Professional Documents
Culture Documents
Learning Objective
To know and understand the below mentioned points:
To know the Voluntary Retirement Schemes (VRS)- Exit Policy- Its Effects
To learn the Procedure for Voluntary Retirement Scheme
To get aware of the Merits and Demerits of voluntary retirement scheme
Voluntary Retirement
The Government of India adopted a new economic policy whereby it
relaxed and in certain cases removed restrictions on import and export.
This resulted in significant changes in industrial and business sectors. One
of the important aspects of the liberalised economic policy is the Exit
Policy. Under this policy the government has allowed business and
industrial establishment, to reduce their excess staff and
employees. The reduction of excess staff is a result of restructuring of
organisations due to modernising, applying new technology and new
methods of operation, so that the industrial organisations could operate
economically and withstand the competition with companies and
organisations which have accepted foreign collaborations, innovative
methods and technology upgradation, rendering some employees surplus.
Since the procedure under Industrial Disputes Act 1947, for retrenching
involves a lot of legal hurdles and complex procedures, the Government
authorised schemes of voluntary retirement of employees after offering
them suitable voluntary retirement benefits, and giving some tax relief on
such payments to employees who are eligible to retire voluntarily under
the guidelines issued by the Government and Income Tax authorities. In
the Five Year Plans which were adopted and implemented by the
Government it had established and developed public sector undertakings
to create employment and also to augment the increased demands of
industrial goods, fertilisers and other core industries. The encouragement
given to public sector was so significant that .it created employment
opportunities on a mass scale. Most of the public sector undertakings
were not cost effective. The trade unions have been opposing
retrenchment under the existing labour laws. The government, therefore,
found a solution to the problem of surplus staff by allowing voluntary
retirement both in public and private sectors.
The human resources in the industrial sector have become surplus on
account of
(a) existing level of technology
(b) will become surplus with adoption of newer technologies and
technological up-gradation.
If the textile industry adopts latest technology in manufacturing units, 15
million workers in the industry would be out of their jobs, around 2-4
million workers are found surplus in the various sick industrial units all
over India. Similarly, millions
have been found surplus in government undertakings.
Demerits of VRS
To certain extent it creates fear, a sense of uncertainty among
employees. Sometimes the severance costs are’ heavy and
outweigh the possible gains. 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 which may cause
embarrassment to the managements.
It is found in practice that organisations may have to repeat the
scheme if there is no response or poor response to the scheme
by the employees. However, there are instances when the
managements have really made the schemes very attractive by
making it “Golden Hand Shake.”
It is incumbent on the establishments that they do not recruit
similar staff immediately after the implementation of voluntary
retirement scheme. Such recruitment, in spirit and essence is
contrary to the principle of staff being excessive or surplus.
Tutorial Activity 1.1
Voluntary Retirement Schemes have been legally found to be giving no problem to employers, employees and their unions.
But, the retrenchment plans of an organization must be compatible to its strategic plans. Its procedure and reasons for
introduction must be discussed with all management staff including top management. One need to identify departments or
employees to whom VRS is applicable and thereby formulate its terms and conditions and also state the benefits that would be
available to those who took VRS. Such information should be made available to every employee of the organization,
mentioning the period during which the scheme will be open. Also,existing employees might face insecurity because of fear of
losing their job too. One of the possible drawback of the VRS is that the efficient employees would leave the company while the
inefficient may stay back. Thus it is the /responsibility of the employer to motivate them and remove their apprehensions and
fears