Voluntary Retirement Scheme:- There are numerous circumstances where companies feel compelled to cut workforce strength. The organization employs a variety of strategies to achieve this goal. A Voluntary Retirement Scheme is one of these measures. Today, we will provide you with all of the necessary facts about this scheme, such as what is a Voluntary Retirement Scheme? Its goal, benefits, characteristics, need, process, and so on. So, if you want to learn everything there is to know about voluntary retirement, you should read this article all the way through.
Table of Contents
What is Voluntary Retirement Scheme?
The employee is offered the option to voluntarily leave the company before the retirement date under this arrangement. In order to diminish staff strength, voluntary retirement programs are used. Workers, company leaders, cooperative society authorities, and others can choose to retire voluntarily. Companies in both the public and private sectors can provide voluntary retirement plans. A golden handshake is another name for this strategy. Employee strength is reduced through voluntary retirement, allowing the corporation to lower its overall costs. Voluntary retirement comes with a slew of laws and requirements. One of the most basic regulations is that a retiring employee should not apply to work for another firm in the same industry.
VRS Scheme Details in Highlights
|Name of scheme
|Voluntary Retirement Scheme
|Government of India
|To reduce the strength of employees in a company
Voluntary Retirement Scheme Objective
The major goal of this strategy is to reduce employee strength in a company that is unable to pay its employees owing to financial difficulties. The corporation can save money by granting voluntary retirement. Many benefits are also provided to employees under this system, such as staff rehabilitation facilities, help in managing funds, and so on, all of which will immediately increase their income.
Voluntary Retirement Scheme Advantages & Characteristics
- Employees are given the option to retire from their jobs under the scheme.
- This retirement takes place before the scheduled retirement date.
- It is important to understand that voluntary retirement is not the same as forced retirement. Employees have complete control over whether or not they want to leave their jobs.
- It should be emphasized that only those employees who have completed 10 years of service or are over the age of 40 are eligible for a voluntary retirement scheme.
- Both public and private companies participate in this program.
- A golden handshake is another name for this strategy.
- Employees’ strength is lowered through voluntary retirement in order to reduce the firm’s costs.
- A person who retires voluntarily is not eligible to work for another company in the same field.
- Employees who have completed 10 years of service or are above the age of 40 are eligible for this scheme.
- The corporation provides different perks to those who choose to retire voluntarily, such as rehabilitative services, counseling, and so on.
- Retiring employees are also provided tax-free remuneration up to a specific amount.
- Employees will be provided with a provident fund and gratuity dues when they retire.
- Direct Retrenchment for Voluntary Retirement
- As you may be aware, Indian labor rules prohibit employers from directly retrenchment employees, and if they do, trade unions are outraged. Due to financial difficulties, a business may find itself unable to pay its staff. A voluntary retirement system has been implemented to deal with the condition of overworked personnel. Employees take voluntary retirement; thus, labor unions are not opposed to this concept.
Situations Where a Voluntary Retirement Scheme Is Used
- Product or technology obsolescence.
- Mergers and takeovers
- Foreign collaborations in joint ventures.
- Recession in business.
- Intense competition.
Voluntary Retirement Scheme Compensation
- The remuneration under the voluntary retirement scheme is based on the employee’s most recent income.
- The company’s payment is equivalent to the employee’s 3-month salary for each completed year of service, or the employee’s salary at the time of retirement is multiplied by the months of service left before the actual date of retirement.
- Compensation in public sector banks is computed on the basis of 45 days of salary each year of service or the salary for the remaining period, whichever is lower.
Employees under Voluntary Retirement Scheme Benefits
- For each completed year of service, the employee will be paid 45 days’ salary or monthly emoluments multiplied by the remaining month of service before the usual date of service, whichever is smaller.
- A provident fund and gratitude dues will also be provided to the employee.
- Up to a certain sum, the remuneration paid at the time of voluntary retirement is tax-free.
- Employees who choose voluntary retirement receive benefit packages from their employers.
Conditions under which an Employee may Choose to Retire Voluntarily
- Recession in business.
- Joint venture with foreign collaboration.
- Takeover and merger.
- Intense competition.
- Obsolescence of product or technology.
- At least 40 years of age is required for the applicant.
- The applicant must have worked for the company for a minimum of ten years.
- Only the company’s employees are eligible to participate in this program.
- The only exceptions are company directors and cooperative societies.
Entitlement Of Voluntary Retirement Scheme
- For each year of service completed, the departing employee will be paid 45 days of salary
- Monthly emoluments at the time of retirement multiplied by the number of months of service remaining until the regular date of service (whichever is less)
- The employee will be provided with a provident fund and gratuity dues.
- Up to a specific sum, the compensation received by the retiring employee at the time of voluntary retirement is tax-free (terms and conditions applied)
- Employees who choose a scheme are also provided benefit packages.