Voluntary Retirement Scheme :- The Government of India recently started a Voluntary Retirement Scheme for the employees of both public and private sector firms. Sometimes a company gets in a situation where they do not have enough resources to pay salaries to all the employees. Under this scheme, the employees are given a choice if they want to take voluntary retirement before the date of their actual retirement. The aim of this scheme is to reduce the number of employees in the company which will help them in optimizing the overall cost. This Scheme and its various features are discussed in the article given below. What are the benefits of the VRS scheme? What are the reasons a company needs VRS? The answers to all your questions are given in this article. Read further to know more details.
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Voluntary Retirement Scheme, what is it?
The VRS Scheme is recently started in the year 2021 for the employees of private and public sector companies. Under this scheme, the employee of any company can take a voluntary retirement before his/her retirement date. The aim of this scheme is to reduce the total strength of a company to reduce the overall cost of the firm. This scheme is applicable to workers, authorities of cooperative society, executives, etc. This scheme can be seen as a golden handshake as it provides the company with a great way of cost-optimization. As the number of employees reduces in any company the cost of the company also decreases because there are fewer people to pay salaries and other expenses. The Government set up various rules and regulations before starting this scheme so it can’t be misused by the employees or firms. The most important rule of all is that after retiring the employee can’t work in any firm belonging to the same industry.
Highlights of VRS Scheme
| Scheme Name | Voluntary Retirement Scheme |
| Launched By | Government of India |
| Beneficiaries | Companies |
| Registration Process | Online/Offline |
| Objective | Reduce the strength of employees in a company |
| Category | Central Go |
Objective of Voluntary Retirement Scheme
The main objective of this scheme is to reduce the number of employees in a company whom they are not able to pay due to financial problems. The company can offer voluntary retirement to its employees and do some cost-cutting. This scheme can be used by the companies as a method of cost-optimization. The employees are offered various benefits under this scheme like advice on managing funds, rehabilitation facilities etc. which can help them in improving and managing their income.
Benefits of Voluntary Retirement Scheme
- The employees can use this scheme to take voluntary retirements before their date retirement.
- This is not a kind of forced retirement that companies can use whenever they need it. This scheme gives employees the right to choose whether they want to give up a job or not.
- The VRS scheme is applicable only on those employees who are above the age of 40 years and have completed 10 years of their service to the company.
- Both public and private sector employees can avail this scheme.
- This scheme is a method of reducing total strength of the firm which will help them in reducing the overall cost.
- The VRS scheme is also called a Golden Handshake.
- Any employee who is taking a voluntary retirement under this scheme is not allowed to work in a firm belonging to the same industry.
- The employees who are taking a voluntary retirement from their jobs will be given various other benefits like advice on managing funds, rehabilitation facilities etc. which can help them in improving and managing their income.
- These employees are also provided compensation amount which is tax-free up to some level.
- At the moment of retirement, the employee will also be provided with provident fund and gratuity dues.
Voluntary retirement Direct Retrenchment
In the Indian Labour Laws, the companies are not allowed to directly retrench the employees and if any such case happens there is strong opposition from the trade unions. But, in times of recession, takeover, merger, etc., a company is in a situation that they are not able to pay a proper salary to its employees. The Government of India introduced this scheme to overcome this issue by giving employees a choice of taking voluntary retirement. In the case of excess employees, the company gives them a chance to take retirement if they wish so.
Situations in Which Voluntary Retirement Scheme is adopted
- Takeovers and mergers
- Recession in business
- Obsolescence of product or technology
- Joint ventures with foreign collaborations
- Intense competition
Entitlement of voluntary retirement scheme
- The employee who is taking a retirement will be given 45 days of salary for each year of service to the company.
OR
- At the time of retirement, the employee will be provided monthly emoluments multiplied by the remaining years of service before the normal date of service.
- The employee will be provided with Provident fund and gratuity dues.
- The employees will be provided benefit packages under this scheme.
- At the time of retirement, the employees will be provided compensation amount which is tax-free up to some level (Terms and conditions applied).