Submitted By : Piyush Dobariya (16)
Department of Human Resource Development
Veer Narmad South Gujarat University
Subject : Industrial Relations
VRS is one of the strategies introduced
in the early 1980s in central public sector
It varies from company to company.
VRS is a scheme whereby the employee
is offered to voluntarily retire from his
services before his retirement date.
There shall be No Recruitment against
vacancies arising out of VRS
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.
on the Gujarat Pattern will consist of salary of 35
days for every year of service completed and 25 days
for every year of service left until superannuation.
60* months salary / salary for service left, whichever
is less. as compensation is attached to vss/vrs package
of the Department Of Heavy Industry only.
The employees will have a choice between the two
* if he has completed 30 years or more service
It is applicable for employees, worker, executives.
3 months wages / salary for every year of completed
services, or wages for the remaining months of
service at Present Rates. (Department Of Heavy
Basic pay + DA only is to be taken into account for
computation of ex-gratia under VRS.
1. Calculation of compensation would be on the basis of
completed years of service :
Basic + DA
Rs. 7000 + Rs. 2500 = Rs. 9500
Rs. 9500 / 26 days = Rs. 365.38 (one day’s salary)
Completed 32 years service.
32 Yrs. X 35 days X Rs. 365.38 = Rs. 4,09,225.60
NOTE: (I) For computation of one day’s salary 26 days a month is
Remaining 3 years service:
3 years X 25 day X Rs. 365.38 = Rs. 27,403.50
Total amount payable:
Rs. 4,09,225.60 + Rs. 27,403.50 = Rs. 4,36,629.10
Amount to be paid shall be restricted to:
3 X 12 = 36 months
Total amount to be paid as VRS compensation:
36 X Rs. 9500 = Rs. 3,42,000/-
NOTE: The payable amount would have to be restricted
to Rs. 3,42,000/-.
* 36 = 3 year remaining
The Voluntary Retirement Scheme is given tax exemption
as per the following limits:
Least of following :
Last drawn salary 3 completed yrs. Of services
Last drawn salary remaining month of service
which ever is higher
Rs. 5,00,000 limit. ( Income Tax Act )
Actual compensation received
Trade unions play a crucial role in introducing the
VRS in any organized sector firm.
The scheme cannot be implemented without, at least,
the tacit approval of the representative union.
Sometimes without the consent of the trade unions,
workers legalize the VRS by accepting it in mass.
When the workers are convinced that the scheme is
sufficiently attractive monetarily and/or the company
is in deep crisis, they opt for the scheme.
Employers refer to VRS as 'Golden Handshake',
Trade unions call it 'Voluntary Retrenchment Scheme',
For the government, it is 'Unstated Exit Policy'
which means that an exit policy which may not exist on paper.
The most humane technique to retrench
the employees in the company today is the
voluntary retirement scheme.
The scheme which is formally permitted
by the Department of Public Enterprises
and DHI which provides the lucrative way
for the employees to terminate their
services and accept VRS.
This is very necessary because it is not only the posts that are
downsized but there are human beings involved in this
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.
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