Voluntary retirement Scheme

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INTRODUCTION

1.1 GENERAL INTRODUCTION

Industries are the most vital for all economies of the world irrespective of developing or developed. It provides support to each sector that holds the economy of the country intact. Industrial Training refers to work experience that is relevant to professional development prior to graduation. The purpose of the Industrial Training is to provide exposure for the students on practical fields.

Through this exposure, students will have better understanding of functioning of the organization in general and sense of frequent and possible problems. It is a part of the learning process which uplifts the knowledge, experience and confidence of a student. This training is done at Keltron Equipment Complex (KEC). KEC is situated at Karakulam, Trivandrum. India’s largest manufactures of electronic products and IT products. The company has been certified ISO 9001-2000 for design, manufacture and support of aluminum electronic capacitors.

STUDY OF VRS AT KELTRON, KARAKULAM, TRIVANDRUM

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ORGANIZATION PROFILE

HISTORY OF THE COMPANY

KELTRON’S history is a saga of innovation in electronics. From being a pioneer in 1973, to the role of a trend-setter today, Keltron has been the catalysis for the development of electronics industry in Kerala. The tag line launching a State-owned electronics enterprise, more than a quarter century ago, read “spearheading an electronics revolution in Kerala”. It was an experiment by Government of Kerala to transform the laid-back, picturesque Kerala State known for its spices, natural beauty, Kathakali and the Onam boat races, to an arena for industrial and technological development. That was how Keltron was born. Within five years of its inception, Keltron had set up a production centre in every district of the State. More than 5,000 people were engaged directly or indirectly by Keltron for the manufacture of electronic goods. The model of a State-owned electronics corporation was so successful that several other States in India followed suit; launching their own electronics corporations.

A quarter century later, Keltron after having contributed substantially to the industrialization of the State, set about transforming Trivandrum, the capital city of Kerala, into one of the major electronics hubs of the country. Today, the city is home to Techno park, the internationally known technology park where thousands of talented men and women participate in the development of a burgeoning information technology industry. Thus Keltron has in effect triggered a revolution that still keeps churning out its benefits to individuals and institutions in different parts of the world, continuing in its quest to innovate products and processes that would add further value to life and to the industry.

Strategic Vision

To be a world-class, growth-oriented electronics corporation specialized in providing quality, market-focused products, services and cost-effective system solutions to a large clientele. To attain leadership position in the knowledge industry by training and utilizing the rich knowledge capital available in Kerala, and creating a wide technology horizon for the development of knowledge wares and intelligent systems.


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INDUSTRY PROFILE

India is the fifth largest economy in the world and has the second largest GDP among emerging economies. Owing to its large population, the potential consumer demand is almost unlimited and consequently under appropriate conditions, strong growth performance can be expected.

In fact, the liberalization of the economy in 1991 has lead to rapid growth. The electronics industry, in particular, is emerging as one of the most important industry in the Indian market.

The electronics industry in India dates back to he early 1960’s. Electronics was initially restricted to the development and maintenance of fundamental communication systems including radio-broadcasting, telephonic and telegraphic communication, and augmentation of defense capabilities. Until 1984, the electronics sector was primarily government owned. The late 1980’s witnessed a rapid growth of the electronics industry due to sweeping economic changes, resulting in the liberalization and globalization of the economy. The economic transformation was motivated by two compelling factors- the determination to boost economic growth, and to accelerate the development of export oriented industries, like the electronics industry.

The electronics industry has recoded very high growth in subsequent years. By 1991, private investments both foreign and domestic- were encouraged. The easing of foreign investment norms, allowance of 100 percent foreign equity, reduction in custom tariffs, and delicensing of several consumer electronic products attracted remarkable amount of foreign collaboration and investment. The domestic industry also responded favorably to the politic policies of the government. The opening of the electronics field to private sector enabled entrepreneurs to establish industries to meet hitherto suppressed demand.

Improvements in the electronics industry have not been limited to a particular segment, but encompass all its sectors. Strides have been made in the areas of commercial electronics, software, telecommunications, instrumentation, positioning and networking systems, and defense. The result has been a significant trade growth that began in the late 1990’s.

Despite commendable achievements in the sphere of electronics, considerable infrastructural improvements remain a priority. Water, power, telecommunications, and transportation sectors must still be augmented so that high economic growth can be sustained.

The Indian Electronic industry is a text for investors who are considering India as a potential investment opportunity. The important aspects of the Indian electronics industry are:

the historical background of the electronic development in India. tax structure, market strategies, economic policies(domestic and foreign), and traditional

areas of economic development. the growth of various segments of the electronics industry including telecommunications,

consumer electronics, computer hardware and software, and medical electronic systems.


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the problems faced by the industries pertaining to power, transportation, communication net works, and other environmental considerations.

directions and strategies for radical industrial growth in the future, and hints at promising development in the coming years.

Overall objectives & Approach of Kerala State’s Industrial Policy

The overall objectives and features of the policy can be listed as under:

Accelerate the rate of industrial growth in the state, the target being 9% of the average annual growth.

Create massive employment opportunities in the industrial sector of the state. Create the necessary infrastructure facilities for establishing industries. Convert the state public sector under takings into performing assets and ensure their

development, diversification and modernization. Modernize the traditional sector to make it more dynamic, competitive & self-reliant, and

ensure decent wages for the workers. Attract domestic & foreign private investments subject to the existing laws that governing it. Utilize the resources and potentials available in the state prudently. Create a management culture and promote cordial industrial and labor relations. Provide necessary assistance for the marketing of industrial products in both internal and

external markets at favorable terms and conditions. Revive sick and closed units both in private and public sectors and utilize their assets and

technology to the maximum. Promote the use of non-polluting machinery and technology and renewable sources of

energy. Revitalize the delivery mechanism with a view to making it more efficient, transparent and

accountable. To take necessary steps to get increased central investment for the industrial development of

kerala. Expand welfare schemes to cover more areas. Promote agro-based industries like coconut-processing units.

FUNCTIONAL DEPARTMENT OF KELTRON

The main functional departments of KEC are as follows:

1. Personnel and Administration Department


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2. Finance Department3. Production Department4. Marketing Department5. Purchase Department6. Quality Assurance Department

1) Personnel and Administration Department

The division has got adequate manpower trained appropriately for their respective area of activity. It is ensured that persons deputed for a particular work is competent enough for the job based on his qualification, skill, training and work experience. KELTRON Personnel Department is responsible for implementation of human resource development action. The department heads evaluate the competency and awareness of personnel in the area of activity by a suitable evaluation procedure. The department heads intimate training needs of the personnel to the personal department. The personal department of each division also prepares the attendance report and calculation of leave account of all its employees. It provides the employees yearly holidays, working hours and conduct training or other development programs for the benefit of the employees.


PERSONNEL OFFICER

TIME OFFICE ESTABLISHMENT

WELFARE

SR. SUPERIENTEDENT 1


SR. SUPERIENTEDENT

DATA ENTRY OPERATOR


SR. ASSISTANT II

P A

PERSONNEL OFFICER

HEAD OF FIRST AID

HELPER

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Personnel department provides employee benefits and other remuneration to the employees. It provides fringe benefits like provident fund, pension, gratuity etc to the employees. The firm also provides medical benefits to the employees in the form of ESI facility.

This department is mainly divided into three min sections:

a) Personnel Mattersb) Welfare and Administrationc) Industrial Relation

a) Personnel Matters

Recruitment :The main function of recruitment is done at the corporate office and distributing the required human resources to units and branches. Some recruitment is done on apprenticeship basis and select apprenticeship on contract for doing the lower level work.

Selection : The selection procedure involves the following steps:

- Screening/ Test/ Interview.- Preparation of selection list.- Offer letter to candidates.- Joining report/ personal data.- Placement details.- Report to corporate office. Training Training programs are conducted to increase the efficiency of the employees. Personnel department invites training requirement from all departments. Training needs proposed by the officials are consolidated category wise (executives, supervisors, ministerial staffs, workmen). The minimum training program is 15 days and maximum for one month.

Working hours:Working time is at 8.30am to 4.30pm

Attendance:Attendance is mainly recorded both on manual ways and with the help of machines. Photo cum ID punching cards are issued to the employees and they make attendance of IN and OUT. The attendance data is collected on a weekly basis and sent to the required section for verification. On the basis of that loss of pay has been sent to the finance department on monthly basis.

Leave:The employee must apply for the leave and the sanction of leave is made as per the rules of the corporation and then the leave application is forwarded to the time office section that makes proper entries in the leave cards and then comes the preparation of master rolls for the finance department for salary payment.

Holiday: 17 holidays per year and also the government holidays.


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Payment of wages: Lower level employees are working on daily wage of Rs.140/day.

b) Welfare And Administration

Promotion:Promotion is mainly done on the basis of seniority cum merit. There are separate promotion measures for the workers and the employees and all these will be affected as per a particular period.

Bonus: Bonus payment is an employee which he earns salary up to 7500.

Housing facility: The organization provides employees to the top level employees and also they give some facility to lower level employees

Transport facility: Organization provides transport facility for all employees.

Uniforms:Organizations give uniforms to the lower level employees otherwise they give money to purchase the uniforms.

Stipend of trainee: Organization provides a small amount of stipend give to the apprentice.

Canteen facility for all units:They provide canteen facility to all employees. They food coupon to all employees in the organization.

c) Industrial Relation and Trade Union Management

KELTRON endorse good industrial relations and management uses all the possible ways to make the workers motivated and loyal to the company. These exists good support between the management and the trade unions in KEC include KEA (Keltron Employees Association affiliated to CITU), KEO (Keltron Employees Organization) and KEU (Keltron Employees Union affiliated to INTUC). The union representing the management includes SPATO (State Public Sector of Officers Association) and KEXA (Keltron Employees Executive Association). Trade unions are that much active so there is no need of setting up of a separate work committee and trade unions acts as the representatives of the employees and talk to the management.

Grievance and Disciplinary Procedures

The company follows an open door policy in handling grievances, any worker can at any time to go and talk to any officer on work related matters and in this company there is not much


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distinction between the management and the workers. There exist separate disciplinary proceedings against the workmen and the executives, if they commit any thing that violates the rule of the company. The procedures are as follows:

Issue of charge memo. Suspension pending enquiry. Explanation from the individual’s part. Enquiry. Submission of enquiry report. Final decision of management. Awarding punishments. Appeal.

Safety and Security Measures

The company has got its own unique safety and security measures. The security system of the company comprises 17 security guards for protecting the 17 acres of premises. These people work in the three shifts,5 persons in first shift, 6 persons in second shift, and 6 persons in third shift. There exists some break ups in their working hours like 6 am – 2 pm, 2 pm – 10 pm, 10 pm – 6 am. There is a duty post for them to register. Though the company is famous for producing unique products, safety measures are adopted to avoid dangerous situations. The employees are provided with shoes, glows, mask, ear plug and other fire fighting equipments for a better and healthier working condition.


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LITERATURE REVIEW

In the present globalised scenario, right sizing of the manpower employed in an organization has

become an important management strategy in order to meet the increased competition. The

voluntary retirement scheme (VRS) is the most humane technique to provide overall

reduction in the existing strength of the employees. It is a technique used by companies for

trimming the workforce employed in the industrial unit. It is now a commonly used method to

dispense off the excess manpower and thus improve the performance of the organization . It is a

generous, tax-free severance payment to persuade the employees to voluntarily retire from the

company. It is also known as “GOLDEN HANDSHAKE” as it is the golden route to

retrenchment.

In India, the Industrial Disputes Act, 1947 puts restrictions on employers in the matter of

reducing excess staff by retrenchment, by closures of establishment and the retrenchment process

involved lot of legalities and complex procedures. Also, any plans of retrenchment and reduction

of staff and workforce are subjected to strong opposition by trade unions. Hence, VRS was

introduced as an alternative legal solution to solve this problem. It allowed employers including

those in the government undertakings, to offer voluntary retirement schemes to off-load the

surplus manpower and no pressure as such was put on any employee to exit. The voluntary

retirement schemes were also not subjected to not vehement opposition by the Unions, because

the very nature of its being voluntary and not using any compulsion. It was introduced in both


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the public and private sectors. Public sector undertakings, however needs to obtain prior

approval of the government before offering and implementing the VRS.

VRS means Voluntary Retirement Scheme. Employers who want to reduce the employee

strength give some employees the option to retire before normal retirement age. The employees

may or may not accept this option. Those who accept the option are VRS employees. The VRS

employees get the compensation. They receive lump sum from the employers including VRS

compensation, Provident Fund, Gratuity, Leave Encashment etc. The VRS employees have to

depend on income from the investments of the lump sum for their future life.

A business firm may opt for a voluntary retirement scheme under the following

circumstances:-

Due to recession in the business.

Due to intense competition, the establishment becomes unviable unless downsizing is

resorted to.

Due to joint-ventures with foreign collaborations.

Due to takeovers and mergers.

Due to obsolescence of Product/Technology

Changes in technology, production process, innovation, new product line

Realignment of business - due to market conditions

Procedure for Voluntary Retirement Scheme followed by the employer

The employer has to issue a circular communicating his decision to offer voluntary retirement

scheme – mentioning therein

The reasons for downsizing

The age limit and the minimum service period of employees who can apply

The benefits that are offered. It should be noted that employees who offer to retire

voluntarily are entitled as per law and rules the benefits of Provident Fund,’ Gratuity and

salary for balance of privilege leave up to the date of their retirement, besides the

voluntary retirement benefits.


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The right of an employer to accept or reject any application for voluntary retirement.

The date up to which the scheme is open and applications are received for consideration

by the employer.

The circular may indicate income tax incidence on any voluntary retirement benefits

which are in excess of Rs. 5 lakhs, which is maximum tax free benefit under such schemes.

It should also indicate that those employees who opt for voluntary retirement and accept

the benefits under such scheme shall not be eligible in future for employment in the

establishment.

Procedure for VRS to be followed by the employee

An eligible employee may submit request opting for Voluntary Retirement under the

scheme to the Competent Authority through proper channel in a prescribed proforma which

shall be available in the PSU.

The Competent Authority may after considering the application and after giving an

opportunity to the applicant; of being heard, pass a speaking order within a period of 3

months, either accepting or rejecting the request.

In case the Competent Authority fails to pass an order rejecting the request by the due

date as given above, the request would be deemed to have been accepted and the employee

would be retired.

A copy of every order made under above shall be given to the employee.

An employee who is aggrieved by an order of rejection may within thirty days from

issuance of such orders file

an appeal before the Administrative Secretary of the Department under which the

concerned PSU falls, whose decision shall be final and binding.

The date of acceptance of VRS by the competent authority will be treated as date of

voluntary retirement.


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Steps to be taken for introducing and implementing voluntary retirement scheme

If the company is a public sector undertaking obtain approval of the government.

Identify departments/employees to which VRS is to be offered more.

If there is a union of employees in the establishment involves the union by

communicating to them the reasons, the target group and the benefits to be offered to those

who opt for the scheme.

Terms of VRS and benefits to be offered are to be mentioned in the circular or

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

open.

Counseling employees is an essential part of implementing the scheme. The counseling

should include what the retiring employee can do in future i.e. rehabilitation, how to

manage the funds received under the scheme.

After receipt of applications for accepting VRS, scrutinize, decide whose applications are

to be accepted and those whose are not to be accepted.

For those whose application are to be accepted prepare a worksheet showing the benefits

each will receive including other dues like Provident Fund, gratuity and earned leave

wages for the balance un-availed earned leave, and tax incidence should the VRS

amount exceed Rs. 5 lakhs.

The challenges in implementing employees Exit

The reasons and need to introduce VRS should be discussed with all management staff

including top management.

The effect of downsizing including on the work or activities of the establishment carried

on is to be considered i.e. post reduction operations to be carried on should also be planned

- post plan reduction employee deployment.

Ensure all concerned employees and managers participate in

the decision making to down size.

The downsizing plan should match with the Strategic plans of the company.

Transparency should be seen and used in choice of persons to be retired.


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Be prepared to manage the after effects of the down sizing - both social and

psychological.

Motivate employees who will stay with the company, remove their apprehensions and

fears, if any.

Provide professional assistance to employees who agree to accept VRS to plan their post

retirement, activities and financial management including, out placement.

The VRS should be made attractive and no pressures should be used to ease out people.

Merits of voluntary retirement Scheme

There is no legal obstacle in implementing VRS - as is predominantly encountered in

retrenchment under the labour laws.

It offers to the employee an attractive financial compensation than what is permitted

under retrenchment under the law.

Voluntary nature of the schemes precludes the need for enforcement which may give rise

to conflicts and disputes.

It allows flexibility and can be applied only to certain divisions, departments where there

is excess manpower.

It allows overall savings in the employee costs thus lowering the overall costs.

Demerits of VRS

To a certain extent it creates fear, a sense of uncertainty among employees. Sometimes the

severance costs are heavy and outweigh the possible gains. Trade unions generally protest the

operation of such schemes and may cause disturbance in normal operations. Some of the good,

capable and competent employees may also apply for separation which may cause

embarrassment to the managements.

It is found in practice that organizations may have to repeat the scheme if there is no response or

poor response to the scheme by the employees. However, there are instances when the

managements have really made the schemes very attractive by making it “Golden Hand

Shake.”


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It is incumbent on the establishments that they do not recruit similar staff immediately after

the implementation of voluntary retirement scheme. Such recruitment, in spirit and essence is

contrary to the principle of staff being excessive or surplus. In case disciplinary action is pending

against an employee, who has sought Voluntary Retirement, the Disciplinary Authority shall,

after considering all facts, convey to the Competent Authority whether the request of the

employee should be accepted or not. In case the Disciplinary Authority decides that the request

of such an employee for Voluntary Retirement be not accepted, the same shall be communicated

to the employee in writing and he shall have a right to make an appeal as provided under section

9 (v).

Amount of Ex-gratia

An employee seeking Voluntary Retirement under the scheme will be entitled to the

compensation consisting of salary of 35 days for every completed year of service and 25 days

for every year of the balance of service left until super annuation. 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 80% of the sum of the salary that the employee would draw at

the prevailing level for the balance of the period left before superannuation. In case an employee

is governed by a retiring/superannuation pension scheme the disbursement of pension shall

commence from the month next to the date an employee would have retired in the ordinary

course.

100% of the amount of ex-gratia payable to an employee on opting for Voluntary Retirement

under this Scheme would be paid in cash within 60 days from the date of his relieving. An

employee whose offer for Voluntary Retirement under the Scheme is accepted will be eligible,

apart from the ex-gratia defined above, to any benefit that would have been available to him

upon superannuation as per the policy extant in the PSU prior to the date of notification of this

scheme. It is clarified, however, that an employee shall not be eligible for both retrenchment

compensation and ex-gratia under this scheme but shall have to opt for one of the two.


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General Conditions

Arrears of wages due to general revision of pay scales etc. shall not be included in

computing the eligible amount.

Only completed years of service shall be reckoned for arriving at the minimum eligible

service.

Fraction of service of 6 months and above shall be reckoned as one year for the purpose

of calculating the ex-gratia. Fraction of service less than 6 months will be ignored for the

purpose of calculating the ex-gratia.

The salary shall be calculated on the basis of last salary drawn by an employee/officer.

No employee shall be allowed to withdraw the request made for voluntary retirement

under the scheme after it has been accepted by the Competent Authority.

The Competent Authority shall have absolute discretion either to accept or reject the

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

rejecting the request of any employee seeking Voluntary Retirement shall be recorded in

writing by the Competent Authority.

All payments under the scheme and any other benefit payable to an employee shall be

subject to the prior settlement/re-payment in full of loans, advances, returning of Govt.’s

property and any other outstanding due against him and payable by him to the PSU

concerned.

All payments made under the scheme shall be subject to deduction of tax at source as per

Income Tax Act 1961 wherever applicable.

An employee who seeks voluntary retirement under this scheme shall not be eligible for

re-employment in Govt., any PSU or any of its subsidiaries. A complete data/record, on

website of all those employees of the Public Sector Undertakings / Corporations, who have

availed the VRS shall be retained. While making future recruitments no person out of these

shall be retaken in service.

In the event of the death of an employee, whose request for voluntary retirement under

the scheme has been accepted, the compensation, which would have become due and

payable to the deceased employee, shall be paid to the person nominated to receive such

dues.


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The benefits payable under this scheme shall be in full and final settlement of all claims

of whatsoever nature, whether arising under the scheme or otherwise to the employee (or

his nominee in case of death). An employee who voluntarily retires under this scheme will

not have any claim against the PSU concerned of whatsoever nature and no demand or

dispute or difference will be raised by him or on his behalf, whether for re-employment or

compensation or back wages including employment of any of his relative on compassionate

grounds.

Eligibility criteria in general

The companies can frame different schemes of voluntary retirement for different classes of

their employees. However, these schemes have to conform to the guidelines prescribed in

rule 2BA of the Income-tax Rules. The guidelines for the purposes of section 10( 10C ) of

the Income-tax Act have been laid down in the rule 2BA of the Income-tax Rules.

The guidelines provide that the scheme of voluntary retirement framed by a company should

be in accordance with the following requirements, namely:

It applies to an employee of the company who has completed ten years of service or

completed 40 years of age

It applies to all employees (by whatever name called), including workers and executives

of the company excepting Directors of the company

The scheme of voluntary retirement has been drawn to result in overall reduction in the

existing strength of the employees of the company

The vacancy caused by voluntary retirement is not to be filled up, nor the retiring

employee is to be employed in another company or concern belonging to the same

management

The amount receivable on account of voluntary retirement of the employees, does not

exceed the amount equivalent to one and one-half months salary for each completed year of

service or monthly emoluments at the time of retirement multiplied by the balance months

of service left before the date of his retirement on superannuation. In any case, the amount

should not exceed rupees five lakhs in case of each employee, and


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The employee has not availed in the past the benefit of any other voluntary retirement

scheme.

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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 wayfor 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.

Technicalities

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 withthese 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:


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· 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

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 post-VRS blues.

Measures

The company can avoid or reduce the magnitude of any problem occurring due to the VRS scheme. There are certain aspects, which have to be kept in mind before offering the scheme.

· The company must have a genuine reason for the downsizing. It should not be a 'slogan of the week ' nor should it be to oblige blindly the conditions of the global partner. The company must


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be having some genuine reasons to offer the VRS and this is the first step in getting the things right.

· The company must conduct 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 should be done considering all the aspects like automation, technology upgradation, new working methods like optimization of resources, total qualitymanagement, etc.

· Depending upon the manpower planning the company should boil down to a number to be downsized and the period over which downsizing should be done. Keeping these figures in mindthe company must move towards offering VRS scheme.

· Communication is the most important phase of execution of any VRS scheme. The company should make 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 also should be taken into confidence and the all the facts of the scheme should be explained to them. They should be 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. But this theory has received criticism of being biased for the upper class or being Brahminist. This issue is debatable but it has worked wonders for many companies.

· Once the scheme is designed, the company should implement two-pronged strategy of identifying the VRS candidates and also identify the key performers. This can be done by empowering line managers and also through the system of performance appraisal. Once these candidates are identified, these employees should be counseled accordingly either to accept the VRS or to stay in the company.

· Keep the promises you made, so as to implement the scheme smoothly. Include in the severance package different benefits, which would help employees to accept the scheme. Also offer the option of receiving the package in lumpsum or in the pension form or in combination.


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· Making the employees accept the scheme is no 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 should take up few measures that will help to maintain the morale of the existing employees.

Some of the measures, which could be provided, are:

· Outplacement· Help of placement agency· 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.


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VOLUNTORY RETAIRMENT SCHEME IN KELTRON.

The Kerala State Electronics Development Corporation (Keltron), which recently implemented a voluntary retirement scheme as part of its revival plan, has chalked out a slew of programmes to turn itself around in the near future.

While the ``right-sizing'' exercise has seen the exit of 625 employees under VRS, the company has now started scouting for fresh talent for critical areas, including information technology, into which it plans to diversify in the days to come.

The company had identified IT as a thrust area for future growth. One of the proposals in this direction is to develop a full-fledged ``Software Development Centre'' with high-end servers and well-trained manpower, according to Mr. K. Mohandas, Principal Secretary for Industries, and Mr. Ajaykumar, Managing Director, Keltron.

They told presspersons here on Tuesday that the company also proposed to utilize its available infrastructure and manpower, wherever possible, for productive purposes in the area of information technology.

Mr. Mohandas said Keltron had identified strategic partners in the software field to take up various projects relating to the State Government and outside. Also, along with fresh recruitments, the existing software personnel would be provided training to handle projects alongside the strategic partners.

He said the computer manufacturing facility of Keltron was being strengthened. The company proposed to introduce home PCs for domestic use at reasonable prices in the next few months. And considering the need for service at door-steps, the programme would d initially begin with one district and later extended to cover the entire State.

In the medium to long term, Keltron would enter into providing various IT-enabled services like data warehousing, caller service centers and e-commerce, Mr. Mohandas said.

On financial restructuring, he said the overall liabilities of Keltron to financial institutions such as IDBI, ICICI and IFCI amounted to Rs 44 crore as on March 31. The company had paid Rs 14 crore to FIs as one-time settlement of the dues.

In addition, the company had outstanding liabilities of the order of Rs 146 crore to a consortium of four banks. The company had recently offered a settlement package to the banks and was awaiting their formal approval, Mr. Mohandas said.

He said the company was in the process of establishing a research and development centre with the assistance of the Department of Science and Technology of the Union Government.


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In the meantime, product development and product diversification were being undertaken with R&D partners like Electronics Research and Development Corporation (ER&DC) and Centre for Development of Telematics (C-DoT).As part of rejuvenating the existing central Tool Room, a project proposal had been submitted to the Union Government for establishing a tool room-cum-production-cum-training centre with a total outlay of Rs 15 crore.

The Management of the Kerala State Electronics Development Corporation (Keltron) has decided to offer voluntary retirement scheme to 625 employees.

The VRS is part of the package being implemented for revival of the ailing public sector undertaking.

Around 770 employees had applied for voluntary retirement and the screening committee appointed by the Management had excluded 145 from the list as they were considered necessary for the running of the various subsidiary units of Keltron, according to of ficial sources.

Those who have been offered VRS will be given compensation within 90 days. The State Government will give Rs 25 crore from the PSU Revitalization Fund to implement the scheme.

The Karakulam unit of Keltron accounts for the maximum number of employees going out under the scheme. While 247 employees have been offered voluntary retirement at Karakulam, the Aroor unit will see the exit of 85 employees. The number of employees at t he other units and centers include Kulathoor (72), Mudadi (13), head office (11), Chennai (25), Mumbai (30) and Calcutta (20).

As per the package, the compensation will be equal to one-and-a-half months' salary for every completed year in service or the salary for all the months in the remaining years, whichever is lower. The maximum compensation allowed is the salary for 36 months, apart from gratuity.

This will mean that every employee will get a minimum of Rs 2.5-3 lakh and a maximum of Rs 6-7 lakh.

The company will save Rs 35 lakh every month under the salary head, with the implementation of the scheme.


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In order to conduct the project, we conducted a survey by distributing a schedule to HR manager of KELTRON at karakulam.The schedule and the corresponding answers is as under-

1. What is the total number of all employees (headcount) at the business unit?Ans: Managerial level & Supervisory level – 160 employees Staff/Operator level – 280 employees Total – 440 employees

2. Whether your organization offers VRS or any other golden hand shake offer as a part of downsizing strategy?Ans: Yes, VRS.

3. Is there a written notice before embarking the VRS exercises?Ans: Yes.

4. What is the notice period?Ans: 3 months

5. Is there a committee to assist the employees for VRS?Ans: Yes. There is a screening committee to process the application.

6. What is the procedure for VRS? (Steps to be followed)Ans:

PROCEDURE

The employees have to submit the application. It should be submitted to MD These applications are sent to the corporate office There will be a screening committee to process the application After processing the applications the committee decides which applications should be

accepted and which should be rejected. The MD will send a letter to those whose applications were rejected says that the

company needs there service.

7. What are the enabling rules of the VRS?

Ans: Those who have been offered VRS will be given compensation within 90 days. The State Government will give Rs 25 crore from the PSU Revitalization Fund to implement the scheme.


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As per the package, the compensation will be equal to one-and-a-half months' salary for every completed year in service or the salary for all the months in the remaining years, whichever is lower. The maximum compensation allowed is the salary for 36 months, apart from gratuity.

This will mean that every employee will get a minimum of Rs 2.5-3 lakh and a maximum of Rs 6-7 lakhs. The company will save Rs 35 lakh every month under the salary head, with the implementation of the scheme.

8. Has the LIFO concept being implemented?Ans: No particular strategies were being followed. The decision will depends on the screening committee, and the decision taken by the committee will be final.

9. Are there any other benefits?Ans: No special benefits towards the employees. Organization growth increases because the VRS helps in downsizing the number of employees. KELTRON made a profit of Rs. 1 crore by implementing this scheme.

10. What were the various disputes in the VRS scheme in this organization?Ans: There was some opposition from the part of the employees. Some employees were totally against this VRS scheme. With the support of the trade unions they tried to act against implementing the scheme within the organisation.

“The government takes the initiative to implement the VRS in order to downsize the excess staff level within the organization”.

“The organization growth increases as the number of excess staff level decreases.

Keltron made 1 crore profit as a result of this VRS”


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DATA ANALYSIS

KELTRON offers VRS to 625 staffs.The Management of the Kerala State Electronics Development Corporation (Keltron) has decided to offer voluntary retirement scheme to 625 employees. The VRS is part of the package being implemented for revival of the ailing public sector undertaking.

Around 770 employees had applied for voluntary retirement and the screening committee appointed by the Management had excluded 145 from the list as they were considered necessary for the running of the various subsidiary units of Keltron, according to of ficial sources. Those who have been offered VRS will be given compensation within 90 days. The State Government will give Rs 25 crore from the PSU Revitalization Fund to implement the scheme.

The Karakulam unit of Keltron accounts for the maximum number of employees going out under the scheme. While 247 employees have been offered voluntary retirement at Karakulam, the Aroor unit will see the exit of 85 employees. The number of employees at the other units and centers include Kulathoor (72), Mudadi (13), head office (11), Chennai (25), Mumbai (30) and Calcutta (20).

As per the package, the compensation will be equal to one-and-a-half months' salary for every completed year in service or the salary for all the months in the remaining years, whichever is lower. The maximum compensation allowed is the salary for 36 months, apart from gratuity. This will mean that every employee will get a minimum of Rs 2.5-3 lakh and a maximum of Rs 6-7 lakh. The company will save Rs 35 lakh every month under the salary head, with the implementation of the scheme.

1. What is the total number of all employees (headcount) at the business unit?Ans: Managerial level & Supervisory level – 160 employees Staff/Operator level – 280 employees Total – 440 employees2. Whether your organization offers VRS or any other golden hand shake offer as a part of downsizing strategy?Ans: Yes, VRS.

3. Is there a written notice before embarking the VRS exercises?Ans: Yes.

4. What is the notice period?Ans: 3 months5. Is there a committee to assist the employees for VRS?Ans: Yes. There is a screening committee to process the application.

6. What is the procedure for VRS? (Steps to be followed)


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Ans:

PROCEDURE

The employees have to submit the application. It should be submitted to MD These applications are sent to the corporate office There will be a screening committee to process the application After processing the applications the committee decides which applications should be

accepted and which should be rejected. The MD will send a letter to those whose applications were rejected says that the

company needs there service.


Ans: Those who have been offered VRS will be given compensation within 90 days. The State Government will give Rs 25 crore from the PSU Revitalization Fund to implement the scheme. As per the package, the compensation will be equal to one-and-a-half months' salary for every completed year in service or the salary for all the months in the remaining years, whichever is lower. The maximum compensation allowed is the salary for 36 months, apart from gratuity.

This will mean that every employee will get a minimum of Rs 2.5-3 lakh and a maximum of Rs 6-7 lakhs. The company will save Rs 35 lakh every month under the salary head, with the implementation of the scheme.

8. Has the LIFO concept being implemented?Ans: No particular strategies were being followed. The decision will depends on the screening committee, and the decision taken by the committee will be final.

9. Are there any other benefits?Ans: No special benefits towards the employees. Organization growth increases because the VRS helps in downsizing the number of employees. KELTRON made a profit of Rs. 1 crore by implementing this scheme.

10. What were the various disputes in the VRS scheme in this organization?Ans: There was some opposition from the part of the employees. Some employees were totally against this VRS scheme. With the support of the trade unions they tried to act against implementing the scheme within the organisation.


“The organization growth increases as the number of excess staff level decreases.

Keltron made 1 crore profit as a result of this VRS”


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FINDINGS OF THE STUDY

As part of the project, we conducted a brief study on VRS at Keltron, Karakulam unit, Trivandrum. We collected data through a schedule and also we had a direct interview with the HR Manager of the unit. Our main objective was to find out what the real aim of implementing VRS at Keltron is and whether they got any benefits through the scheme. After the study we came to the conclusion that they implement VRS mainly to downsize the excess staff levels within the organization. The organization growth increases as the number of excess staff level decreases. Keltron made 1 crore profit as a result of this VRS”.


“The organization growth increases as the number of excess staff level decreases.”

“Keltron made 1 crore profit as a result of this VRS”


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CONCLUSION

As part of Human Resource Management subject we conduct a study about VRS. VRS means withdrawal of a person from his existing job in an organization. Different reasons for taking VRS like Health problems, Recession of the company, Changes of technology, Takeovers and Mergers etc. Lot of procedures and steps to be taken for implementing and introducing VRS. VRS is beneficial to the organization. It allows overall savings in the employee cost, thus lowering the overall cost. Now a day’s mostly all public sectors implementing VRS, with the approval of the Government. Example IRE, KMML, KELTRON etc. Here we elaborate VRS scheme of KELTRON at Karakulam, Trivandrum.


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APPENDICES

Application for voluntary retirement scheme

To---------------------------------------------------------------------------------------------------------------------------------------------

Sub:- Application for Voluntary Retirement under Scheme notified vide Circular

No……………………………………….. Dated………………

Sir,

1. With reference to Circular no……………………………dated…….......... on the abovesubject. I hereby opt for release under the Voluntary Retirement Scheme.

2. I agree with the terms & conditions as contained in the aforesaid circular.

3. I may kindly be relieved by ……………………….. in accordance with the above Scheme and the various benefits as provided therein may be paid to me on the date of release. My particulars as on date are as under:


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NameEmployee No.Father’s/Husband nameDate of BirthDate of joining the CorporationTotal service in the Corporation in Completed yearsDesignationScale of PayBasic PayDADeclared Home TownDetails of Family Members residing with me (along with date of birth)1. ……………………………………………2. …………………………………………………3. …………………………………………………4. …………………………………………………Present PostingAfter retirement I wish to settle at :

Thanking YouYours faithfully

( )Name & Signature of the employee.

Date:Name, Designation, Addresses and Signatures of two Witnesses:1. ……………………………………………………2. ……………………………………………………Certified that I have neither applied nor I have the intention to apply for employment in anyPublic Sector Enterprise/Government Organization after Voluntary Retirement.

( )Name & Designation of the employee.

Date:


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FOR OFFICIAL USE

The Application of Sh./Smt/Km…………………………………… ………… for release underVoluntary Retirement Scheme has been verified. The application of Sh./Smt./Km…………………………………………. may be accepted/may not be accepted for reasons specified on aseparate sheet.*

Date ………… (Name/Designation and

Signature of Head of theDepartment)

* strike out whichever is not applicable.

Forwarded for acceptance through

Head of the Deptt.

Application of Sh./Smt./Km. ……………………...……………. for release under VRSaccepted/not accepted.*

CMD/Head of the project.

Date : ……………….

* strike out whichever is not applicable.


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SCHEDULE

Company information

Company nameIndustry classification Business unit name (if applicable)Address

CityCountryTelephone number

Company contactsNameDesignationPhone

Schedule - Voluntary Retirement Schemes

1. What is the total number of all employees (headcount) at the business unit? Managerial level : Supervisory level : Staff/operator level: Total :

2. Whether your organization offers VRS or any other golden handshake offer as a part of downsizing strategy?

3. A. Is there a written notice before embarking the VRS exercises?

a) Yes b) No

B. What is the notice period?


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a) 1 month b) 2 month c) 3 month 4) more than 3 months

C. Is there a committee to assist the employees for the VRS?

a) Yes b) No

D. What is the committee called?

4. What is the procedure of the VRS? (Steps to be followed)


6. What is the eligibility criterion for the employees to avail VRS?

7. Has the LIFO Concept being implemented?

8. What is the compensation structure in the VRS scheme?

9. Are there any other benefits?

10. What were the various disputes in the VRS scheme in this organization?


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BIBLIOGRAPHY

WEBSITES REFERRED

http://www.pbdisinvest.nic.in/pdf/vrs_scheme.pdf

http://planningcommission.nic.in/reports/sereport/ser/stdy_vrs.pdf BOOKS REFERRED

Aswathapa, Human Resource Management, Tata McGrew Hill Publishing Company Limited, New Delhi 1997

Gary Desler Personnel/HRM 7th edition Eastern Economy Edition, New Delhi 2002


Voluntary retirement Scheme

Documents

Transcript of Voluntary retirement Scheme