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The Golden Handshake The Voluntary Retirement Scheme (VRS) is the latest mantra of many a corporate and Public

sector units. The company may decide to declare a VRS based on their HR plan and suitability. For a common salaried individual this becomes a major decision. The company as per their human resource policy declares VRS or the Voluntary Retirement Scheme. VRS is a scheme whereby the employee is offered to voluntarily retire from his services before his retirement date. Subject to certain conditions the company offers VRS to its employees It is the golden route to cut the excess flab. The most humane technique to retrench the employees in the company today is the voluntary retirement scheme. It is the golden handshake for the employees and the only option today for the companies to downsize their headcount. The scheme which is formally permitted by the Department of Public Enterprises and which provides the lucrative way for the employees to terminate their services and accept VRS. As the name suggests the VRS is strictly voluntary i.e. one can neither compel the workers to accept it nor apply it selectively to certain individuals. One can however choose the levels, units and age groups among whom one wants to offer VRS. But the company can always accept or reject the application for the VRS. But usually this is not done in practical circumstances as it sends wrong signals to the employees. It might imply that the VRS is not actually voluntary but a selective procedure of downsizing. MAINSTREAM economists perceive voluntary retirement as a measure to shed the workforce whose marginal productivity is zero. Further, it is argued that this could be introduced in an industrial organization for maintaining its cost effectiveness in an increasingly competitive world. Moreover, voluntary retirement is accompanied by technological modernization that warrants the replacement of labor with capital. Technological modernization improves the productivity of existing workforce so much so that a section of the existing workforce becomes again redundant even as modernization enhances the installed capacity of the technology. The workforce that becomes redundant in this process has to retire or be retrenched. The rationale behind the introduction of voluntary retirement scheme (VRS) in India is that any organized industrial organization has to operate within the existing legislative framework, which does not allow the organization to shed the redundant workforce without adequate compensation .Employers refer to VRS as 'golden handshake', trade unions call it 'voluntary retrenchment scheme', and for the government, it is 'unstated exit policy' which means that an exit policy which may not exist on paper. VRS is one of the strategies introduced in the early 1980s in central public sector undertakings (PSUs) to reduce the socalled surplus or redundant workforce. It gained publicity after the introduction of new economic policy in 1991.

In India, the government employs more than 70 per cent of the organized workforce; it uses all its channels to reduce the organized sector of the workforce without antagonizing the trade unions. It is envisaged in the new economic policy that VRS can provide minimum sustenance security to the retired individual and his family. Trade unions play a crucial role in introducing the VRS in any organized sector firm. The scheme cannot be implemented without, at least, the tacit approval of the representative union. Sometimes without the consent of the trade unions, workers legalize the VRS by accepting it en masse. Very recently, the entire workforce of Sri Ram Mills (1,400 workers) has accepted VRS while the major union opposed the scheme tooth and nail. Other companies such as Ind Auto, SKF Bearings, Novartis, Biddle Sawyer, and Siemens have also been able to successfully reduce their workforce through the introduction of VRS. When the workers are convinced that the scheme is sufficiently attractive monetarily and/or the company is in deep crisis, they opt for the scheme. When workers find the company's performance good, they refuse to accept the scheme. In such situations, trade unions through various strategies (for instance, by exposing the status of those workers who have accepted VRS) persuade workers not to accept the scheme. A study by Shri Ram Center for Industrial Relations and Human Resources in 14 industrial centers of various states revealed that workers opted for VRS due to apprehension of closure of firms or personal reasons such as poor health, clearance of debt, marriage, education of children, etc. Another study observed that complaints were recorded by some of the VRS workers who came for retraining under NRF that invisible discrimination affected their prospects for promotion in the organization where they were working. Thus, the atmosphere of discrimination and apathy towards the socially disadvantaged groups is also forcing most of the workers belonging to these groups to opt for VRS. The main objective behind the scheme is to send out those who cannot be retrained in new skills. The premise of the argument appears to be weak. The liberalization policy, in its anxiety to modernize, restructure and globalize the products of Indian industry, is wasting precious labor force that could have been modernized through retraining and on-thejob training. Precious skills and abilities of the retrenched workforce are equated with worn out physical capital that may not be susceptible to repair or modernization. Are human beings not capable of learning and modifying their knowledge, skills and applying the same to produce higher output? The current emphasis on restructuring does not allow such questions. The free economy and trade liberalization have ushered in the need for the enterprises to have a competitive edge. Economic forces have led to organizational cost cutting, changes in production processes, exploration of new markets, plant relocations, modernizations, downsizing and structural changes. Organizational adjustment at all levels has become extremely imperative. Over manning has crept into almost all industrial units on account of the inability of the enterprises to reduce or adjust workforce as per the business needs. The sort of cuts that only happened in heavy industries has now become widespread. The days of nibbling away deadwood have long gone. It's time for the organizations to realign and focus on the core competencies.

Technicalities of the Golden Handshake The Voluntary Retirement Scheme is a legal way to down size and thus it involves certain technicalities. The VRS candidates must have worked for the organization for minimum of 10 years and also the age of the worker must be minimum of 40. Employees not complying with these conditions still can apply for the early separation but it would not be counted as the VRS legally. Thus these employees won't be able to avail the benefit of tax exemption. The employees receiving VRS can get the tax exemption for the amount of Rs. 5 lacs lumpsum. Anyone receiving more than Rs. 5 lacs would be charged under Income Tax Act. Thus an employee opting for early separation and not fulfilling the age or experience criteria would be taxed on the whole amount he receives. However the lumpsum amount could be lower of the following: Three months' salary for each completed year of

service. The monthly salary at the time of applying for the VRS multiplied by the number of months left before retirement. The normal benefits that an employee gets: Provident fund Encashed accumulated leave Gratuity Salary for the notice period Cost of transfer to the hometown
Also to make the scheme very attractive for the employees the severance package as it is called can include other benefits like

Medical insurance Housing loans Subsidies on children's education loans, etc.

Hurdles in execution of the VRS The Voluntary Retirement Scheme is not as easy as eating the cake. It deals with actual human beings. It deals with the lives of people who are offered to end the careers abruptly and probably do nothing for the rest of their lives. Thus a lot many problems can arise during the actual execution of the scheme. Some of the problems which could be anticipated and for which appropriate action plan could be drawn are: Non- acceptance of the VRS Over-acceptance of the VRS Operational problems Post-VRS blues Over and above these anticipated problems, there could be many more problems, which could arise during the execution of the scheme. These problems may be industry sector specific, industry specific, company specific or any other unexpected problems. The major hurdle in the acceptance of any scheme is trade union. The trade union does not easily accept such changes even if these changes are made for the genuine reasons. At the same time over-acceptance can cause a lot of problems, as it is visible in the PSU banks. Also due to ongoing retrenchment in the company, the company is vulnerable to all sorts of operational problems. And if the company does not provide for the downsizing the company must be prepared to face the postVRS blues.

VRS Opted at BSES-NDPL

The saga of the workers struggle in the private power distribution companies for Delhi BSES and NDPL, came to a temporary halt when S Reghunathan, Chief Secretary, Delhi Government, announced immediate payment of pension and other benefits to the workers who opted for VRS. The workers had been protesting for the last nine months to get the benefits they are legally entitled to. They were protesting under the banner of the erstwhile DVB SVRS-2003 Employees Welfare Forum, a joint venture of BRPL, BYPL and NDPL SVRS employees. In July 2002, Reliance took over the Delhi Vidyut Board. The following year, on 19 December 2003, they introduced the luring Special Voluntary Retirement Scheme (SVRS) in BSES Rajdhani Power Limited (BRPL) and BSES Yamuna Power Limited (BYPL), which distribute power in central, east, south and west Delhi. The scheme was open to all regular employees who had completed 10 years of service from the date of joining Delhi Vidyut Board or had reached 40 years of age. The time frame given to opt for the scheme was from December 22 to December 31. In a press release jointly issued by BRPL and BYPL management, it was stated that an employee whose application was accepted for the voluntary retirement scheme would be entitled to 60 days salary (basic pay plus dearness allowance) as on December 31of the said year, for each completed year of service or the monthly salary (basic pay plus dearness allowance) multiplied by the balance months of service left before the normal date of retirement. The two companies had over 11,500 employees.

By 31 December 2003, more than 6,200 workers of BSES and NDPL companies had opted for VRS. "Many of us couldn't bear the ill-treatment of the
companies, after the VRS was introduced. They started playing with us shifting from one place to another", said an employee, who was working as a Hindi steno with BSES. She had put in 30 years of service and was forced to opt for VRS. The employeese thought it would be better because all the benefits will come to them immediately and the money could be used for family needs. Instead, to the dismay of the 6,200 workers who opted for VRS, they

were not given anything other than the ex-gratia payment. "For me opting for VRS was a very crucial decision. I had to marry-off my three daughters and the amount I get would have catered to it", says Jamuna Arora an old employee. Many of the workers decided to take voluntary retirement thinking that the lump sum amount could be used to marry off their children, their higher studies, setting up a business for themselves etc. Alas all their dreams turned sour when the management refused to make the settlement. The workers, under the leadership of Abani Roy, Member of Parliament and Secretary of United Trades Union Congress (UTUC) met many government officials including Chief Minister of Delhi, Sheila Dikshit, requesting her to hear their plea. Though each one gave reassurances, nothing constructive happened till 20 September 2004. On 28 August 2004, a delegation under the leadership of Abani Roy met Sheela Dikshit at her residence and apprised her in detail about the grievances of the employees who have so far not been paid the terminal benefits after opting for the Special Voluntary Retirement Scheme. She immediately placed a call to the Chief Secretary requesting him to take action, but to no avail. The employeeses were asked to vacate our houses within 15 days of VRS. Theywere told that if they are not doing it, their ex-gratia benefits will be withheld", The workers vacated the houses immediately after opting for VRS. "People who had a support system could survive. But families with single earning members were at total loss" says Ashok Khanna of NDPL. With no pensions, there was tension in families. Unable to take the pressure, more than 65 people died in the last nine months. The employees had requested the Chief Secretary to settle all their dues by 20 September 2004. On 13 September a decision was taken at a meeting presided over by Abani Roy, that in case the decision of making the payment by 20 September 2004 was not taken, the Joint Front having no other alternative would go for direct action. They informed Chief Secretary's office that the employees facing acute financial crisis could even take the most drastic step of self-immolation, the entire responsibility of which would lie with the Delhi Government. As decided, more than one thousand workers gathered near Shakti Sadan, New Delhi on 20 September 2004, demanding immediate action from the government. Workers shouted slogans and demanded their rights. They threatened to protest by blocking the road, demonstrating, sit-in and even self immolation. It was only then that the Chief Secretary called five representatives of workers along with Abani Roy for a meeting. After holding a meeting with the employers the government officials informed that the workers dues would be cleared within fifteen days. Pension would be paid with immediate affect and the arrears settled in three months time. GPF and other benefits would also be settled within the said period.

Measures taken by BSES for VRS The company in order to avoid or reduce the magnitude of any problem occurring due to the VRS scheme,take care of certain aspects, which have to be kept in mind before offering the scheme. BSES showed a genuine reason for the downsizing. It was not be a 'slogan of the week ' nor should it was to oblige blindly the conditions of the global partner. The company showed having some genuine reasons to offer the VRS and this is the first step in getting the things right. The company conducted its manpower planning to analyze the manpower inventory it has in terms of number and skills and also the manpower inventory it requires to operate at the optimal level. This planning was done considering all the aspects like automation, technology upgradation, new working methods like optimization of resources, total quality management, etc. Depending upon the manpower planning BSES boil down to a number to be downsized and the period over which downsizing should be done. Keeping these figures in mind the company moved towards offering VRS scheme. Communication is the most important phase of execution of any VRS scheme. The company made an explicit announcement of the scheme all over the organization at the same time so as to prevent the spreading of any rumors. The trade union was also be taken into confidence and the all the facts of the scheme was explained to them. They were explained the need of the scheme and also told that if this particular number of people are not downsized the company might face lots of problems in the future which might result into anything even closure of the company. All the workers in the organization should be explained the why's and how's of the scheme. This would make them understand the need of the scheme. They should be communicated the advantages of the scheme like lucrative severance package, preclusion of any need for enforcement. Also the assurance should be given to all the employees that whoever accepts the scheme would be helped by the company during the phase of leaving the company to resettlement. At the same time assurance should also be given to all those employees that those retained could breath easy, as they need not worry about further retrenchment. In the actual implementation of the scheme the different age limits are suggested for different levels and this concept has been extremely successful. The logic given behind this concept is that the people with higher skills retain their productivity for the longer time. Also since the qualified personnel are less in number than that of unqualified ones the model is designed in that manner.

Once the scheme is designed, the company implemented two-pronged strategy of identifying the VRS candidates and also identify the key performers, by empowering line managers and also through the system of performance appraisal. Once these candidates are identified, these employees were counseled accordingly either to accept the VRS or to stay in the company. Making the employees accept the scheme was not the only objective. Also the employees who stay in the company have to be motivated enough so as to keep going. For this key performers have to be individually counseled and also the retraining and redeployment program has to be drawn so as to keep the managers motivated and so as to adjust to the change in the organization. Besides in order to alleviate the effect of the whole exercise, company took up few measures that will help to maintain the morale of the existing employees. Some of the measures, which could be provided, are: 1. Outplacement 2. Help of placement agency 3. Counseling Outplacement: It is the in-house help provided by the organization itself in order to help the employees during the transition phase from retrenchment to the resettlement. The company can play an important role by providing counseling, training, and all the other help required by the employees. Although this involves cost, however compared to the advantages obtained in return, it is negligible. It not only helps organization to convince employees to accept VRS but also helps in maintaining the morale of the retained employees. Moreover this exercise also helps in creating good corporate image of the organization that can help organization in the long term like future recruitment. Placement agency: Besides having outplacement facility a company can also take the help of placement agency. This agency can appraise, counsel and place the retrenched employees on deserving jobs. Also there have been practices where company purposefully asks the agency to tell nice things about the retrenched employees so that they will have the " feel good " factor to keep their motivation even after the retrenchment. Counseling: This is an effective tool to reduce the effect of the VRS. The retained as well as retrenched employees could be counseled to good effect to keep up their motivation level.

Compensation structure of BSES after VRS

BSES have revised the scheme to make it more efficacious having regard to both, the interests of the employees and the need to enable itself to rationalize their surplus manpower. 1. In no case shall the compensation exceed 60 days salary for each completed year of service or the salary for the number of months service left, whichever is less. Salary for the purpose of VRS shall consist of basic pay and DA only and no other element. 2. BSES adopted the revised scheme of VRS which is modelled on the Scheme that exists in the State of Gujarat. The details of the scheme are set out hereunder: (i) The compensation will consist of salary of 35 days for every completed year of service and 25 days for the balance of service left until superannuation. The compensation will be subject to a minimum of Rs. 25,000/- or 250 days salary whichever is higher. However, this compensation shall not exceed the sum of the salary that the employee would draw at the prevailing level for the balance of the period left before superannuation. (ii) (iii) Salary for purpose of VRS will consist of basic pay and DA only. Arrears of wages due to revision etc. will not be included in computing the eligible amount.

(iv) Payment of bonus should conform to the provisions in the Bonus Act; Casual Leave may be encashed in proportionate measure upto the date of VRS. Computation of one Days Salary in Gujarat Pattern Basic + DA Rs. 7000 + Rs. 2500 = Rs. 9500 Rs. 9500 26 days = Rs. 365.38 (one days salary) Completed 32 years service. 32 Yrs. X 35 days X Rs. 365.38 = Rs. 409225.60 NOTE: (i) for computation of one days salary 26 days a month is taken. i. similar is for the remaining period of service left. 10

Remaining 3 years service: 3 years X 25 X Rs. 365.38 = Rs. 27403.50 Total amount payable: Rs. 409225.60 + Rs. 27403.50 = Rs. 436629.10 Amount to be paid shall be restricted to: 3 X 12 = 36 months Total amount to be paid as VRS compensation: 36 X Rs. 9500 = Rs. 342000/NOTE: The payable amount would have to be restricted to Rs. 3,42,000/-. 3. For sick and unviable units, the VRS package of Department of Heavy Industry will be adopted. As a corollary, the VRS scheme may be modelled on Gujarat. However, employees would have to opt for VRS within 3 months from the date of offer failing which they would be eligible only for retrenchment compensation. The details of VRS are as under:(i) An employee would be entitled to an ex-gratia payment equivalent to 45 days emoluments (pay + DA) for each completed year of service or the monthly emolument at the time of retirement multiplied by the balance months of service left before the normal date of retirement, whichever is less;

(ii) All those who have completed not less than 30 years of service, will be eligible for a maximum of 60 (sixty) months salary/wage as compensation. This will be subject to the amount not exceeding the salary/wage for the balance period of service left (at the rate of monthly salary/wage at the time of voluntary retirement).

4.

The compensation under VRS/VSS will be in addition to terminal benefits.

5. Employees of industrial cooperatives with Government equity participation and who are not members of the cooperative will also be covered under the VRS. 6. Budgetary support will be provided to the marginally profit or loss making enterprises and to the sick enterprises for implementing VRS only in case bank credit is not available. The funds would normally be made available at the beginning of the financial year.. 7. VRS will be applicable to the permanent employees, badli workers, work charged established and temporary workers but not to the casual workers. There will be no recruitment against vacancies arising due to VRS.

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8. It will be the responsibility of the concerned administrative Ministry to assist those opting for VRS in getting loans from banks for pursuing gainful self employment.

9. In implementing the VRS scheme, managements shall ensure that it is extended primarily to such employees whose services may be dispensed without detriment to the company. Care will be exercised to ensure that highly skilled and qualified workers and staff are not given the option. As there shall be no recruitment against vacancies arising due to VRS it is important that the organization is not denuded of talent. The managements of the BSES shall introduce the VRS with the approval of their Boards and the administrative Ministries.

Conclusion VRS should have a humane touch to the downsizing. This is very necessary because it is not only the posts that are downsized but there are human beings involved in this process. This process should convince them that the posts in the organization have become redundant and not the person and the organization still values the person. Since this process involves emotions and feelings, every care must be taken by the management that the process must be carried out in such a manner that it keeps the dignity of the employees but at the same time achieves the objective in a tactful manner.

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