VOLUNTARY RETIREMENT SCHEME

(VRS)

Presented by:
Vaishali More
 WHAT IS VRS?
• VRS is one of the strategies introduced in the early 1980s in central public
sector undertakings (PSUs).
• It varies from company to company.

• VRS is a scheme whereby the employees are offered to voluntarily retire

from their services before to their retirement date.
• There shall be No Recruitment against vacancies arising out of VRS
 TECHNICALITIES

• 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 years.

• Employees not complying with these conditions still can apply for the
early separation but it would not be counted as the VRS legally. Thus
these employees won't be able to avail the benefit of tax exemption.
 THE GOLDENHANDSHAK
E

• The most human technique to retrench the employees in the company

today is the voluntary retirement scheme.

• It is the golden handshake for the employees and the only option today
for the companies to downsize their headcount.

• The scheme which is formally permitted by the Department of

Public Enterprises
 CONTD…
• As the name suggests the VRS is strictly voluntary i.e. one can neither compel
the workers to accept it nor apply it selectively to certain individuals.

• One can however choose the levels, units and age groups among whom one
wants to offer VRS.

• 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
REASONS FOR PROPOSING VRS

• Recession in business
• Downsizing
• Realignment of business – due to market
conditions
• Joint – Ventures with foreign collaborations
• Takeovers and mergers
• Business re – engineering process
MERITS OF VRS
• There is no legal obstacle in implementing VRS – as
predominantly encountered in retrenchment under the
labour laws

• It offers employee an attractive financial compensation than what

is permitted under retrenchment under the law

• It allows flexibility and can be applied to certain divisions,

departments where there is excess manpower

• It allows overall savings in the employee costs thus lowering the

overall costs
MERITS OF VRS- FOR EMPLOYEES

 Lump sum amount at a time

 The right to accept or reject any application
 The Income Tax benefit
 Pension and Gratuity
DEMERITS OF VRS
• Uncertainty among the employees

• Sometimes the severance costs are heavy

• Trade Unions generally protests the operation of such schemes and

may cause disturbance in normal operations

• Some of the good capable and competent employees may also

apply for separation.
THANK
YOU!