In recent years, the Indian economy has seen many large public sector companies and some private sector companies let a part of their workforce go. The cost-cutting measures are taken to maintain the profit, competition from smaller and nimbler competitors, demanding customer base and overall economic scenario, both global and national level, are some of the factors for this move. However, due to the presence of the Industrial Disputes Act 1947, there is a restriction on how the companies can let go of their excess staff. One of the most popular methods is the Voluntary Retirement Scheme (VRS).

VRS means the nicest possible way to tell your employees to terminate employment. That is why it is called the Golden Handshake. Let us discuss the major features of the scheme.

1. Criteria:

Voluntary retirement scheme can be applied to employees who have a minimum of 40 years of age or who have completed a minimum of ten years of service. It is applicable to all employees of the concern. It will be applicable no matter by what name the employees are called, to all worker and executives excepting directors of a cooperative society or directors of a company.

2. VRS Calculation:

VRS calculation will be done in the following way. The last drawn salary is the basis of all calculation related to VRS. 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.

3. VRS Rules:

There are certain VRS rules for the procedure. It has to cause an overall reduction in the total employee strength of the concern. The vacancies thus caused by VRS cannot be filled again. The employees taking VRS cannot be re-employed to any sister concerns under the same management from which they are taking VRS.

VRS was made popular by many large private and public sector companies. Recently the telecom department is evaluating this option, and it is calculated it will save crores of rupees in salary each year. There is a debate that has always been there whether VRS is good or bad. However, for the companies fighting to survive, it is always good, and it is, therefore, suitable for the employees who are dependent on the company.

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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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