Hi all
As a case study a private ltd co. with 150 employees in Tamil Nadu wants to introduce a Voluntary reirement scheme. Our queries our
1. Is there a 'model' VRS scheme draft?
2. What are the safeguards / permissions we should take before introduction of the scheme?
3. How do we ensure that the 'target' group employees take the scheme.
4. How do we ensure some employees do not take the VRS / Can we reject VRS offer of some and accept of others?
5. What are the legal payments i.e. Gratutity / PF etc.
6. What is an 'idea' VRS compensation formula?
Thanks
Leges
From India, Patiala
As a case study a private ltd co. with 150 employees in Tamil Nadu wants to introduce a Voluntary reirement scheme. Our queries our
1. Is there a 'model' VRS scheme draft?
2. What are the safeguards / permissions we should take before introduction of the scheme?
3. How do we ensure that the 'target' group employees take the scheme.
4. How do we ensure some employees do not take the VRS / Can we reject VRS offer of some and accept of others?
5. What are the legal payments i.e. Gratutity / PF etc.
6. What is an 'idea' VRS compensation formula?
Thanks
Leges
From India, Patiala
Hi
The VRS compensation has some exemption from Income Tax Act. Hence before introduction of VRS, exemption from the Appropriate Authority under the Income tax Act is required for claiming IT relief.
We can identify employees with poor medical history, poor efficiency & attendance, poor antecedents (misconducts, attitude etc) and persuade them to opt for VRS. We have to do some ground work for this. Example: Issuing show cause notice for their absence, misconduct etc. We can informally communicate to the target employees that if they fail to make use of this VRS opportunity, they may be terminated after complying with the procedures like show cause notice, domestic enquiry etc.
Similarly accepting the VR of employees is the prerogative of the employer and only if the application of an employee is accepted by the management, he can avail the VRS benefits. There are apex court judgments favoring the employer. Hence you need not have any apprehension about retaining the talent.
Other than the VRS compensation, the employees are also entitled for other retiral benefits such as settlement of gratuity, PF, EPS (Employees Pension) etc. While discharging the employees under VRS, all these statutory payments have to be settled fully and finally. Then only the employer employee relation will cease to exist.
The VRS compensation is again the prerogative of the management. But your scheme should be attractive to tempt the target employees to leave. You can have two components:
a) Amount for the put up service
B) Amount for the left out service
If the average age of the employees is high, you have to keep the maximum amount in put up service and if the average age is less, you have to keep the maximum sum in the left out service.
Please revert to me for any clarifications.
Thanks & Regards
Kalyan R
Manager - Personnel
Sundaram-Clayton Ltd
Brakes Division
Chennai - 600 058.
Mobile: 9840942232
From India, Madras
13The VRS compensation has some exemption from Income Tax Act. Hence before introduction of VRS, exemption from the Appropriate Authority under the Income tax Act is required for claiming IT relief.
We can identify employees with poor medical history, poor efficiency & attendance, poor antecedents (misconducts, attitude etc) and persuade them to opt for VRS. We have to do some ground work for this. Example: Issuing show cause notice for their absence, misconduct etc. We can informally communicate to the target employees that if they fail to make use of this VRS opportunity, they may be terminated after complying with the procedures like show cause notice, domestic enquiry etc.
Similarly accepting the VR of employees is the prerogative of the employer and only if the application of an employee is accepted by the management, he can avail the VRS benefits. There are apex court judgments favoring the employer. Hence you need not have any apprehension about retaining the talent.
Other than the VRS compensation, the employees are also entitled for other retiral benefits such as settlement of gratuity, PF, EPS (Employees Pension) etc. While discharging the employees under VRS, all these statutory payments have to be settled fully and finally. Then only the employer employee relation will cease to exist.
The VRS compensation is again the prerogative of the management. But your scheme should be attractive to tempt the target employees to leave. You can have two components:
a) Amount for the put up service
B) Amount for the left out service
If the average age of the employees is high, you have to keep the maximum amount in put up service and if the average age is less, you have to keep the maximum sum in the left out service.
Please revert to me for any clarifications.
Thanks & Regards
Kalyan R
Manager - Personnel
Sundaram-Clayton Ltd
Brakes Division
Chennai - 600 058.
Mobile: 9840942232
From India, Madras
Thank you for your detailed reply. I seek more details regarding devising of a suitable formula for VRS compensation. I understand that average age will play a crucial part, however even for calculating either 'left service or put in service' what multiplier should be adopted to ensure success? Can we amend the compensation / scheme at a later date in case it fails to draw response?
Regards
From India, Patiala
Regards
From India, Patiala
Thanks Mr.Satish.
With regard to Mr.Leges queries on suitable formula for calculating VR Compensation, here is a sample.
For the employees who are less than 53 years of age (superannuation - 58 years):
VR Compensation:
a) Comp for past service: Total Salary X No. of completed years of service X 1.90
b) Total Salary X No. of completed years of service X 0.60
Total VR Compensation: a + b
For the employees who are more than 53 years of age (superannuation - 58 years):
VR Compensation = Total Salary X No. of left out months X 0.90.
As you have to exhibit the VR formula while announcing the VR Scheme, you cannot amend the VR compensation/formula often. Hence I would suggest you to work out the compensation for all the target employees after arriving at the formula to analyze the effects. Then, if required you can modify the formula before announcing the VR Scheme.
Thanks & Regards
Kalyan R
From India, Madras
With regard to Mr.Leges queries on suitable formula for calculating VR Compensation, here is a sample.
For the employees who are less than 53 years of age (superannuation - 58 years):
VR Compensation:
a) Comp for past service: Total Salary X No. of completed years of service X 1.90
b) Total Salary X No. of completed years of service X 0.60
Total VR Compensation: a + b
For the employees who are more than 53 years of age (superannuation - 58 years):
VR Compensation = Total Salary X No. of left out months X 0.90.
As you have to exhibit the VR formula while announcing the VR Scheme, you cannot amend the VR compensation/formula often. Hence I would suggest you to work out the compensation for all the target employees after arriving at the formula to analyze the effects. Then, if required you can modify the formula before announcing the VR Scheme.
Thanks & Regards
Kalyan R
From India, Madras
Thank you Mr. Kalyan.
The entire process has been superbly explained by you. I also request all to kindly recommend a good HR expert / lawyer who can assist with the VRS process i.e. right from drafting of scheme, identifying target group, suggestion of formula to implementation.
I await your recommendations.
Thanking you
Regards
From India, Patiala
The entire process has been superbly explained by you. I also request all to kindly recommend a good HR expert / lawyer who can assist with the VRS process i.e. right from drafting of scheme, identifying target group, suggestion of formula to implementation.
I await your recommendations.
Thanking you
Regards
From India, Patiala
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