Voluntary retirement

Scheme
PRESENTED BY:

ANUSREE MENON 23

AARTI MISHRA 24

DEEPAK SINGH 43

HEMANT VYAS 52
WHAT IS VRS ?
• 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
• Employers call it 'golden
handshake',

• Trade unions call it 'voluntary

retrenchment scheme’,

• For the government, it is 'unstated

exit policy’
 Golden handshake
• The most humane 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 and which
provides the lucrative way for the
employees to terminate their services
and accept VRS.
 Highlights of VRS
• Strictly Voluntary

• Cannot be compelled

• Cannot be selective

• Can be level , unit or age oriented.

• The company can accept or
reject the application .

• Usually this is not done in

practice as it can give a
wrong message .

• VRS is not actually

voluntary but a selective
Why VRS?
 EMPLOYEE PERSPECTIVE
Attractive monetarily

The company is in deep crisis,

they opt for the scheme.

Apprehension of closure and

personal reasons.

When the company's

performance is good, they
refuse to accept the scheme
 COMPANIES PERSPECTIVE
• Due to Recession
• Intense competition
• Joint ventures with
Foreign Companies
• Due to Takeovers and
Mergers
• Due to change in
 HOW IT IS IMPLEMENTED
• Manpower planning is conducted
• A notice is put up
• The reasons behind downsizing may be stated
• The eligibility criteria
• The age limit and minimum service period who can apply
• The benefits offered
• The rights of employer to accept or reject an application
• The date up to which it is open
• The income tax benefit and incidence related to the
scheme
• Those who take VRS now are not eligible for
employment further
TECHNICALITIES
• The Voluntary Retirement Scheme is a legal
way to down size and thus it involves certain
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.

• 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 employees receiving VRS can get the tax

exemption for the amount of Rs. 5 lacs
lumpsum.
• The Voluntary Retirement Scheme is given tax
exemption as per the following limits:
– Three months salary per completed year of
service
– Remaining salary
– Rs. 5,00,000
– Whichever is least
• Thus an employee opting for early separation and not fulfilling
the age or experience criteria would be taxed on the whole
amount he receives. However the lump sum amount could be
lower of the following:

 Three months' salary for each completed year of service.

 The monthly salary at the time of applying for the VRS
multiplied by the number of months left before retirement.
BENEFITS
• The normal benefits that an
employee gets:

1. Provident fund

2. En-cashed accumulated leave

3. Gratuity

4. Salary for the notice period

5. Cost of transfer to the hometown

 OTHER BENEFITS
Also to make the scheme very
attractive for the employees the
severance package as it is called
can include other benefits like
1. Medical insurance
2. Housing loans
3. Subsidies on children's education
loans, etc.
Why is VRS
justified?
VRS is justified because…
• 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.

• The sort of cuts that only happened in heavy

industries has now become widespread. The
days of nibbling away deadwood have long
gone. It's time for the organizations to
realign and focus on the core competencies
 HURDLES IN EXECUTION
The Voluntary Retirement Scheme is not as easy as eating the
cake. It deals with actual human beings. 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. Thus a
lot many problems can arise during the actual execution of
the scheme. Some of the problems which could be
anticipated and for which appropriate action plan could be
drawn are:

Non- acceptance of the VRS

Over-acceptance of the VRS
Operational problems
Post-VRS blues
 MEASURES
The company can avoid or reduce the magnitude of any problem
occurring due to the VRS scheme. There are certain aspects,
which have to be kept in mind before offering the scheme.

• The company must have a genuine reason for the downsizing. It

should not be a 'slogan of the week ' nor should it be to oblige
blindly the conditions of the global partner. The company must
be having some genuine reasons to offer the VRS and this is the
first step in getting the things right.

• 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. This planning should be done considering all the aspects
like automation, technology upgradation, new working methods
like optimization of resources, total quality management, etc.
 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.

Some of the measures, which could be

provided, are:
∂ Outplacement
∂ Help of placement agency
∂ Counseling
CASE STUDY
CONCLUSION