In recent years, the economy has seen recession coupled with excessive competition from various new companies fighting for dominance with old established companies. The profitability of traditional companies took a beating while competing with leaner new companies. One option they had to reduce employee strength to sustain in the competition.

However, the legal structure of India does not allow retrenchment of employees. Therefore, one option available for these companies is the Voluntary Retirement Scheme (VRS), aka the Golden Handshake. The company is saving crores of rupees in salary every year. The employees are leaving the job with handsome severance pay.

When an employee is opting for voluntary retirement scheme, one important thing that comes to his mind is voluntary retirement compensation calculation. How much money can he get? Will it be enough for the future? Let us discuss how VRS calculator works.

1. VRS Eligibility:

Not all the employees are eligible for taking VRS. An employee who has worked for a minimum of ten years in the company or who have completed a minimum of 40 years of age is eligible for this scheme. There are certain other regulations, as well. The vacancy thus created, cannot be refilled. An employee who is taking VRS cannot be rehired in any sister concern managed by the same management.

2. Calculation:

VRS retirement calculator India is based on the last drawn salary of the employee. It takes into account basic salary, DA, both variable and fixed, and other components. The VRS amount is limited to an amount which is equal to three months’ salary of each completed years of service. Or in another way of calculation is salary at the time of retirement multiplied by the rest of the months of service before normal retirement. VRS amount up to Rs. 5 lakhs is exempted from tax.

3. Benefits of VRS:

VRS is beneficial for both the company and employees. Recently telecom department of India is evaluating the VRS option, and it is calculated that for MTNL VRS can save an approximate amount of Rs. 1080 crore annually. MTNL and VSNL, who in recent years has not performed well, can do well with this amount of money. For employees also, particularly from companies which are on the verge of shutdown, they can leave with a good amount of severance pay.

The calculation of VRS is depended on the scheme. Employees are advised to go through the scheme document properly to understand the benefits and drawbacks if any.

Click here to visit our Retirement Planning Calculator

DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



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