Voluntary Retirement Scheme

Submitted By : Piyush Dobariya (16)

Department of Human Resource DevelopmentVeer Narmad South Gujarat University

Surat.

Subject : Industrial Relations

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 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.

TECHNICALITIES

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 schemes.

Compensation under VRS modeled

* 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 Industry )

Basic pay + DA only is to be taken into account for computation of ex-gratia under VRS.

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

taken.

VRS COMPENSATION UNDER GUJARAT PATTERN(OM No. 2(32)/97-DPE(WC)GL-XXXV dated 8th December, 2000)

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/-.

2. Similar is for the remaining period of service left.

* 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 Or Last drawn salary × remaining month of service which ever is higher

Rs. 5,00,000 limit. ( Income Tax Act )

Actual compensation received

TECHNICALITIES

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.

TRADE UNIONS & VRS

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.

MORE ON VRS

THE GOLDEN HANDSHAKE

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.

CONCLUSION

This is very necessary because it is not only the posts that are downsized but there are human beings involved in this process.

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 tactful manner.