Voluntary Retirement Scheme – There are many instances in which companies feel the need to reduce employee strength. For this purpose, the company takes various measures. One of these measures is a voluntary retirement scheme. Today through this article we are going to give you all the important information regarding this scheme like what is a Voluntary Retirement Scheme. Its objective, benefits, features, need, process, etc. So if you are interested to grab every single detail regarding voluntary retirement then you have to read this article very carefully till the end.
What Is A Voluntary Retirement Scheme?
Under this scheme, the employee is offered to voluntarily retire from his services by the company before the retirement date. A voluntary Retirement Scheme is adopted to reduce the strength of employees. The workers, executives of companies, the authority of cooperative societies, etc can take voluntary retirement. Both public and private sector companies can offer voluntary retirement schemes. This scheme is also known as a golden handshake. Through voluntary retirement, employee strength is reduced so that the company can reduce the overall cost of the firm. There are many rules and regulations under voluntary retirement. One of the most basic rules is that the employee who is retiring should not apply to another firm that belongs to the same industry.
Objective Of Voluntary Retirement Scheme
The main objective of this scheme is to reduce the strength of employees in a company that is not able to pay the employees due to financial problems. By offering voluntary retirement the company can reduce the cost. Under this scheme, many benefits are also offered to the Employees like rehabilitation facilities to staff, advice on managing funds, etc which will automatically improve their income. Know to Register on Employment Exchange
Details of VRS Scheme 2024
| Name of scheme | Voluntary retirement scheme |
| Launched by | Government of India |
| Beneficiary | Companies |
| Objective | To reduce the strength of employees in a company |
Benefits And Features Of Voluntary Retirement Scheme
- Under the scheme, employees are offered voluntary retirement from the services
- This retirement occurs before the retirement date
- It is to be noted that voluntary retirement is not a kind of forced retirement. It’s totally in the hands of employees to leave the job or to keep the job
- It is to be noted that a voluntary retirement scheme is applied to only those employees who have completed 10 years of service or above the age of 40 years.
- This scheme is offered by both public and private sector companies
- This scheme is also known as a golden handshake
- Through voluntary retirement of employees, strength is reduced in order to to reduce the cost of the firm
- The person taking voluntary retirement is not allowed to apply to another firm that belongs to the same industry
- This scheme is applied to those employees that have completed 10 years of service or above the age of 40 years
- The person taking voluntary retirement is offered various benefits by the company like rehabilitation facilities, counseling, etc
- The retiring employees is also offered compensation which is tax-free up to a certain amount
- At the time of retirement provident fund and gratuity dues will be provided to the Employees
Voluntary Retirement Direct Retrenchment
As you all know that Indian labor laws do not allow companies to directly retrench their employees and if they do so then it is strongly opposed by trade unions. Sometimes a company is in a situation of not being able to pay the employees due to financial issues. In order to cope with the situation of excess employees, a voluntary retirement scheme has been introduced. This scheme is not opposed by labor unions as employees take voluntary retirement
Situations in which Voluntary Retirement Scheme is adopted
- Obsolescence of product or technology
- Takeovers and mergers
- Joint ventures with foreign collaborations
- Recession in business
- Intense competition
Compensation For Voluntary Retirement Scheme
- The compensation under the voluntary retirement scheme is calculated on the last drawn salary of an employee
- The payment which is offered by the company is equal to the 3-month salary of the employee for each completed year of service or the employee’s salary at the time of retirement is multiplied by the remaining months of service left before the original date of retirement
- In the case of public sector banks compensation is calculated on the basis of 45 days of salary for every year of service or the salary for the remaining period whichever is lower
Benefits Provided To Employees Who Opts For VRS Scheme
- The employee will get 45 days’ salary for each completed year of service or monthly emoluments at the time of retirement multiplied by the remaining month of service before the normal date of service whichever is less
- The employee will also get a provident fund and gratitude dues
- The compensation which is received at the time of voluntary retirement is tax-free up to a prescribed amount
- Companies also provide benefit packages to Employees who opt for voluntary retirement
Conditions On Which Employee Can Opt For Voluntary Retirement
- Recession in business
- Intense competition
- Joint venture with foreign collaboration
- Takeover and merger
- Obsolescence of product or technology
VRS Eligibility Criteria
- The applicant’s age should be at least 40 years old
- Applicant must be working with the company for at least 10 years
- Only the employees of the company can be able to take benefit of this scheme. The only exceptions are directors of companies or a cooperative society.
Entitlement Of Voluntary Retirement Scheme
- The retiring person will get 45 days’ salary for each completed year of service
OR
Monthly emoluments at the time of retirement multiplied by the remaining months of service before the normal date of service (whichever is less )
- Provident fund and gratuity dues will provide to the employee
- The compensation that is received by the retiring employee at the time of voluntary retirement is tax-free up to a certain amount (terms and conditions applied)
- Benefit packages are also offered to employees who opt for a scheme
Conclusion
Through this article, we have provided all the important information regarding the scheme. If you are still facing any kind of problem then you can ask us in the comment box. Your comment is very important to us. We will try to solve your problem. Thank You.