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Voluntary Retirement Scheme - VRS

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Voluntary Retirement Scheme (VRS)

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Voluntary Retirement Scheme - VRS

  1. 1. Voluntary Retirement Scheme (VRS) Presented by: M Naveen Reddy
  2. 2. WHAT IS VRS? ° VRS is one of the strategies introduced in the early 1980s in central public sector undertakings (PSUs). ml ° 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
  3. 3. 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.
  4. 4. THE GOLDEN HANDSHAKE ° 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. /« O - The scheme which is formally permitted by the Department of Public A allel C Enterprises C 1 I
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. 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.
  9. 9. CALCULATION OF VRS - Basic + DA = Rs 7000 + Rs 2500 = Rs 9500 Rs 9500/ 26 days = Rs 365.38 (one day salary) Completed 32 years of service 32 years x 35days x Rs 365.38 = Rs 409225.60 Note: for computation of one day salary 26 days a month is taken Similarly for the remaining period of service left 3 years x 25 x Rs 365.38 = Rs 27403.50 Total amount payable = Rs 409225.60 + Rs 27403.50 = Rs 436629.10 Amount to be paid shall be restricted to : 3 x 12 months = 36 months Total amount to be paid as VRS compensation : 36 months x Rs 9500 = Rs 342000 Note: The payable amount would have to be restricted to Rs 3,42,000
  10. 10. THANK ‘U’

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