashish Jain.Other Options
Besides in order to alleviate the effect of the whole exercise. company should take up few measures that will help to maintain the morale of the existing employees. ashishsjc@gmail. Some of the measures.com
. which could be provided.
It is the in-house help provided by the organization itself in order to help the employees during the transition phase from retrenchment to the resettlement. The company can play an important role by providing counseling. it is negligible. and all the other help required by the employees. Although this involves cost.com
. ashishsjc@gmail. Moreover this exercise also helps in creating good corporate image of the organization that can help organization in the long term like future recruitment. however compared to the advantages obtained in return. training.
Ashish Jain. It not only helps organization to convince employees to accept VRS but also helps in maintaining the morale of the retained employees.
. This agency can appraise.
Ashish Jain. Also there have been practices where company purposefully asks the agency to tell nice things about the retrenched employees so that they will have the " feel good " factor to keep their motivation even after the retrenchment. counsel and place the retrenched employees on deserving jobs.Placement agency:
Besides having outplacement facility a company can also take the help of placement agency.
. ashishsjc@gmail. The retained as well as retrenched employees could be counseled to good effect to keep up their motivation level.COUNSELING:
This is an effective tool to reduce the effect of the VRS.
This process should convince them that the posts in the organization have become redundant and not the person and the organization still values the person.CONCLUSION
These techniques that are suggested above give the humane touch to the downsizing.
. ashishsjc@gmail. Since this process involves emotions and feelings. every care must be taken by the management that the process must be carried out in such a manner that it keeps the dignity of the employees but at the same time achieves the objective in a tactful manner. This is very necessary because it is not only the posts that are downsized but there are human beings involved in this process.