Voluntary Retirement Scheme

 

What is VRS?

Voluntary Retirement Scheme

 

Figure 1: Voluntary Retirement Scheme

Companies provide their employees with the option to retire voluntarily before they reach retirement age through a program known as a Voluntary Retirement Scheme, or VRS. Retirement is something that, as we all know, is related to getting older, although many people look to retire far earlier. Employees are able to do this thanks to the voluntary retirement scheme, or VRS. Offering VRS to employees is primarily intended to help businesses cut back on surplus staff, decrease costs, and boost productivity. The Voluntary Retirement Scheme, or VRS, is a benefit that employers provide to their staff members that allows them to voluntarily cease their employment and retire early. Offering VRS to the employees in these situations is a fantastic method to ensure that while doing what is essential for the company, the employees are also rewarded. Companies frequently have to let go of people for a variety of reasons, such as cost cutting and decreasing the load (Sujaini, 2023).

 

 

 

Who is eligible for a VRS?

Employees must be at least 40 years old or have served for at least 10 years in order to be eligible to participate in the voluntary retirement plan. All employees of an organization are subject to the VRS, with the exception of directors of the business or cooperative society (Dhand, 2022).

Features of Voluntary Retirement Scheme

Before an employee opts for VRS, they must make themselves aware of all the features of this scheme:

·         Employee must have completed 10 years of service or must be above 40 years of age to avail VRS.

·         Companies clear Provident fund (PF) and gratuity dues at the time of retirement under VRS.

·         The compensation paid under VRS is income tax-free up to Rs. 5 lakhs under section 10 (10C) of the Income Tax Act. You must claim it in the same assessment year as that of receiving compensation.

·         Employees can benefit from rehabilitation, tax consultation, and counseling, etc. Companies offer assistance to facilitate smooth retirement.

·         Retiring employees must not join any other organization belonging to the same industry or management.

·         Companies cannot refill the vacancies created by implementing VRS (Dhand, 2022).

Benefits of VRS

Figure 2: Benefits of VRS

Both employers and employees stand to gain from VRS. Let's examine the benefits of the voluntary retirement program:

·         First, VRS offer companies an empathetic way to relieve employees of their duties while improving their economic efficiency.

·         As the name suggests, the scheme is voluntary. Nobody can force the employees into opting for early retirement. Additionally, the entire process is very transparent. Therefore, the trade unions do not object to it.

·         At the time of retirement, the employee receives all the benefits and dues they are owed. They can use these funds to pursue other interests or even start their own business.

·         Finally, whenever a company offers VRS, it must comply with all the regulations laid out by the Industrial Disputes Act, 1947. Therefore, employees are guaranteed transparency and fair settlements (HDFC team, 2021).

Problems of Voluntary Retirement Scheme

VRS do have some problems as well. These are as follows:

·         Management might lose talented employees due to voluntary retirement scheme because many skilled, competent and productive employees may also apply for VRS in order to be separated from the company.

·         If in a company a number of employees apply for VRS then a feeling of fear and uncertainty develops among the existing employees regarding their job security.

·         The employee's separation from the organization due to VRS may cost much more as compared to the gains achieved from productivity.

·         Although VRS is a better method of separation of employees, still there might be protest by the trade unions and other members of organization against this scheme, which can hamper the working of the industry.

·         The name and fame of the organization may also get affected due to the VRS operations (Solanki, 2022).

 

 

Conclusion

A voluntary retirement program is a lifesaver for businesses that are having trouble surviving. They might be able to improve their financial situation by laying off some workers. Dependent employees can leave such fragile companies. They might choose options for income that are more reliable. The financial simplicity and upskilling support provided by some businesses make it easier for their employees to adjust to this new stage of life. Once your employer does, though, take the time to review the details of the Voluntary Retirement Program. Only make a choice after assessing the advantages and disadvantages of choosing a VRS.

 

References

Dhand, A., 2022. Scrip Box. [Online]
Available at: https://scripbox.com/saving-schemes/vrs/
[Accessed 24 April 2023].

HDFC team, 2021. HDFC Life. [Online]
Available at: https://www.hdfclife.com/insurance-knowledge-centre/retirement-planning/voluntary-retirement-scheme-features-and-benefits
[Accessed 24 April 2023].

Solanki, K., 2022. Top 4 u. [Online]
Available at: https://www.toppers4u.com/2022/02/voluntary-retirement-scheme-meaning.html
[Accessed 24 April 2023].

Sujaini, 2023. Clear Tax. [Online]
Available at: https://cleartax.in/g/terms/voluntary-retirement-scheme#:~:text=So%20how%20is%20this%20compensation,the%20employee%20for%20each%20year.
[Accessed 24 April 2023].

 

Figure 1: Voluntary Retirement Scheme. 1

Figure 2: Benefits of VRS. 2