VOLUNTARY RETIREM ENT

LESSON 38: VOLUNTARY RETIREM ENT

SCHEM E

government before offering and implementing the voluntary (4)Formulate terms of V R S and benefits to be offered are to

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retirement schemes.

be mentioned in the circular or communication to employees P

E The Reasons for Proposing VRS

and decide the period during which the scheme is to be kept

(1) Recession in business A

open.

(5) Motivate the managers through counseling.

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(2) Intense competition, which makes the establishment

unviable unless downsizing is resorted to (6) Counselling employees is an essential part of implementing

M the scheme. The counselling should include what the retiring A

(3)Changes in technology, production process, innovation, new employee can do in future i.e. rehabilitation, how to manage

product line

the funds received under the scheme.

(4) Realignment of business - due to market conditions

(7) After receipt of applications for accepting \IRS, scrutinize,

(5) Joint-ventures with foreign collaborations

decide whose applications are to be accepted and those E N T

(6) Takeovers and mergers

whose are not to be accepted.

(7) Business re-engineering process (8) For those whose application are to be accepted prepare a (8) Product/Technology obsolencences.

worksheet showing the benefits each will receive including other dues like Provident Fund, gratuity and earned leave

Procedure for Voluntary Retirement Scheme

wages for the balance un-availed earned leave, and tax The employer has to issue a circular communicating his decision

incidence should the V R S’ amount exceed Rs. 5 lakhs. to offer voluntary retirement scheme - mentioning therein.

The challenges in implementing employees Exit

(a) The reasons for downsizing (1) The reasons and need to introduce V R S should be (b) E ligibility i.e. who are eligible to apply for voluntary

discussed with all management staff including top retirement

management.

(c) The age limit and the minimum service period of employees (2) The effect of downsizing including on the work or activities who can apply (E mployees who is 40 and above and those

of the establishment carried on is to be considered i.e. post who have completed minimum 10 years of service in the

reduction operations to be carried on should also be planned establishment.)

- post plan reduction employee deployment. (d) The benefits that are offered. It should be noted that

(3) E nsure all concerned employees and managers participate in employees who offer to retire voluntarily are entitled as per

the decision making to down size.

law and rules the benefits of Provident Fund,’ Gratuity and salary for balance of privilege leave up to the date of their

(4) The downsizing plan should match with the Strategic plans retirement, besides the voluntary retirement benefits.

of the company.

(e) The right of an employer to accept or reject any application (5)Transparency should be seen and used in choice of persons for voluntary retirement.

to be retired.

(/) The date up to which the scheme is open and applications (6)Be prepared to manage the after effects of the down sizing - are received for consideration by the employer.

both social and psychological.

(g) The circular may indicate income tax incidence on any (7)Motivate employees who will stay with the company, remove voluntary retirement benefits which are in excess of Rs. 5

their apprehensions and fears, if any.

lakhs, which is maximum tax free benefit under such (8) Provide professional assistance to employees who agree to schemes.

accept V R to plan their post retirement, activities and (h) It should also indicate that those employees who opt for

financial management including, out placement. voluntary retirement and accept the benefits under such

(9) The VRS should be made attractive and no pressures should scheme shall not be eligible in future for employment in the

be used to ease out people.

establishment.

M erits of voluntary retirement Scheme

Steps to be taken for introducing and implementing voluntary (1)There is no legal obstacle in implementing VRS - as is retirement scheme

predominantly encountered in retrenchment under the (1) If the company is public sector undertaking obtain approval

labour laws.

of the government. (2)It offers to the employee an attractive financial compensation (2) Identify departments/employees to whom VRS is to be

than what is permitted under retrenchment under the law. offered (Target group of employees -age above 40 years and

(3)Voluntary nature of the schemes precludes the need for employees with more than 10 years service in the company).

enforcement, which may give rise to conflicts and disputes. (3) If there is a union of employees ‘in the establishment

(4) It allows flexibility and can be applied only to certain involve the union by communicating to them the reasons,

divisions, departments where there is excess manpower. the target group and the benefits to be offered to those who

(5) It allows overall savings in the employee costs thus lowering opt for the scheme.

the overall costs.

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Demerits of VRS M

the “Punjab Cooperative Societies Act, 1961, as

To certain extent it creates fear, a sense of uncertainty among amended from time to time including Apex

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employees. Sometimes the severance costs are’ heavy and

Cooperative Institutions

outweigh the possible gains. Trade unions generally protests the

operation of such schemes and may cause disturbance in (b) “Scheme” means Punjab State Public Sector Undertakings

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normal operations. Some of the good, capable and competent Voluntary Retirement Scheme (VRS) 2002.

employees may also apply for separation which may cause (c) “E mployee” means a person employed on permanent/

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embarrassment to the managements. regular basis working against regular sanctioned graded post.

G It is found in practice that organisations may have to repeat the

VRS-SCHEM E.DOC-2-

scheme if there is no response or poor response to the scheme

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by the employees. However, there are instances when the (d) “Service” means a period of permanent or regular

managements have really made the schemes very attractive by employment against graded post as defined in the Service making it “Golden Hand Shake.”

Bye Laws/ Regulations of the PSU. It is incumbent on the establishments that they do not recruit

(e) “Year” means a financial year commencing on 1st April and similar staff immediately after the implementation of voluntary

ending on the subsequent 31st March retirement scheme. Such recruitment, in spirit and essence is

(f) “Salary” means Basic Pay plus appropriate %age of DA as on contrary to the principle of staff being excessive or surplus.

the date of applying.

Tutorial Activity 1.1

(g) “Family” means as defined under rule 2.17 of the Punjab Voluntary Retirement Scheme (VRS) for the employees of

Civil Services Rules, Vol. I

Public Sector Undertakings Short Title: (h) “Request for V.R.” means application submitted for VR, as (i) This scheme may be called the Punjab State Public Sector

per specimen proforma annexed as Annexure-A. Undertakings Voluntary Retirement Scheme (VRS) 2002.

(i) “Competent Authority” means the Chief E xecutive Officer/ (ii) This scheme shall apply to all the Public Sector Undertakings

Managing Director of the Public Sector Undertaking (PSUs) including all Cooperative Institutions of the State of

concerned.

Punjab. This will apply to the Subsidiaries of the PSUs

4. Operation of the scheme:

defined as entities in which PSUs and/or Govt. hold more The Scheme shall remain in operation for 6 (six) months from than 50% equity.

the date of issuance of notification to this effect. The Govt may (iii)This scheme shall come into force from the date of its

extend it from time to time.

notification.

(i) Within the period of operation:

(a) In the case of a PSU which does not require budgetary (i) To achieve optimum human resource utilization.

2. Objective

or any other external support to implement the (ii) To optimize return on investment in PSU.

scheme, it shall come into operation upon the approval by the Administrative Department of a

(iii)In implementing the VRS scheme, managements shall resolution of the Board of Directors that the scheme ensure that it is extended primarily to such employees whose

be brought into effect with specified eligibility criteria services can be dispensed with without detriment to the

company. Care shall be exercised to ensure that highly skilled (b) In the case of a PSU, which requires budgetary or any and qualified workers and staff are not given the option. As

other external support to implement the scheme, it there shall be no recruitment against vacancies arising due to

shall come into operation only after the Department VRS, it is important that the organisation is not denuded of

of Finance approves a proposal of the Administrative talent. The managements of the PSUs shall introduce the

Department based on a resolution of the Board of VRS with the approval of their Boards and the

Directors as in (a) above to this effect. administrative departments. Under no circumstances shall

Vrs-Scheme.doc-3-

grant of VRS be construed as a right.

5. Eligibility

3. Definitions: In this Sscheme, Unless the Context

All persons employed on permanent/regular basis working

Otherw ise Requires,

against regular sanctioned graded post of Public Sector Undertakings will be eligible to seek Voluntary Retirement

(a) “Public Sector Undertaking (PSU)” means an entity that is : provided they have completed a minimum of 5 years of service (i)

Created under a Statute of the State Legislature; or and have at least 5 years of service remaining before their (ii)

Created under a statute of Parliament, in which case

superannuation.

the management & control vests in Govt. of Punjab or However, the employees falling in the following categories as (iii) Created under the Companies Act 1956 in which the

determined by the concerned PSU are not eligible to seek Govt. of Punjab, holds equity share more than 50% of

Voluntary Retirement under the scheme: those issued or A Cooperative Society as defined under

(a) Specialist employees who have executed service bonds and of being heard, pass a speaking order within a period of 3

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have not completed the period prescribed therein; months, either accepting or rejecting the request.

(b)E mployees serving abroad under special arrangement/ (iii)In case the Competent Authority fails to pass an order

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bonds; rejecting the request by the due date as given at sub para (ii)

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(d)E mployees appointed on contract basis; above, the request would be deemed to have been accepted

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and the employee would be retired.

(e) Any other category of employees as may be specifically

debarred by the Public Sector Undertaking from seeking (iv )A copy of every order made under paragraph (iii) above

retirement under this scheme. N shall be given to the employee.

A Note

(v) An employee who is aggrieved by an order of rejection may

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In case disciplinary action is pending against an employee, who within thirty days from issuance of such orders file an appeal

before the Administrative Secretary of the Department under E N

has sought Voluntary Retirement, the Disciplinary Authority

shall, after considering all facts, convey to the Competent which the concerned PSU falls, whose decision shall be final Authority whether the request of the employee should be

and binding.

accepted or not. In case the Disciplinary Authority decides that (vi)The date of acceptance of VRS by the competent authority the request of such an employee for Voluntary Retirement be

will be treated as date of voluntary retirement. not accepted, the same shall be communicated to the employee

10. General Conditions

in writing and he shall have a right to make an appeal as (i) Arrears of wages due to general revision of pay scales etc. provided under section 9 (v). shall not be included in computing the eligible amount.

6.Amount of Ex-gratia

(ii)Only completed years of service shall be reckoned for arriving An employee seeking Voluntary Retirement under the scheme

at the minimum eligible service.

will be entitled to the compensation consisting of salary of 35 (iii)Fraction of service of 6 months and above shall be reckoned days for every completed year of service and 25 days for every as one year for the purpose of calculating the ex-gratia. year of the balance of service left until superannuation. The Fraction of service less than 6 months will be ignored for the compensation will be subject to a minimum of

purpose of calculating the ex-gratia.

VRS-SCHEM E.DOC-4

(iv)The salary shall be calculated on the basis of last salary drawn Rs.25,000/- or 250 days salary whichever is higher. However,

by an employee/officer.

this compensation shall not exceed 80% of the sum of the salary that the employee would draw at the prevailing level for

(v) No employee shall be allowed to withdraw the request made the balance of the period left before superannuation. In case an

for voluntary retirement under the scheme after it has been employee is governed by a retiring/superannuation pension

accepted by the Competent Authority. scheme the disbursement of pension shall commence from the

(vi)The Competent Authority shall have absolute discretion month next to the date an employee would have retired in the

either to accept or reject the request of an employee seeking ordinary course.

Voluntary Retirement under the scheme. The reasons for rejecting the request of any employee seeking Voluntary