CHAPTER - 6

VOLUNTARY
RETIREMENT
SCHEME
6.1 Introduction.

6.2 Origin of Voluntary Retirement

Scheme

6.3 Meaning and Definition of

Voluntary Retirem ent Scheme

6.4 Scope of Voluntary Retirem ent

Scheme
 CHAPTER 6

VO LU N TAR Y R E T IR E M E N T SCHEME.

6.1 INTRODUCTION:-

T h e g lo b alisatio n h a v e in crease d th e co m p etitio n all o v e r th e w orld

in e a c h a n d e v e ry field an d at e a c h a n d e v e ry c o rn e r o f th e w orld. Such

c o m p e titio n is about p roducts, th e ir q u alities, th e ir p rices, and th eir

m a rk e tin g s tra te g ie s . Each o rg a n is a tio n is fighting for e x is te n c e or to

re m a in in th e c o m p e titio n . B ut it is very difficult to a c h ie v e th e o b jective

of g ettin g th e profit a n d to re m a in in th e c o m p e titio n .

Because th e d e v e lo p in g n atio n s like India w e re p re s s u rize d to

lib e ra liz e policy m e a n s to m a k e th e m a rk e t fre e , by rem o vin g ta riff and

non ta riff re s tric tio n s . D u e to lib e ra lis a tio n , th e G ia n t c o rp o ra tio n s a n d

M u ltin a tio n al c o rp o ra tio n s e n te re d in th e In dian m a rk e t. S u c h M N C s and

G ia n t co rp o ratio n s w e re having a m p le fin an cial b a c k g ro u n d , and latest or

m o d e rn technology. D u e to au to m ation , m ore fa s t an d su p erio r production

is p o s s ib le a t v e ry low cost and as the cost of p ro d u ctio n is low th e

selling p rice s a re also ke p t low. Now in stead o f a c tu a l exp o rtin g th e

g o o d s to d ev e lo p in g countries th ey h ave started th eir m an u factu rin g units

in s u c h d e v e lo p in g co u n tries an d started cap tu rin g th e w orld m arket.

In o rd e r to a c h ie v e in th e c o m p e titio n th e in d u stries in th e

d e v e lo p in g c o u n trie s in clu d in g In d ia , a d o p tin g th e m e a s u re s like,

restructuring, re o rg a n izin g , rationalizing of o p e ra tio n an d tech n o lo g ical up

g ra d a tio n etc . T h e s e m e a s u re s a re not u sefu l o n ly for their survival but

also fo r th eir grow th. S o m e industries w hich a re utilizing th e old technology

like te x tile in d u strie s, p h a rm a c e u tic a l, e n g in e e rin g , coal, mines, etc. are

c o lla b o ra tio n s w ith th e M N C s , a re fo rced by th e M N C s to a d o p t urgent

m e a s u re s like to ra tio n a liz e or d o w n s iz e th e ir m a n p o w e r to re m o v e the

in e fficie n cy in th e o rg a n iza tio n . T h e re a re aro u n d 2 3 5 public s ecto r units

in In d ia . T h e g o v e rn m e n t re fe rre d 5 8 units, w h ic h a re recurring m akin g

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lo ss es o r sick units a re d e c id e d to b e clo sed or liq u id ated . T h e re a re 2

la k h s w o rk e rs e m p lo y e d in th e s e units, th e re will b e im m e d ia te pro b lem

o f th e ir su rvival. In th e W e s te rn C o u n trie s like E n g la n d , A m e ric a and

E u ro p e , U .K , no su ch c a re o f w o rk e rs survival is ta k e n . T h e e m p lo y e rs

a re h a vin g th e fre e d o m to ‘h ig h e r a n d fire ’ su ch w o rk e rs e .g . T h e G ia n t

c o rp o ra tio n s in A m e ric a like IB M re d u c e d Its s tre n g th by th o u s a n d s

p eo p le s within o n e day. But for such acts th e re a re highly regulated labour

la w s in In d ia . E v e n th o u g h th e o rg a n iza tio n is n e e d e d to in c re a s e th e

p e rm a n e n t w ork force or in c a s e of lay off or a b o u t closure o r retren ch m en t

th e p e rm is s io n is req u ired to b e ta k e n . T h e a m e n d m e n t o f Industrial

D is p u te A c t in 1 9 7 6 w h e re by th e c h a p te r V B w a s introduced w hich h ave

c re a te d th e difficulty to g e t th e a p p ro v a l. T h is a m e n d m e n t h a v e c re a te d

th e o b s ta c le s in d e c la rin g th e c lo su re an d lay o ff to th e e m p lo y e r. T h is

a m e n d m e n t in th e In d u strial D is p u te A c t is m a d e fo r th e p u rp o s e of

protecting th e w o rk e rs. A cco rd in g to this A c t th e re w a s no re q u ire m e n t of

taking p erm issio n o f th e b u sin ess clo sure or w h ile d eclarin g th e lay off. If

th e w o rk e rs a re b e lo w 3 0 0 in th e o rg a n iza tio n la te r on this lim it red u ced

up to 1 0 0 w o rk e rs , but a t p re s e n t sin ce 2 4 ’'' J u n e 2 0 0 4 this limit a g a in <

has raised up to 1 0 0 0 w o rke rs i.e. If th e w o rkers a re b e lo w 1 0 0 0 then no

p e rm is s io n o f th e g o v e rn m e n t is req u ired fo r d e c la rin g lay o ff o r th e

c lo su re by th e em p lo ye r. H e n c e th e re a re g re a t difficulties in restructuring

th e e x c e s s m a n p o w e r.

VRS - the new solution for restructuring:-

A s th e rules a re not fa v o u ra b le for hire an d fire to th e In dian

em ployers, but now the em ployers have found the n ew m ethod of discharging

s u rp lu s labour, w h ic h is ‘ V o lu n ta ry R e tire m e n t S c h e m e ’ o r ‘G o ld e n H a n d

S h a k e ’ or ‘E a rly S e p a ra tio n S c h e m e s ’ etc. T h e s e V o lu n ta ry re tire m e n t^

s c h e m e s a re not n e w to th e industries, b e c a u s e s o m e public an d private

s e c to r u n d e rta k in g s like H in d u s ta n A ro h ite s Ltd. A n d M /S G u est keen

W illia m s Ltd, In d ian R a ilw a y s h a v e im p le m e n te d th e vo lu n tary re tire m e n t

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s c h e m e fo r red u cin g surplus lab o u r force b e fo re 1 9 7 6 . T h is s c h e m e h ave

g a th e re d th e m o m e n tu m since th e 198 0 s , and in th e last 4 to 5 years this

s c h e m e h a v e g e a re d up a t a fa s t s p e e d . T h e la rg e c o m p a n ie s inpublic

sector as w ell as private sector undertakings h a v e introduced th e voluntary

retirem e n t s c h e m e . T h e em p lo yers w h o applies for perm ission to dow nsize

e ith e r b y retren ch in g or by laying o ff w orkers, is a lm o s t n e v e r given by the

s ta te g o v e rn m e n t on th e ground o f social security o f th e e m p lo y e e s . T h e

v o lu n ta ry re tire m e n t schem e is less painful s tra te g y w h ich is m o re

a c c e p ta b le . T h e b asic principal of voluntary re tire m e n t s c h e m e is th a t it is

b e tte r c h o ic e th e n re tre n c h m e n t. V R S o ffers a n a ttra c tiv e p a c k a g e o f /

b e n e fits , s o th a t it e n a b le s th e o rg a n iza tio n to ra tio n a liz e th e la b o u r

stren g th , attain cost e ffe c tiv e n e s s an d to m in im ize th e co st o f production.

V R S helps to sim u la te the growth in short run by increasing th e productive

efficien cy. T h e in sertio n of te c h n o lo g y also becom es p o s s ib le a t e a c h

s ta g e of o p e ra tio n s so th e s ta n d a rd iza tio n b e c o m e s p o ssib le. D u e to th e

s ta n d a rd p ro d u cts a t low cost, o f good size, s h a p e a n d at m o re attractive

p ric es in c re a s e s th e d e m a n d an d b e c o m e s m o re c o m p e titiv e .

6.2 ORIGIN OF VOLUNTARY RETIREMENT SCHEME:-

V o lu n ta ry R e tire m e n t is not th e n e w co n cep t, it is In p ractice in th e

p ublic s e c to r sin c e 1 0 0 y e a rs back. T h is s c h e m e is in p ra c tic e a t all th e

s ta te s in In d ia. T h e c o n c e p t o f ‘V o lu n ta ry R e tire m e n t’ is o rig in a te d in th e i /

fo re ig n n atio n s. It is b ro u g h t in India by th e fo re ig n banks a n d th e

M u ltin a tio n a l C o rp o ra tio n s . T h e first V R S w a s b ro u g h t in to In d ia by th e

C ity B a n k o f A m e ric a in 1977, 1981 and 1993 and British S ta n d a rd

C h a rte re d B a n k in 1 9 9 4 , 1 9 9 6 an d in 1 9 9 9 . In d ia n R a ilw a y a n n o u n c e d

th e V R S in 1 9 7 7 . O N G C h a s th e p e rm a n e n t V R S , B h a ra t G old m in e Ltd

in tro d u c e d th e V R S in 1 9 8 7 a n d revised in 1 9 8 8 , 1990. B atliboi a n d

c o m p a n y Ltd in tro d u c ed V R S in 1 9 8 7 a n d re v is e d in 1 9 8 8 , 1 9 9 0 and

1991. The C a d b u ry In d ia Ltd, P re m ie r A u to m o b ile Ltd, C o ro n a Ltd,

G o d re j S o a p s Ltd, im p le m e n te d th e V R S in 1 9 9 2 . S a n d o z in 1 9 9 4 , B a y e r

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C ro m p to n G re a v e s , In d ia n S ta n d a rd M e ta ls , Bayer d e c la re d seco n d

schem e. M a n y su ch In d ia n C o m p a n ie s h a v e ta rg e te d to re d u c e th eir

w o rk fo rc e on la rg e s c a le in o rd e r to re d u c e th e co st o f p roduction.

In 1 9 2 7 , th e In te rn a tio n a l E c o n o m ic C o n fe re n c e in clu d ed in th e

c o n c e p t o f ratio n alizatio n , th e c o n cep t o f lab o u r efficiency, stan d ard izatio n

of p ro d u cts, c o n s e rv a tio n of ra w m a te ria ls and p o w er, sim plification

distribution p ro c e d u re s m in im iz e th e fin a n c ia l c h a rg e s w ithin th e c o n c e p t

o f rationalization. T h e advisory co m m ittee o f IL O d efin ed th e rationalisation

a s ‘a n y refo rm te n d in g to re p la c e h abitual a n tiq u a te d p ra ctices by m e a n s

o f m e th o d s b a s e d in s y s te m a tic re a s o n in g ,’ but it is c lo s e ly a s s o c ia te d

w ith th e la b o u r utilization. T h e o th e r te rm s a s s o c ia te d w ith th e c o n c e p t o f

ra tio n a liz a tio n a re a u to m a tio n , m o d e rn iz a tio n a n d m e c h a n iz a tio n . All o f

th e m in vo lves th e c h a n g e s in m a n p o w e r utilization.

T h e co n cep t o f rationalization or ch an g es in th e m a n p o w e r originated

in T o yo ta J a p a n , w h ich w a s m a n u fa c tu rin g critical a u to m a tic parts, this

c o rp o ra tio n a llo w e d a c o m p le te fre e d o m to ‘hire a n d fire ’ a t a n y tim e a t

s h o rt n o tice a n d c a n re m o v e th e e m p lo y e e s a n y w h e re in th e industry.

Firstly it w a s o p p o s e d b y th e u n io ns, but a fte rw a rd s it w a s a c c e p te d . ^

T h e ra tio n a liz a tio n a n d m a n p o w e r red u ctio n a re m u c h fa m ilia r in

th e W e s te r n c o u n trie s b e c a u s e th e in dustrial stru ctu rin g is a lre a d y inj^

p ra c tic e s in c e m a n y d e c a d e s th e re . T h e ra tio n a liza tio n m e a n s to re d u c e

th e fats to k e e p th e m a x im u m flexibility in m a in te n a n c e a n d utilization o f

th e w o rkfo rce.

T h e e m p lo y m e n t declin es b e c a u s e o f au to m a tio n a n d rationalization

a n d c re a te s th e e c o n o m ic an d so cial p ro b le m s . T h e e c o n o m ic problem s*^

a re level o f in co m e s gets, low, th e e x p e n s e s c a n n o t b e incurred an d th ere

will b e a p ro b le m o f in v e s tm e n t o f th e s a v in g s etc. W h e r e as th e so cial

p ro b le m s in c lu d es th e psych o lo g ical a d ju stm en t.

Indian lab o u rs h a v e a lw a ys o p p o sed to th e ration alizatio n, b e c a u s e

th e old w o rk e rs a re req u ire d to be re p la c e d by new w o rk e rs if th e

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a u to m a tio n m e a s u re s a re a d o p te d in th e o rg a n iz a tio n . A fte r th e se c o n d

w orld w a r th e re w a s a p ro b lem o f surplus la b o u r a s w ell as re p la c e m e n t

o f old m a c h in e rie s . In 1 9 5 0 , th e Fiscal c o m m is s io n in In d ia felt th a t th e

la b o u r p ro d u c tiv ity in iron an d s te e l an d co al in d u stries is d e clin ed

b e c a u s e o f surplus labours. But it w a s very difficult to retrench the w orkers

in difficult e c o n o m ic situations.

In th e p o s t W a r y e a rs e m p lo y e r tried th e m e th o d o f a g re e m e n t to

ra tio n a liz e . Such a g re e m e n t w as re a c h e d b e tw e e n Kanpur T extile

industrialists an d IN T U C and H M S unions. In this a g re e m e n t th e necessity

of re tre n c h m e n t w as a c c e p te d an d w as partially im p le m e n te d but

a fte rw a rd s th e IN T U C union changed th e s ta n d and opposed to th e

e m p lo y e rs a s s o c ia tio n .

The e x p e rt te e m of IL O a rriv e d in In d ia and m ade its

re c o m m e n d a tio n th a t th e productivity should b e e a s ily in c re a s e d with th e

s a m e w o rk fo rc e , but w ith c h a n g e o f m e th o d s a n d m a n a g e ria l p ro cesses,

a d d e d to union th in kin g as w ell. In th e m e e tin g a t R a jk o t in 1 9 5 4 th e

A IT U C u nion changed its s ta n d and a g re e to a llo w ra tio n a liza tio n of

labour, b u t o n ly if th e som e b e n e fits a re g iv e n to th e w o rk e rs an d

com m u n ity. T h is w a s assig n to c h a n g e th e g o v e rn m e n t policies from tim e

to tim e.

Rationalization Policy:-

T h e ra tio n a liz a tio n policy w a s a d o p te d by th e e m p lo y e rs in first 3

p la n s b u t w a s o p p o s e d by th e g o v e rn m e n t by im p o sin g m a n y restriction

u pon it. T h e first p lan p ro p o s ed th e follo w ing s e le m e n ts -

a) T h e stre s s should b e given on n atu ral s e p a ra tio n .

b) T h e r e should b e provision for a lte rn a te e m p lo y m e n t to th e affected

person.

c) T h e lib eral s e p a ra tio n a llo w a n c e should b e g iven .

d) T h e te c h n ic a l e x a m in a tio n of th e w o rklo ad sh o u ld b e th e re .

e) T h e r e sh o u ld b e retraining a rra n g e m e n ts .

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^ D u e to su ch c h a n g e if g a in s a re th e re , it sh o u ld b e s h a re d .

T h e r e w a s no p ro p o s als m a d e up to th e third plan T h e third plan

a ls o s ta n d a rd o f living c a n n o t be in c re a s e d u n le s s th e productivity is

in c re a s e d because th e in c re a s e d productivity will in c re a s e th e s a le s

tu rn o v e r a n d profit an d u ltim ately th e w a g e s o f w orker.

A t th e 15'^ In d u strial L a b o u r C o n fe re n c e in 1 9 5 7 m a d e th e m o d e l

a g re e m e n t to gu id e the em p lo ye es. T h e co n feren ce suggested the following

p recau tio n s.

i) T h e r e sh o u ld not b e re tre n c h m e n t o r loss o f e a rn in g s o f existing

e m p lo y e e s . If th e y h a v e m a d e th e a g re e m e n t, th e n a lte rn a tiv e jobs

sh o u ld b e m a d e a v a ila b le .

ii) T h e union should b e in fo rm ed, a b o u t th e c h a n g e s in th e w ork flow

a n d th e e a rn in g s o f th e e ffe c te d e m p lo y e e s .

iii) T h e e m p lo y e r should inform th e n u m b e r o f red u ctio n s to b e m a d e

a n d its e ffe c t on existin g jobs.

iv) T h e b e n e fits o f ra tio n a liz a tio n s sh o u ld b e s h a re d e q u a lly b e tw e e n

e m p lo y e r, e m p lo y e e s an d th e co m m u n ity equally.

v) A fte r th e n o tic e th e e m p lo y e r can fre e ly discu ss th e c h a n g e s a n d

should provided th e required inform ation d e m a n d e d by th e workers.

vi) The u n io n s sh o u ld p re s e n t th e ir a rg u m e n ts w ithin a w e e k a fte r

d iscu ssio n s.
y
vll) T h e r e sh o u ld b e p ro p e r a s s e s s m e n t o f w o rk lo a d by th e m u tu al

a g r e e m e n t a n d s u ita b le im p ro v e m e n ts sh o u ld b e m a d e in it.

viii) T h e n o tice o f th e p ro p o sed c h a n g e s should b e given in d etail such

a s th e p ro p o s e c h a n g e , d a te o f c h a n g e , p ro p o s e d d u tie s a n d jo b

a s s ig n e d etc.

ix) T h e c h a n g e s to b e m a d e in m achinery, layout an d organization and

ra tio n a l u s e o f labour, m a te ria l e tc w ith o u t violating th e law.

x) If th e re is d iffe re n c e th e n th e d is p u te provision should be ap p lied .

T h e Industrial L a b o u r C o n fe re n c e reaffirm ed th e 1 9 5 7 principles. In

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1 9 6 7 , th e d iscu ssio n o f au to m a tio n c a m e . T h e issu e w a s raised a g a in in

1 9 6 8 a n d th e u n io n s w e r e a g a in s t th e a u to m a tio n d u e to u n e m p lo y m e n t

p ro b le m . T h e s u p re m e court h a v e provided to th e trib u n a ls th e p o w e r of

re in s ta te m e n t in c a s e o f d ism is sal o f th e w o rk e rs a n d th e trib u n al can

in te rv e n e in c a s e o f d is m iss al if-

i) T h e m a n a g e m e n t o f victim izatio n o f th e w o rk e r in c a s e o f u n fair

la b o u r p rac tic es .

ii) The m a n a g e m e n t is guilty w h e n th e b a s ic e rro r o f violation o f f

natu ral justice.

iii) T h e r e is w a n t o f g o o d faith.

iv) A fte r h avin g e x a m in e d an d m a n a g e m e n t fo u n d guilty is p u n ish ed .

T h e ra tio n a liz a tio n w a s a d o p te d by m a n y in d u stries to re d u c e th e

e m p lo y e e s a n d for this m an y tactics e.g. In ju te industry, initially sealing off

loom s or red u cin g th e n u m b e r o f shifts or b ad lies o f w o rk e rs or substitute

w o rk ers , ava ila b ility o f raw m a te ria ls or flu ctu atio n s in m a rk e t d e m a n d for

fin ish ed p ro d u c ts , te c h n o lo g ic a l c h a n g e s in la rg e in d u stries, tra n s fe r o f '

e m p lo y e e s a t o th e r p la c e s .

T w e n ty y e a rs a fte r th e in d e p e n d e n c e s o m e c o m p a n ie s ad o p ted th e

u s e o f c o m p u te rs in Indian R ailw ays, th e co m p u ters, w e re installed in five

z o n e s a t C h itta ra n ja n L o co m o tive w orks , th e D ie s e l L o co m o tive w orks in

V a ra n a s i, in In teg ral C o a c h F actory at P e ra m b u r etc. but e v e n though after

c o m p u te riza tio n th e re w e re re tre n c h m e n t resulted.

A fte r th e re c o m m e n d a tio n s o f 1 5 ‘" IL C th e w o rk e rs o rg a n iza tio n s

b e c a m e fa v o ra b le to in tro d u ce th e ratio n alizatio n by m u tu a l a g re e m e n ts .

T h e trip artite c o m m itte e , s e t up a N atio n al P roductivity C o u n cil w hich laid

dow n certain guidelines for sharing th e gains of productivity by rationalization.

The National Commission 1969:-

T h is co m m is sio n su g g e s ted certain g u id elin e fo r ratio n alizatio n th at

th e rationalization can b e m a d e by th e a g re e m e n t b e tw e e n em p lo yers and

e m p lo y e e s . T h e s c h e m e fo r ratio n alizatio n should c o m p le te th e follow ing

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conditions.

a) It sh o u ld re s u lt in h ig h e r productivity a n d efficiency.

b) It sh o u ld a c c o m m o d a te all surplus labour.

c) It sh o u ld in c re a s e th e level o f e a rn in g s o f th e w o rk e rs . ^

d) It should lead reduction in costs and be a b en efit to th e com m unity.

T h e R a m a n u ja m c o m m itte e re c o m m e n d e d th a t th e surplus w o rkers

should b e a b s o rb e d . It said “If th ere is an y surplus lab o u r fo r a n y reasons,

such surplus lab o u r shall b e ab so rb ed in a n y o th er plants u n d er th e s a m e

m a n a g e m e n t on jo b s of sim ilar n a tu re w ith o u t re d u c tio n in e m o lu m e n ts

e ith e r by o p e ra tio n ad d itio n a l shifts, or s e v e n d a y s w o rkin g o r exp an sio n

o f th e cap acity.

Oppositions by the unions:-

S in c e b eg in n in g th e unions o p p o s e d to th e ra tio n alizatio n , e v e n in

1 9 8 0 s w h e n th e ra tio n a liza tio n w a s e s s e n tia l th e un io n s a rg u e d th a t the^i

s e p a ra tio n sh o u ld b e on n atu ra l basis. H o w e v e r th e un io n s a g re e d to

a llo w e m p lo y e rs not to fill up th e posts w h e re th e e m p lo y e e s a re retired

or left by th eir ow n. T h e n a tio n -w id e strike w a s called by th e left union on

9*'^ S e p te m b e r, 1 9 9 3 , a g a in s t th e la b e ra lis a tio n policy. B u t this strike had

no e ffe c t e ith e r in g o v e rn m e n t policy a s w e ll a s on th e e m p lo y e rs . T h e

IN T U C a n d o th e r c e n tre unions jo in e d to g e th e r in o rd e r to o p p o s e th e

e m p lo y m e n t policy o r exit policy. T h e unions criticized th e e s ta b lis h m e n ts

u n d e r N a tio n al R e n e w a l F und ( N R F ) , as th e thrust a p p e a rs sep aratio n or

V R S ra th e r th a n re d e p lo y m e n t, an d also a tte m p te d to a m e n d th e ID Act,

th e c la u s e s on re tre n c h m e n t clo su re a n d lay o ff etc.

T h e u n io n s a re o p p o s in g th e ra tio n a liza tio n o r V R S b e c a u s e -

i) V R S le a d s to abolition o fjo b .

II) T h e r e will b e loss o f m e m b e rs h ip o f th e u nions.

III) T h e fin a n c ia l b e n e fits g iven by th e e m p lo y e rs willm is g u id e th e

w o rkers.

iv) If m o re b en efits a re given th e y h a v e to s a le th e a s s e ts like Land or

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 bu ilding o r p la n t an d m achinery.

T h e u n io n s g e n e ra lly o p p o s e s to th e V R S b e c a u s e th a t opposition

will c re a te th e m a bargaining p o w e r and w hile bargaining th ey can d em an d

good b a rg a in in g te rm s a n d conditions. F o r th o s e w h o a re takin g V R S ,

s o m e tim e s th e v a c a n c ie s a re c re a te d , or k e e p in g th e position o f union

le a d e rs intact, or to in c re a s e th e m e m b e rs h ip o f th e union, c re a te s

o b s ta c le s b y filing th e c a s e s in th e courts an d o b tain in g th e interim stays

and put th e pressures. T h e unions also co -o p erates V R S b ec a u s e improved

u n d e rs ta n d in g s o f c o m p a n ie s position a n d d ifficulties. S o m e tim e s th e

c o m p a n y w o rk e rs puts th e p re ssu re on unions not to o p p o s e th e s c h e m e

in this situ atio n u n io n s re m a in s co n stan t.

T h e Industrial D isp u te Act, h a v e im posed restrictions on lay off and

re tre n c h m e n t o f th e w o rkers. T h e w o rk e r w h o is w orking fo r not less than

one y e a r and in th a t o rg a n iz a tio n if c e rta in n u m b e r o f e m p lo y e e s a re

e m p lo yed c a n n o t b e retren ch ed unless th e following conditions a re fulfilled.

i) O n e m o n th ’s n o tice is g iven.

ii) C o m p e n s a tio n o f 15 d ays pay, for e a c h c o m p le te d y e a rs of service.

iii) N o tic e is s e n t to th e a p p ro p ria te G o v e rn m e n t.

T h e original provision in the restriction w a s k e p t on th e en terp rises

e m p lo y in g 3 0 0 or m o re w o rkers. In 1 9 8 2 , th e a m e n d m e n t w a s m a d e and

this w a s re d u c e d 1 0 0 or m o re w orkers. A g a in th e a m e n d m e n t w a s m a d e

on 24"" July, 2 0 0 4 a n d th e n u m b e r of w o rk e rs a re in c re a s e d up to 1 0 0 0

o r m o re w o rk e rs . T h is restriction fo r th e e n te rp ris e s in W e s t B e n g a l is

kept up to 5 0 or m o re w o rk e rs . T h e p rovisions o f c h a n g e o f ow n ersh ip

a re o b s e rv e d by s ec tio n ( 2 5 F F ) a n d th e c lo s u re is d is c h a rg e d by th e

s ec tio n ( 2 5 F F A ) . If th e n o tice perio d is fu rth e r e x te n d e d fo r m o re th an

tw o m o n th s , th e n th e c o m p e n s a tio n is restricted up to 3 m o n th s pay.

These p ro vis io n s a re not a p p lic a b le to th e seasonal e m p lo y m e n t,

c o n s tru c tio n a c tiv ities etc. G e n e ra lly th e p re fe re n c e fo r re tre n c h m e n t is

given by ‘Last in first out’ m ethod. If th e circum stance for such retrenchm ent

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a re beyond th e c a p a c ity o f th e e m p lo y e r such as s h o rta g e o f raw

m aterial, th e fin an cial difficulties, stock accu m u latio n d u e to lack o f orders,

ex p iry o f lic e n s e o r e x h a u s tio n o f m in e ra ls in c a s e o f m in in g activities. {__ ^

T h e e m p lo yers of big industries are putting th e pressure on th e governm ent

to revise or a m e n d th e clau ses of ID A ct but th e g o v e rn m e n t is not paying

a tte n tio n upon it, b u t indirectly in favour o f V o lu n ta ry R e tire m e n t S c h e m e s .

T h e p e r m a n e n t e m p lo y e e s resisted this s y s te m fo rc e d th e unions an d

m a n a g e m e n ts th e m u ch m o re m a rk e t o rien ted re q u ire m e n ts o f th e 1 9 9 0

th ro u g h th e V R S .

V o lu n t a r y R e t ir e m e n t S c h e m e : -

T h e v o lu n ta ry re tire m e n t re c e iv e d le g is la tiv e reco g n itio n in 1 9 5 3 .

W h e n th e d e fin itio n o f re tre n c h m e n t w a s e n la rg e d in th e In d ustrial A ct,

1 9 4 7 by inserting section 2 (0 0 ) in th e C e n tra l A ct. T h e section 2 (0 0 ) also

a ss erts th a t re tre n c h m e n t d o e s not include th e vo lu n tary re tire m e n t o f t h e ^

w o rkm en .

T h e c h a p te r V B o f Industrial D ispute A c t h a v e m a d e th e provisions

o f L a y off, re tre n c h m e n t and closure. T h e a m e n d m e n t m a d e in th e ID A ct

on 2 4 July 2 0 0 4 h a v e in c re a s e d th e stren g th fro m 1 0 0 w o rk e rs to 1000 ^

w o rk ers now. If re tre n c h m e n t or lay off is required th e n s p e c ia l perm ission

o f th e g o v e rn m e n t is req u ired w h ich is g e n e ra lly not g iven .

T h e r e fo r e VRS is th e new w ay fo u n d o u t to th e cash re a c h

e s ta b lis h m e n ts to m in im iz e th e stren g th o f th e w o rk e rs . V R S a ffe c ts th e

e m p lo y e rs , e m p lo y e e s a n d th e un io n s a t a tim e . It is a ls o v e ry m u ch

s e n sitiv e iss u e w ith m a n y p sy ch o lo g ical re a s o n s .

T h e voluntary retirem ent has b e c o m e a n ecessary featu re o f industrial ^

e c o n o m y w h e re th e survival is d e p e n d e n t upon th e c o m p e tin g efficiency.

T h e W orld B ank and International M onetary fund has 189 m e m b e r countries,

h e n c e th e re a re 1 8 9 co u n try p la y e rs in th e g lo b a l e c o n o m ie s . T h e n e w

e c o n o m ic policy p a s s e d by th e g o v e rn m e n t a ffe c ts th e e n terp rises in th a t

country. In th e n e w global village w e o b s erves th e tre n d s like privatization,

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disinvestm ent, foreign collaborations the liberalization etc. T h e disinvestm ent

an d p rivatizatio n policies a re a d o p te d in o rd er to re m o v e th e public debts

an d in efficien cy in th e o rg a n izatio n , on th e o th e r h an d th e g o v e rn m e n t is

also responsible to m a k e available the infrastructural facilities which requires

th e fu n d s v\/hich a re raised by d isinvesting th e p u blic s e c to r units.

T h e g o vern m en t labour policy have direct im pact on H u m a n Resource

M a n a g e m e n t th e A rtic le 1 5 ,1 6 an d 17 re la te s w ith H um an R e s o u rc e

M a n a g e m e n t. A ccording to th e Article 16 o f th e N e w Industrial Policy if the

w o rk m e n re fu s e s to u n d e rg o training th e y c a n be re tre n c h e d w ith o u t

o b tain in g g o v e rn m e n t license.

6.3 M EA N ING AND DEFINITION OF VO LUNTARY RETIREM ENT

SCHEM E:-

T h e w ord ‘R E T IR E ’ has b een defined in th e concise Oxford Dictionary

a s c e a s e fro m o ffic e or g iv e up th e o ffice o r p ro fe s s io n o r e m p lo y m e n t.

D u e to la rg e s c a le m o d e rn is a tio n an d th e lib e ra lis a tio n , th e m o s t o f th e

w o rk ers h a v e b e c o m e surplus in large n u m b e r of o rgan isations. T h e re fo re

th e re is a q u estio n o f m illion dollar, th at how to m in im ize or right size the

w o rk fo rc e . T h e la b o u r law s a re not s p e c ia lly m a d e fo r V R S . M o s t o f th e

o rg a n iz a tio n s h avin g a v a ilab ility o f fu n d s h a v e a d o p te d th e p ro cess of

V R S for restru ctu rin g , but th e re a re lots of p ro b le m s in im p le m e n ta tio n of

VRS.

Definition:- “V o lu n ta ry ” m e a n s w ith o u t co m p u lsio n o r willingly. T h e re fo re

V o lu n ta ry R e tire m e n t is a n ac t on th e part o f th e e m p lo y e e to g ive up the

e m p lo y m e n t w illin g ly an d w ith o u t co m p u ls io n fro m th e e m p lo y e r. It is an

u n ila te ra l a c t on th e p art o f a n e m p lo y e e to cease th e c o n tract of

em p lo ym en t with the em ployer. T h e word “Voluntary R etirem en t” has received

th e leg islative recognition in 1 9 5 3 w h e n section 2 ( 0 0 ) w a s included in the

In d u strial D is p u te s A ct. T h e said section 2 ( 0 0 ) a s s e rts th a t re tre n c h m e n t

d o e s not in c lu d e V o lu n ta ry re tire m e n t o f th e w o rk m e n . T h e re is no n eed

o f d isclo sin g th e re a s o n fo r V R S .

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 T h e re a re no ru les o r law s fo r V R S , a n d prio r c o n s e n t o f th e

u n io n s a ls o not n e c e s s a ry fo r ta k in g V R S . S u b m ittin g a n ap p lic a tio n by

th e e m p lo y e e is ju st like a proposal for bringing th e c o n tract of service to

a n d e n d , a n d su c h te rm in a tio n o f c o n tra c t o f s e rv ic e is o b s e rv e d by th e

s e c tio n s 4 & 5 o f th e c o n tra c t A ct, 1 8 7 2 .

T h e c o n c e p t o f V o lu n ta ry R e tire m e n t is m a d e c le a r by D ivision

B e n ch o f M a d ra s H igh C o u rt th a t un less th e te rm in a tio n o f s e rv ic e is th e

result o f a vo lu n tary m o ve on the part o f the e m p lo y e e , he can n o t be said

to h a v e “voluntarily retired”. M e re subm ission of an application o f Voluntary

re tire m e n t is not e n o u g h but th e e m p lo y e r h as th e p o w e r to te rm in a te t h ^ ^

s erv ice . Such p o w e r m a y b e e x e rc is e d b y a n o tice o r b y giving o n e

m o n th s p a y w ith notice.

T h e A n d h ra P ra d e s h H igh C o u rt h a v e s u m m a riz e d th e g e n e ra l

principles a b o u t th e V o lu n tary R e tire m e n t a b o u t th e public service, is th at

a fte r jo in in g th e public service th e perso n c a n n o t le a v e th e service till his

d ate of retirem ent. But th e go vern m ent h ave m a d e th e provision o f Voluntary

re tire m e n t to th e public s e rv a n ts b e fo re h e a tta in s th e a g e o f re tire m e n t

or s u p e ra n n u a tio n . T h e voluntary retirem en t is a condition o f service gives

an o p tio n to th e p u b lic s e rv a n t to retire vo lu n ta rily q u alifyin g age or

q u alifyin g s e rv ic e . H e re th e s e rv a n t m a k e s a re q u e s t to retire voluntarily

an d th e e m p lo y e r a cc e p ta n c e , but in c a s e o f a b s e n c e o f rules o r no m uch

s c h e m e is d e c la re d by th e g o v e rn m e n t, th e n th e e m p lo y e e h a v e no right

to a s k for vo lu n tary retirem en t. T h e rules providing th e voluntary retirem ent

m a y b e o f tw o ty p e s .

i) T h e ru les o f vo lu n tary re tire m e n t a fte r attain in g a p articu lar a g e or

a fte r c o m p le tin g a p a rtic u la r y e a rs o f s e rv ic e ,

il) A ru le m e re ly p rescrib in g th e eligibility of V R S .

A s p e r th e first ru le th e V R S b e c o m e s th e right o f a n e m p lo y e e

w h e r e a s in s e c o n d c a s e V R S is th e re q u e s t to th e e m p lo y e r a fte r h e

b e c o m e s elig ib le an d h o p e s so.

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T h e V o lu n tary R e tire m e n t is not opposing to th e public policy but hf

fu rth e ra n c e o f it. T h e p a c k a g e o f V R S is pro viding b e n e fits a p a rt fro ti.

re g u la r re tire m e n t such as P ro v id e n t F u n d , G ratuity, L e a v e e n c a s h m e n t,

th e n o tice p a y a n d 4 5 d a y s salary. T h e union c a b in e t h a v e fixed 4 0 as

q u alifyin g a g e a n d 10 y e a rs s e rv ic e period fo r m a k in g ap p lic a tio n by

e m p lo y e e fo r V R S . The p a rlia m e n t a ls o have announced th e fiscal

c o n c e s s io n s u pon such s c h e m e s e .g . T h e tax lim it h a s b e e n raised up to

R s. 5 ,0 0 ,0 0 0 . T h e R a ilw a y s h a s a n n o u n c e d th e V R S in 1 9 7 7 an d it is

held by th e c o u rt in o n e c a s e th a t to ta k e th e V R S is th e right o f th e

e m p lo y e e a n d th e c o n s e n t c a n n o t be re je c te d .

T h e N a tu ra l oil an d g as com m ission of g o v e rn m e n t o f India has the

V o lu n ta ry R e tire m e n t S c h e m e on p e rm a n e n t b asis B h a ra t G o ld M in e s

in tro d u c ed th e V R S in 1 9 8 1 .

T h e re tired J u d g e M r Ju stice M .G .C h ita le , o f B o m b a y H ig h C o u rt

and E x -p re s id e n t o f Industrial C o urt M a h a ra s h tra , g a v e th e approval to the

V o lu n tary R e tire m e n t S c h e m e of C a b le C orpo ration o f India Lim ited un der

his aw a rd . T h e B o m b a y C alcu tta Port Trusts and M a d ra s C ity C orporations

a ls o im p le m e n te d th e V o lu n ta ry R e tire m e n t S c h e m e , C a d b u ry India Ltd,

P re m ie r A u to m o b ile s Ltd, C o ro n a Ltd, G o d re j S o a p s Ltd. Im p le m e n te d

V R S in 1 9 9 2 . B atlibol & C o . ltd in tro d u ced V R S in 1 9 8 7 a n d revised in

1 9 8 8 , a n d 1 9 9 1 . S a n d o z im p le m e n ts th e V R S in 1 9 9 4 . B ayer, C o m p to n

G re a v e s , In d ia n S ta n d a rd M e ta ls also im p le m e n te d it. T h e m a in aim of

d e cla rin g V R S w a s to re d u c e th e w o rkfo rce an d th e V o lu n ta ry R e tire m e n t

S c h e m e w a s im p le m e n te d in Private as w ell a s Public s ecto r undertakings.

Voluntary Retirement Differs from Retrenchment:-

T h e re tre n c h m e n t m e a n s te rm in a tio n o f s e rv ic e o f a w o rk m a n for

a n y re a s o n o r p u n is h m e n t by an y disciplinary action but d o e s not include-

a) T h e V o lu n ta ry R e tire m e n t S c h e m e .

b) R e tire m e n t by rea ch in g at th e a g e o f s u p e ra n n u a tio n .

In o n e c a s e th e c o m p a n y fro m U .P d e c la re d th e V R S . Som e

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w o rk e rs a c c e p te d th e s c h e m e a n d re s ig n e d a n d to o k th e b e n e fit o f th e

s c h e m e . A fte r 5 y e a rs th e y raised a d is p u te w h ic h w a s re fe rre d by

Industrial Tribunal and Tribunal given th e ju d g m e n t infavour o fw o rk m e n and

d ire c te d th e ir re in s ta te m e n t an d b a c k w ages on th e g ro u n d th a t th e

s c h e m e w a s n o t in th e stan d in g order.

T h e c o m p a n y filed th e writ petition in th e H igh court an d High court

a ls o g a v e th e ju d g m e n t a g a in s t th e c o m p an y, th e re a s o n w a s th a t th e

c o m p a n y h a v e v io la te d th e pro visions o f S e c tio n 9 A , o f th e ID A c t and

s e c tio n 6 N o f th e U P . ID A ct, 1 9 4 7 -

Voluntary Retirement Scheme is Contractual in nature:-

In th e case o f V o lu n ta ry R e tire m e n t Schem e d e c la re d by th e

N a tio n a liz e d a n d S ta te B an ks th e S u p re m e C o u rt held th a t d e c la ra tio n of

VRS is not p ro p o s a l but it is an invitation, th e b a n k s h a s th e right to

a c c e p t o r re je c t th e a p p lic a tio n or to c h a n g e th e c o n d itio n s w hich a re

d e c la re d in th e s c h e m e . W h e r e a s th e e m p lo y e e c a n n o t w ith d ra w his

a p p lic a tio n a s h a v e no e n fo rc e a b le right a c c o rd in g to se c tio n 5 o f th e

c o n tra c t A c t 1 9 7 2 . F o r its V alid ity th e a c c e p ta n c e fo r V R S is required to

b e c o m m u n ic a te d to th e ap p lican ts.

Voluntary Retirement is different from compulsory retirement:-

In o n e c a s e d ecid ed by K a rn a ta k a High court com pulsory retirem ent

is th e d isc retio n g iven to th e e m p lo y e r to retire an u n w a n te d e m p lo y e e

irre s p e c tiv e o f w h e th e r th e e m p lo y e e s a re su rp lu s or no, w h e re as

v o lu n ta ry re tire m e n t is th e c h o ic e given to a n e m p lo y e e . T h e e m p lo y e e

c an s e e k V R S w ith o u t o b jectio n from th e m a n a g e m e n t. T h e d o c u m e n ts

like A n n e x u r e (R 1 and R 2 ) have been m a d e unilaterally, by th e m a n a g e m e n t

w ith o u t consulting th e w o rk m e n .

6.4 SCOPE OF VOLUNTARY RETIREMENT SCHEME:-

T h e m o s t d e fe c tiv e c h a n g e s to o k p la c e b e tw e e n th e period 1 9 8 5 -

95. T h e R a je e v G an d h i visited U .S .A . and other countries, and he observed

c e rta in k e y fa c to rs req u ire d for th e d e v e lo p m e n t o f India. T h e re w e re

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m a n y d ra w b a c k s in th e In d ia n in d u stries like o b s o le te m a c h in e ry , high

c o st o f p ro d u ctio n low quality, low productivity, o v e r m a n n in g etc. T h e

c o m p a n ie s in b oth p ublic an d p rivate s e c to rs fo u n d th a t th e viability o f

th e ir units w a s in d an g er. M a n y o f th e units w e re sick, o v e r th e y ears and

it w a s e s tim a te d th a t 1 lakh an d 3 0 th o u san d sick units in o u r country and

m a n y m a rg in a l units w e r e on th e w a y o f sick.

The g o v e rn m e n t als o m a d e c h a n g e in th e policy in 1 9 8 4 , like

p a rtia l d e c o n tro l, d e re g u la tio n and d e lic e n s in g and m o d e rn is a tio n ,

te c h n o lo g ic a l up g ra d a tio n , c o m p e titiv e n e s s , c o s t e ffe c tiv e n e s s a n d g re a t

e m p h a s is on quality, d e liv e ry s c h e d u le a n d prices. T h e old industries

w e re highly s h e lte re d an d w e re o perating in a p ro tective m a rk e t. N o w the

co m p e titio n h a s b e c o m e v e ry stiff d u e to n e w in d u stries an d sm all s c a le

in d u stries also.

M o s t o f th e industries w e re having th e problem o f reducing th e cost

o f p ro d u c tio n fo r w h ich u s e o f m o d e rn m a c h in e rie s a n d m in im izin g th e

w o rk fo rc e w a s n ecessary. B ut Indian law s a re protective to th e e m p lo y e e s

a n d g e n e ra lly th e p erm issio n is not given to retrench or closure or lay off.

T h e re fo re V o lu n ta ry R e tire m e n t is th e n e w te c h n iq u e or th e ‘G o ld e n H an d

s a k e ’ fo u n d to re d u c e th e w o rk force. It is also know n as E arly S e p a ra tio n

S c h e m e a n d u s e fu l to e m p lo y e rs , e m p lo y e e s a s w e ll a s to th e so ciety

also.

6.4.1 Scope of Voluntary Retirement Scheme At International Level:-

T h e c o n c e p t o f V o lu n tary R e tire m e n t o rig in ated in Toyota, J a p a n in

th e a u to m o b ile industry. T h e W e s te rn C ou ntries like A m e ric a , E n g lan d and

E u ro p e a re th e n a tio n s, w h e re th e re is c o m p le te fre e d o m to th e

e n tre p re n e u rs to H ire a n d F ire th e w o rk e rs . In A m e ric a th e re a re big

industrial g ia n ts like IB M , can re d u c e th e ir w o rk e rs stren g th o vern ig h t by

m a n y th o u s a n d s o f p e o p le , by giving sh o rt n o tice w ith o u t a n y tro u b le .

S u c h ru les a re not th e re in India.

A t p re s e n t th e w o rld B a n k an d th e In te rn a tio n a l M o n e ta ry F u n d

196
h a v e 1 8 9 m e m b e r countries, w hich m e a n s th e re a re 1 8 9 country players,

in th e g lo b a l e c o n o m ie s on d o m e s tic a s w e ll a s a t th e w o rld level. T h e

c o u n trie s h a s to look a t th e m o v e m e n ts o f th e g o o d s and s e rvice s,

p e o p le , m o n e y a n d inform ation. T h e countries will also try to k e e p control

on th e s e fo u r fa c to rs in o rd e r to a c h ie v e th e e c o n o m ic g row th . T h e

e c o n o m ic policy o f e a c h country h as th e final im p act on p rivate industries

in th a t country. In th e n e w trend o f global village presen tly th e re is a trend

o f privatisation o f g o v e m m e n t industries. T h e g o vernm ents in m an y countries

a im s th a t to m a k e a v a ila b le th e in frastru ctu ral fa c ilitie s fro m th e fu n d s

e re c te d b y s u ch p riv a tizatio n . W ith re fe re n c e to A m e ric a 9 % o f th e total

a s s e ts a re o w n e d outside th e A m e ric a , w h ile 4 % e m p lo y e e s w orks outside

A m e ric a . In c a s e o f U K 1 4 % o f th e a s sets a re o w n e d o u tsid e U K an d 15

% o f th e e m p lo y e e s w o rks o u ts id e U K s in c e e v e ry co u n try is in n e e d o f

e c o n o m ic g ro w th , c o u n trie s h a v e s ta rte d v iew in g th e w o rld a s a single

m a rk e t. T h e d e v e lo p e d c o u n trie s h a v e s ta rte d looking a t C h in a , In d ia,

In d o n e s ia B razil and M e x ic o as p o ten tial m a rk e ts because o f th e ir

po p u latio n s ize .

T h e re sh o u ld be s iz e a b le la b o u r fo rc e in th e o rg a n is a tio n .

R e tre n c h m e n t is th e policy option, h as p ractical lim itations. T h e re fo re less

painful stra te g y i s . V o lu n tary retirem en t is th e b est option fo r retrenchm ent.

T h e re tre n c h m e n t c re a te s th e industrial u n rest an d it is w ith o u t co n sen t o f

th e w o rk m e n . W h e r e a s V R S o ffe rs a ttra c tiv e p a c k a g e o f b e n e fits .

T h ro u g h o u t th e w o rld , in all th e d e v e lo p in g an d d e v e lo p e d nations

like U .S .A ., C a n a d a , U K , J a p a n , S c a n d in a v ia n co u n tries, C h in a , P a k is ta n

etc, h a ve introduced s a m e kind o f voluntary retirem ent s c h e m e s or voluntary

s e v e ra n c e s c h e m e s to their n eed s. T h e develo p ed countries h a v e a d e q u a te

s o cial s ec u rity m e a s u re s including u n e m p lo y m e n t in s u ra n c e etc, in th e s e

c o u n trie s a n a tte m p ts to e n s u re g re a te r tra n s p a re n c y is m a d e .

A fte r th e e v e n t o f S e p te m b e r 11, 2 0 0 1 th e w o rld e c o n o m y h a v e

lost th e c o n fid e n c e A cc o rd in g to th e p ro jectio n o f th e w orld g row th h as

197
b e e n d eclin ed from 3 .5 % to 2 .4 % . T h e re is slow grow th in both developing

a n d a d v a n c e d co u n tries. T h e U .S . e c o n o m y a n d th e J a p a n e s e e c o n o m y

a re th e m a in e c o n o m ie s w h o a re affecting th e w orld eco n o m y. T h e airline

in d u stry in U .S .A . is th e m a jo r industry, h avin g 2 4 ,0 0 0 flights o p e ra tio n

daily, h a s b e e n a ffe c te d v e ry b a d ly o f th e e n o rm o u s fall in p a s s e n g e r

traffic. T h e U .S . air industries h a v e a ffe c te d th e w h o le chain of industries

like, a irlin e , m e a l a n d ca te rin g industries, to u rism , hotel an d hospitability

industry, U .S a irlin e s laid o f 7 0 ,0 0 0 w o rk e rs w ithin 24 hours. British

a irw a y s also fo llo w e d th e s a m e w o rk e rs cutting policy o f m a n y th o u s a n d

jo b s a n d h a v e a s k e d 3 6 0 0 0 , non m a n a g e m e n t s ta ff to a c c e p t p a y cuts,

m ajo r air carriers h ave reduced th ere sch ed u le by 2 0 -3 0 % and International

A ir T ra n s p o rt A g e n c y e s tim a te s th a t th e re will b e jo b lo sses in g lob al

airlin es industry at a b o u t 2 lakhs. B oeing airlin es h a v e p la n n e d to lay off

3 0 0 0 0 w o rk e rs d u e to slo w d o w n in o rd e rs . J e t e n g in e m a k e r R olls

R o y c e P /C h a s a n n o u n c e d th e c h a n g e s in pro d u ctio n p lan is n ecessary.

L u fth a n s a is also going to fo llo w th e U .S . an d E u ro p e a n p lans w h o h a v e

re d u c e d th e ir jo b s a n d re vised th e ir plan s. S a b e n a a n d S w is s airlines

h a v e d e c la re d th e b an k ru p tc y by im m e d ia te re tre n c h m e n t an d retirem en t

o f th o u s a n d s o f w o rkers. S o m e airlines h a v e a s k e d th e fin an cial help and

lo an s fro m th e re ow n g o v e rn m e n ts .

The U .S . a irlin e s h a v e a s k e d fo r fe d e ra l a id s p a c k a g e an d th e

U .S . c o n g re s s h a v e a g re e d to g a v e a $ 15 billion bail ou t o f w hich 2 .5

billion a s im m e d ia te g ra n ts an d $ 1 2 . 5 billions in th e fo rm o f lo an s and

cred its. The US econom y w as e x p e rie n c in g s lo w grov\/th b e fo re 11'*^

S e p te m b e r, 2001 also . The US econom y is s u ffe re d by in creasin g

u n e m p lo y m e n t, lo w e r c o n s u m e r sp en d in g , lo w e r c o rp o ra te ea rn in g s , lack

o f will fo r long te rm in v es tm e n ts.

T h e in d u strial p ro d u ctio n o f m a jo r industrial c o u n trie s like Britain,

C a n a d a , F ra n c e , G e rm a n y a n d J a p a n h as g o n e d o w n J a p a n is u n d e r

fin a n c ia l crisis fo r m o re th a n one d ecade a n d th e re a re no signs of

198
recovery. D u e to th e industrial crisis th e b an kin g industry in J a p a n is also

fa c in g s e rio u s p ro b le m s . T h e in d u stries a re a ls o fa c in g th e p ro b le m s

s in c e la st d e c a d e w h e re as British econom y has s lip p e d and have

b e c o m e w e a k s in c e 1 9 8 0 .

Table 6.1 : V o lu n ta ry R e tire m e n t Schem es Im p le m e n te d at

International Level

Sr.No. Unit Years of V R S Total V R S Granted

1. S an d o z K O L S H E T 1994 415

2. Whirlpool 2002 1305

3. Philips India 1997 1750

4. Petrochem icals 1999 2000

5. B alasara 1997 15

6. S iem en s 1997,1998 1650

7. O tis 1997 350

8. Park & Davis 1997 300

Foreign Banks

9. A N Z Grindlays — 556

10. Standard Chartered — 2522

Airlines

11. U .S. Airlines N.A. 70000

12. British Airways N.A. 3 6 0 0 0 (pay cut)

13. International AirTransport Agency N.A. 200000

14. Boeing Airlines N.A. 30000

15. China G overnm ent laid off — 6 .5 million workers

( Source- 1. Seminar, Maratha Chamber o f Commerce & Industries, Pune 2.

International Relations in India paradigms by Ratna Sen and 3. Report o f National

Commission on Labour )

F ro m th e a b o v e ta b le , th e international o rg a n iza tio n s a re classified into

p riv a te c o m p a n ie s , fo re ig n b a n k s an d th e airlin es. In th e p riv a te o rg a n iza tio n

m o st o f th e o rg a n izatio n like Philips India, P e tro ch em ica ls, B a la s a ra , S ie m e n s ,

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O tis an d P a rk D a v is c o m p a n ie s restru ctu red th e ir su rp lu s w o rk fo rc e in 1 9 9 7 .

T h e S a n d o z re d u c e d th e w o rkfo rce in 1 9 9 4 an d W h irp o o l in 2 0 0 0 . T h e foreign

b a n k s like A N Z G rin d la y s , S ta n d a rd C h a rte re d B a n k a ls o re d u c e d th e ir

w o rkfo rce an d in th e A ir Lines, U S, British, In te rn a tio n a lA irT ra n s p o rtA g e n c ie s ,

B o e in g A irlin e s re d u c e d w o rk fo rc e . T h e C h in a g o v e rn m e n t a ls o laid off th e

w o rk e rs upto 6 .5 million.

A s ia n E c o n o m ic s : -

T h e r e is m ix e d p ic tu re in A s ia n e c o n o m ie s . T h e o u tp u t in C h in a

and In d ia is rising, w h e re as in M a la y s ia , S in g a p o re an d T a iw a n th e

output level is falling. T h e C h in a and India a re exp erien cing inflation w hich

is a sign o f p ro s p e rity acco rd in g R e s e rv e B a n k o f In d ia.

T h e g lo b a l slo w d o w n an d th e slo w d o w n in U S an d E u ro p e a n

c o u n tries will a ffe c t th e e c o n o m ie s of th e d e v e lo p in g co u n tries like India.

L a te s t N e w s A b o u t V R S :-

T h e Sri L a n k a n D aily N e w s and R e p o rts h a v e ed ite d th e n ew s on

17*^ April, 2 0 0 6 th a t th e Sri L an ka g o v e rn m e n t is considering the Voluntary

re tire m e n t S c h e m e fo r public se rv a n ts w ith th e a im o f cutting g o v e rn m e n t

e xp en d itu re.

T h e W o rld B a n k a ls o h a v e s u g g e s te d a n d sh o w n th e in te re s t to

assist th e Sri L a n k a n g o v e rn m e n t to cut th e w o rk fo rc e in public s e c to r to

im p ro v e th e productivity,

T h e Sri L a n k a g o v e rn m e n t h a s h u g e p u blic sector, a n d also h a v e

o p e n e d fu rth e r re cru itm en t ce n ters for g ra d u a te s . A ccord ing to th e A n n u al

R eport of C en tral B an k of Sri L anka the total e m p lo y e e s in state institutions

a m o u n ts 1 0 ,9 4 ,4 1 5 and 50% of th e s e e m p lo y e e s a re recru ited a fte r

1990. A cc o rd in g to “Sri L a n k a , D e v e lo p m e n t Policy R e v ie w ” o f th e W o rld

B an k , highlights th a t aro u n d 1 8 % of th e total la b o u r fo rc e is recruited by

th e g o v e rn m e n t in Sri L a n k a .

T h e N o rth a n d S o u th E u ro p e a n s h a v e re je c te d th e fo re ig n e rs in

their co u n tries and h av e m a d e anti-im m igrant noise. T h e y started imposing

200
restrictions, by ke ep in g th e w a g e s an d e m p lo y m e n t conditions dow n. O n e

c o m p a n y tried re p la c e th e w o rk e r by n o n -u n io n is e d w o rk e rs .

O n F rid a y M a y 0 5 , 2 0 0 6 , th e H o n g K ong - b a s e d C a th a y P a c ific flight

a tte n d a n ts a re elig ib le fo r a voluntary, e a rly re tire m e n t plan, introduced by

th e airline. T h e p lan is o p e n for th e crew , w h o jo in e d th e airlines, in flight

s e rv ic e s d e p a rtm e n t on or b e fo re 31®‘ D e c e m b e r , 1 9 9 9 a n d th e s c h e m e

will re m a in o p e n up to 5 p .m . on 9'^ J u n e 2 0 0 6 . T h e v o lu n ta ry re tire m e n t

p a y m e n t will a t p re s e n t 6 ,8 0 0 for w hich crew s a re eligible. T h is n ew s has

b e e n p u b lish ed by th e S ta n d a rd C h in a ’s B u sin ess N e w s p a p e r on 5*^ M ay,

2 0 0 6 a n d th e n e w s is g iv e n by Justin M itch ell.

T h e T im e s an d T h e S u n d a y T im e s M a lta a ls o h a v e p u b lish ed th e

n e w s th a t A ir M a lta is a ls o going to re s tru c tu re th e ir e m p lo y e e s by

c o n tin g en c y p lan . T h e A ir M a lta is going to d o w n s iz e th e w o rk e rs through

V o lu n ta ry R e tire m e n t S c h e m e , w ithin fe w w e e k s a fte r this d a te .

Table 6.2:Proposed Downsizing Plans in Selected firms at International

Level in May 2006

Sr. No. Unit N o .o f W o rk e rs P lan n ed

to C u t

1. J a p a n A irlin es 4200

2. F o rd M o to r 2000

3. C h ry s le r 20000

4. P ro c te r a n d G a m b le 9600

5. Indian H o tel (Taj group) 1100

6. N a tio n a lis e d b a n k s in India 90000

7. S te el A uthority o f India Ltd. 19600

8. M o to ro la 7000

9. F ia t India 2 0 to 2 5 %

o f existing staff

( S o u rce- Websites concerned with V R S .)

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 F ro m th e a b o v e ta b le it is c le a r that th e c o m p a n ie s at In te m a tio n a l level

a ls o h a v e p la n n in g to re s tru c tu re its w o rk fo rc e d u e to c o m p e titio n in c re a s e d

b e c a u s e o f g lo b alizatio n .

T h e J a p a n A irlin es is p lanning to d o w n s iz e th e w o rk fo rc e by 4 2 0 0 , th e

m a x im u m w o rkfo rce i.e. N ationalised B anks in India a re planning to red u ce the

w o rk fo rc e by 9 0 ,0 0 0 , F ia t In dia p lan s to re d u c e existin g s ta ff by 2 0 to 2 5 % ,

P r o c te r a n d G a m p le a n d C h ry s ie r a re d o w n s iz in g by 9 6 0 0 a n d 2 0 0 0 0

respectively. T h e steel authority of India ltd. an d M o to ro la a re also planning to

d o w n s iz e by 1 9 6 0 0 and 7 0 0 0 respectively. T h e a b o v e reduction in th e strength

/ ^ w o r k e r is n e c e s s a ry b e c a u s e of surplus labour force, in crease d com petition

an d ad o p tio n o f a u to m a tio n m e a s u re on larg e s c a le ^

6.4.2 S cope o f Voluntary R etirem ent S chem e tn India:-

In o rd e r to fa c e th e co m p etitio n in th e g lo b a l m a rk e t, e v e ry

organisation is trying for cost effectiveness, by w a y of insertion of autom atic

m a c h in e rie s a n d d o w n s izin g th e surplus w o rk fo rc e . B ut th e law s in India

^ re m o stly giving p ro tectio n to th e labours a n d a re n ot allow ing th e ‘H ire

"^and F ire ’ p o licy a s a d o p te d in th e o th e r c o u n tries. A s p e c ia l p erm issio n

o f th e g o v e rn m e n t is req u ired to b e ta k e n fo r re tre n c h m e n t, closure or lay

o ff of th e w o rk e rs . T h e In d ian e m p lo y e rs h a v e n o w fo u n d o n e m o re w a y

to d o w n s iz e th e e m p lo y e e s . If it is im p le m e n te d in an e ffic ie n t m a n n e r

a n d w ith s u ffic ie n t p a c k a g e o f c o m p e n s a tio n a n d by co u n s e lin g to th e

retiring w o rke rs a b o u t th eir individual planning in th e p o s t-V R S period. S o

th a t w o rk e rs w ill n o t s u ffe r in th e ir retired life.

T h e v o lu n ta ry re tire m e n t s c h e m e is no t im p le m e n te d in p rivate

s e cto r units only but also, in P S U s th o se w h o a re sick an d a lw a y s results

in, recu rrin g lo ss es , a n d a re a ls o in n e e d o f im p le m e n tin g th e v o lu n ta ry

re tire m en t s c h e m e . O n the o th er hand s o m e M ulti N a tio n a l C o m p a n ie s a re

ta k in g over th e p riv a te c o m p a n ie s , or c o lla b o ra tin g w ith th e In dian

C o m p a n ie s o r also reg ard in g th e public c o rp o ratio n s th e y a re purchasing

th e ir eq u ity s h a re in th e o p e n m a rk e t b e c a u s e th e y h a v e allo w ed by n ew

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g o v e rn m e n t policy to hold equity capital up to 4 0 % it is raised up to 5 1 % ,

in s o m e c a s e s up to 7 4 % an d in s o m e c a s e s up to 1 0 0 % a ls o of th e re

e q u ity ca p ita l if th e y a re 1 0 0 % exp o rt orien ted units. T h e overall e ffe c t of

such foreign o w n ersh ip is th at th e y a re asking to re d u c e th e old w orkforce

by rep lacin g n e w w o rk ers on contract basis. F o r such reduction th e Indian

o rg a n is a tio n s a re d e c la rin g th e v o lu n ta ry re tire m e n t s c h e m e on larg e

s c a le by bringing m o re a ttra c tiv e p a c k a g e s , w ith o r w ith o u t co n su ltatio n

with th e unions. S o m e o rg an isatio ns a re shifting th eir w o rk p la c e s from old

p la c e s to n e w p la c e by n e w n a m e and closing th e production activities at

old p la ce an d show ing th e surplus w orkfo rce th e re and declaring th e V R S ,

th e w o rk ers fe a rs th a t th e unit will close an d accep tin g th e V R S . T h e n ew

units a re s ta rte d in b a c k w a rd a re a s so th a t th e s e units will g e t th e tax

b en efits o r c o n c e s s io n s in p a y m e n t of s a le s tax, e x c is e duty, custom duty

etc.

The u n io n s also has becom e w eak due to red u ctio n in the

m e m b e rs h ip a n d th e u n io n s h a v e no b a rg a in in g p ow er. M a n y w o rk e rs

h a v e lost th e ir jo b s , an d th e u n e m p lo y m e n t h a s b e e n in c re a s e d , d u e to

VRS.

T h e In d ia n C o m p a n ie s c a n n o t c o m p e te w ith th e M N C s an d G ia n t

co rp o ratio n s b e c a u s e o f lack of m o d ern tech n o lo g y an d sufficient financial

availability. T h e M N C s h a v e ca p tu red th e d o m e s tic m a rk e t also, th e re fo re

it is q u ite difficult situation fo r th e d evelo p in g co u n tries like India to c o m e

o u t o f th e situation.

T h e In d ia n w o rk fo rc e is th e only a s s e t w h ic h will h elp us to c o m e

o u t o f th e situ a tio n . T h e In d ian s a re ta le n t p e o p le s , if th e y a re e d u c a te d

will e a s ily c a p tu re th e good lab o u r o p p o rtu n ities in fo reig n coun tries also,

eg. W e have v e ry g o o d s u p p o rt o f N on R e s id e n t In d ia n s . T h e y a re

w o rkin g on th e top positions in th e a d v a n c e d co u n tries like U S A , E u ro p e,

J a p a n A u stra lia etc. D u e to IT an d so ftw are industries w e a re getting good

jo b o p p o rtu n itie s an d fo reig n e x c h a n g e th ro u g h o u tso urcin g w orks.

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Designing of Voluntary Retirement Scheme:-

B e fo re d e s ig n in g th e V o lu n ta ry re tire m e n t s c h e m e it is n e c e s s a ry

to c o n s id e r, th e la b o u r m a n a g e m e n t relatio n s, th e le a d e rs o f in tern al or

exte rn a l tra d e unions, th e financial considerations o f th e e m p lo y e rs to give

th e c o m p e n s a tio n to VRS a p p lic a n ts , and e x tra a w a rd like g o ld en

h a n d sh ak e.
i
T h e c o m p a n ie s in India started restructuring in e a c h functional area

like fin a n c e , costing, su p p lies, m a te ria ls , m a n u fa c tu rin g a n d a ls o existing

m a n p o w e r a t all levels. T h e restructuring w a s n e c e s s a ry for cutting th e fat

in a n e n te rp ris e fo r k e e p in g profitability a n d liquidity fo r su rvival in th e

c o m p e titiv e m a rk e t, by w a y o f V o lu n ta ry re tire m e n t s c h e m e . V R S should

be th e last option. T h e V R S w a s p re v a le n t in th e p a s t but th e s p e e d w a s

ta k e n a fte r th e n e w e c o n o m ic policy on 24'^ July, 1 9 9 1 . In th e policy th e

g o v e rn m e n t b ro u g h t th e a m e n d m e n t to th e In c o m e T ax A ct, u n d e r section

10 (1 0 c) R u le 2 BA s p e c ifie d th e g u id e lin e s th a t th e am ount of

c o m p en satio n will not b e taxed of both private and public sector em plo yees.

F u rth e r th e a m e n d m e n t w a s m a d e on 1=* N o v e m b e r, 1 9 9 4 . P reviously th e

s c h e m e w a s req u ired to b e ap p ro ved by In c o m e T ax D e p a rtm e n t but with

e ffe c t fro m 1"’ A pril 2 0 0 0 th e re is no such restriction b ut th e c o m p a n y

m u s t e n s u re th a t s c h e m e c o m e s w ithin In c o m e T a x A ct. O n 2 0 - 0 6 -2 0 0 2

th e g o v e rn m e n t d e c id e d to e x e m p t th e V R S c o m p e n s a tio n from tax, for

th o s e e m p lo y e e s w h o h a v e c o m p le te d 10 y e a rs s e rv ic e or 4 0 y e a rs of

a g e . A s p re th e notification o f ( C B D T ) C e n tra l B oard of D irect T a x e s th e

g o v e rn m e n t a m e n d e d th e R u le 2 BA. T h e n o tification said th a t V R S

c o m p e n s a tio n w o u ld b e e x e m p te d fro m ta x fro m A pril 1 ,2 0 0 2 .

B e fo re th e c o m p a n y u n d e rta k e s a V R S to e x e rc is e th e c o m p a n y

m u st identify.

I) Is th e re su rp lu s m an p o w er.

ii) W h y th e c o m p a n y w an ts to go fo r V R S .

iii) W h o w a n ts to in tro d u ce th e V R S .

204
iv) How th e com p an y will m a n a g e after V R S.

Validity of Acceptance ofVR S :-

i) A fte r d e c la ra tio n o f th e s c h e m e if th e c a n d id a te h a v e ap p lie d for

V R S b u t aftenw ards he g a v e a n o th e r letter o f w ith d raw in g th e first

letter, e v e n th o u g h if his first a p p lic a tio n is a c c e p te d th e n such

a c c e p ta n c e is not valid a c c e p ta n c e .

ii) A fte r m a k in g an a p p lic atio n fo r V R S th e e m p lo y e e will retire only

w h e n his ap p lic a tio n is a c c e p te d .

iii) An e m p lo y e e m ay w ith d ra w his a p p lic a tio n of V R S b e fo re it

b e c o m e s e ffe c tiv e or th e re latio n sh ip o f e m p lo y e r a n d e m p lo y e e

c o m e s to a n e n d .

iv) A n o p tio n fo r v o lu n ta ry re tire m e n t c a n n o t b e w ith d ra w n a fte r It is

a c c e p te d .

v) The o p tio n fo r v o lu n ta ry re tire m e n t c a n n o t b e a c c e p te d till th e

d is c ip lin a ry p ro c e e d in g s a re p en d in g a g a in s t a n e m p lo y e e .

vi) A fte r takin g th e V R S and receiving th e a m o u n t o f co m p e n s a tio n . If

a g a in in th e s a m e o rg a n iz a tio n , if th e c a n d id a te is ap p lying for

fre s h a p p o in tm e n t, th e n such fresh a p p o in tm e n t c a n n o t be m a d e .

vii) W h ile w ith d ra w in g th e a p p licatio n o f V R S it is n e c e s s a ry to sh o w

th e s a tis fa c to ry re a s o n for such w ith d ra w a l.

viii) If th e p a y s c a le s a re revised a fte r th e d a te o f V R S but th e e ffe c t

o f su ch pay revision is g iven fro m back d a te th e n such pay

revisio n is p a y a b le to th e e m p lo y e e .

ix) A fte r th e V R S is d e c la re d if th e te rm s & c o n d itio n s a re m a d e by

th e e m p lo y e r fo r th e b e n e fit o f th e c o m p a n y / o rg a n iza tio n a re

allo w ed .

x) If th e long s e rv ic e is re n d e re d by th e c a s u a l w o rk e r th e n his

s e rv ic e is c o n s id e re d fo r V R S b e n e fits .

Reorganization At All Levels:-

T h e reduction in m a n p o w e r m e a n s total reorganization of m a n p o w e r

205
re q u ire m e n ts fro m to p to b o tto m . S u c h re o rg a n iz a tio n is n e c e s s a ry for

c re a tin g p s y c h o lo g ic a l c lim a te , cost red u ctio n , m a x im u m utilization of

m a n p o w e r. W h ile introducing th e V R S th e fo llo w in g fa c to rs should be

c o n s id e re d .

T h e r e is no u n iv ersa l fo rm u la a p p lic a b le to all o rg a n iza tio n s in

d iffe re n t situ atio n . T h e c o m p a n y can in tro d u ce its o w n s c h e m e , but a n y

s c h e m e sh o u ld in clu d e th e follow ing points.

i) It sh o u ld b e o p e n fo r p e rm a n e n t e m p lo y e e s .

ii) it should b e voluntary.

iii) It m a y b e fo r 5, 10 or 15 y e a rs d e p e n d in g u pon a g e , skill an d

position o f th e e m p lo y e e s .

iv) T h e s c h e m e should b e in troduced, by displaying th e notice on th e

n o tice b o ard an d should b e kep t o p en fo r o n e to th re e m onths or

e v e n m o re.

v) T h e s c h e m e sh o u ld b e specifyin g , th a t th e te rm s an d con ditions

a re n o t n e g o tia b le .

vi) T h e a c c e p ta n c e o f a p p lic atio n should be, a t th e d iscretio n o f th e

I
com pany.

vii) If th e e m p lo y e e applies for V R S , and w an ts w ith d raw th e application

th e n it should b e p erm itted b e fo re it is a c c e p te d a n d relieved from

th e post.

viii) T h e a c c e p ta n c e or resig n ation should b e c o m m u n ic a te d in writing.

Legal Dues:-

T h e e m p lo y e e w h o a p p lies for V R S is en titled to re c e iv e th e legal

d u e s like-

a) L e a v e S alary.

b) E a rn e d w a g e s .

c) P ro v id e n t fu n d as p e r law or s e ttle m e n t.

d) P e n s io n if any.

e) S tatutory bonus.

206
f) G ra tu ity a s p e r la w or a g re e m e n t an d s e ttle m e n t.

g) LTA a n d o th e r b en efits.

Compensation:-

A p a rt fro m th e leg a l d u e s , th e s c h e m e p ro v id e s p a y m e n t fo r th e

p a s t s e rv ic e re n d e re d and fu tu re s e rv ic e left in th e o rg a n iza tio n th e

a m o u n t o f c o m p e n s a tio n d e fe rs from o rg a n iza tio n to o rg a n iza tio n as p er

th e s c h e m e s d e c la re d by such o rg an izatio n s.

Payment of Compensation:-

T h e e m p lo y e r h as to d e cid e th e m o d e o f p a y m e n t o f co m p en satio n

as follow s.

h) T h e p a y m e n t in tw o to fo u r installm ents.

i) T h e p a y m e n t In lu m p sum

j) By m o n th ly p a y m e n t th e m a xim u m period o f such p a y m e n t or up to

th e d a te o f re tire m e n t w h ic h e v e r is earlier,

VRS suggested by Income Tax Department-

Taking V R S is th e last m o m e n t in th e s e rvice life o f a n d e m p lo y e e .

H e re c eive s th e lu m p s u m a m o u n t a t a tim e in th a t year. S u ch big incom e

a t o n c e is ta x a b le u n d e r In c o m e T a x A ct. H e n c e it b e c o m e s th e m o ral

responsibility o f th e e m p lo y e r to e d u c a te th e e m p lo y e e s to re d u c e th e tax

liability, fo r this th e follo w in g points should b e b o rn e d in m ind.

i) T h e p a y m e n t o f g ratu ity up to o n e lakh is e x e m p te d fro m in co m e

tax.

ii) S tatu to ry re tre n c h m e n t co m p en satio n p a y a b le u n d e r c h a p te r V A A /B

is ta x fre e .

Hi) T h e le a v e s a la ry is c o n s id e re d fo r ta x re lie f u n d e r this s c h e m e is

tre a te d on p a r w ith re tire m e n t on s u p ervisio n ,

iv) U n d e r th e a m e n d m e n t o f sectio n 10 (1 0 c ) o f th e In c o m e T ax A ct,

in d ic a te s th a t th e c o m p e n s a tio n re c e iv e d to th e p ublic secto r

u n d e rta k in g s e m p lo y e e is to tally e x e m p te d u n d e r th e In c o m e Tax

A ct. T h e fe a tu re s of In c o m e T ax g u id e lin e s laid down, bv th e

207
 governm ent are-

a) T h e s c h e m e should b e o p en at all levels in th e u n d ertakin g .

b) T h e e s ta b lis h m e n t should b e s tan d in g fo r 10 y e a rs or m o re.

c) T h e retiring e m p lo y e e s should not b e re -e m p lo y e d in or an y

s u b s id ia ry o f th e c o m p a n ie s g roup .

d) T h e e m p lo y e e m u st h a v e c o m p le te d 4 0 y e a rs o f a g e or 10

y e a rs s e rv ic e in th a t o rg a n iza tio n .

e) T h e s tren g th of th e e m p lo y e e s should not b e in c re a s e d .

f) T h e ra te o f c o m p e n s a tio n fo r th e p a s t s e rv ic e o f th e retiring

e m p lo y e e shall b e 1 )o n e a n d a h a lf m o n th w a g e s (B a s is + D .A

) p e r y e a r o f service and 2 ) o n e m onth w a g e s (B asis + D .A .) for

th e fu tu re s e rvic e left with a co m p an y.

g) T h e m a x im u m lim it is R s 5 / - lakhs.

V) T h e in v e s tm e n t in ta x savin g s s c h e m e s like N S C 1 9 8 7 , L .I.C .

schem es like J e e v a n A k s h a y s , Jeevan D h a ra to claim th e

b e n e fit u n d e r 8 0 C C A an d in v e s tm e n t in 8 0 C C or S B I m utual

fu n d s c h e m e s will b e helpful.

T h e c o m p a n y should ta k e th e e x p e rt a d vise o f th e tax consu ltant to

g u id e th e e m p lo y e e s w h ile tak in g th e V R S .

6.4.3 VOLUNTARY RETIREMENT SCHEMES AFTER 1991:-

Industrial Policy of 24*" July 1991:-

B e c a u s e o f b a la n c e o f p a y m e n t crisis b e c a u s e o f h y p e r inflation

an d low p ro d u ctivity th e g o v e rn m e n t o f In d ia sold 2 0 to n e s o f gold and

p le d g e d a n o th e r 2 7 to n e s gold in B a n k o f E n g la n d w h ich d e v a lu e d th e

ru p e e v a lu e . S o m e o f th e key steps w e re ta k e n to resto re fiscal discipline

like m a k in g im p o rt d u ty m o re realistic, d e v a lu in g th e In d ia n s ru p e e , deli

c e n s in g , re m o v a l o f M R T P A C T , F E R A ACT, lib e ra liza tio n o f fin an cial

m arkets, e n c o u ra g e m e n t of m utual funds, flexibility in collecting th e prem ium

on s h a re s w h ile o fferin g th e m to th e public s a le o f p u blic s e c to r s h a re s ,

land re fo rm s a n d re v a m p in g o f distribution s y s te m .

208
 T h e a b o v e la b o u r policy h a v e d ire c t im p a c t on H u m a n R e s o u rc e

M a n a g e m e n t. A rtic le 1 5 ,1 6 , an d 17 o f th e policy a re re la te d with th e

H u m a n R e s o u rc e M a n a g e m e n t w hich a re -

1) The g o v e rn m e n t o rg a n iza tio n s a re run on b u s in e s s lines as

e n v is a g e d in th e industrial policy resolution, 1 9 5 6

2) G o v e r n m e n t will p ro tec t th e in te re s t o f th e labour, e n h a n c e th eir

w e lfa re a n d e q u ip th e m in all re s p e c t, to d e a l w ith th e n e c e s s a ry

te c h n o lo g ic a l c h a n g e s.

3) T h e g o v e rn m e n t will e n s u re th e la b o u r as a n e q u a l p a rtn e r in th e

prosperity.

4) W o r k e rs p a rtic ip atio n in th e m a n a g e m e n t will b e p ro m o te d .

5) W o r k e r s c o -o p e ra tiv e s will b e e n c o u ra g e d .

6) In te n s iv e train in g , skill d e v e lo p m e n t a n d u p g ra d a tio n s p ro g ram will

b e la u n c h e d by th e g o v e rn m e n t.

7) P e rs u a s io n to w a rd s p reservation o f th e e n v iro n m e n t an d to en s u re

e ffic ie n t u s e o f a v a ila b le reso u rces .

The in d u stry la b o u r/ tra d e u nions have e n jo y e d th e protection

regarding m a rk e t tec h n o lo g y and w ork habits. B ut th e n e w industrial policy

a t d o c u m e n t level h as tried to re m o v e controls so th a t industry b e c o m e s

c o m p e titiv e . H o w e v e r th e N e w Industrial P o licy is to ta lly silen t on a n y

c h a n g e s with p e rfo rm a n c e . T h e re is hardly a n y n e w direction on handling

c o m p a n ie s th a t a re sick and unviable and n eed to be ren ew al fund. It m ay

b e im p lied fro m a rtic le 16 o f th e N e w In dustrial P o licy th a t if w o rk m e n

re fu s e to u n d e rg o train in g th e y can be re tre n c h e d w ith o u t obtaining

g o v e rn m e n t ap p ro val.

T h e industrial sickness is likely to increase in future. M a n y com panies

a re applying to th e B oard fo r Industrial an d fin an cial reconstruction (B IF R )

fo r d e c la rin g VRS. Such sick c o m p a n ie s w e re 311 in 1987, w hich

officially a c k n o w le d g e d sick w hich w e re 9 7 in 1 9 9 6 a n d 2 3 3 in 1 9 9 7 and

3 2 0 in 1 9 9 8 . S u c h industries w e re m ostly textiles a n d m etallu rg ical, w e re

209
sick b e c a u s e o f th e d u m p in g fro m s o u th -e a s t A s ia n c o u n trie s w h o s e

c u rre n c ie s fell d u rin g 1997 and 1998. B e s id e s th e ir w e re m a n y o th e r

c o m p a n ie s w h o h a v e d e c la re d V R S fo r im proving th e ir profitability an d to

b e c o m e m o re c o m p e titiv e following a re th e e x a m p le s o f s o m e c o m p a n ie s

w h o h a v e d e c la re d V R S .

Table 6.3 : Trends of the workers opted for VRS

Y ear N o. o f w o rk e rs o p te d fo r V R S

1 9 9 2 -9 3 38626

1 9 9 4 -9 5 31617

(Source : Annual Report 2002-03, Ministry o f Labour, Govt, o f India, New Delhi)

F ro m th e a b o v e ta b le , it is c le a r th a t 3 8 6 2 6 e m p lo y e e s o pted for V R S in

1 9 9 2 - 9 3 a n d 3 1 6 1 7 in 1 9 9 4 -9 5 . T h is V R S will h elp to th e c o m p a n y to abolish

th e p e rm a n e n t jo b a n d re p la c e th e m by co n tract la b o u r s y s te m w hich will lead

th e e n tire d e v e lo p m e n t o f th e Indian industries.

Table 6.4: VRS implemented in National Textile Corporation of India (NTC

Sr.No. State 1992-93 1993-94 1994-95 Total (Upto
April 1995)

1. A ndhra Pradesh 735 260 62 1057

2. Karnataka 558 347 166 1071
3. Meghalay 38 - - 38
4. Delhi 324 196 85 605
5. Punjab 189 44 3 236
6. R ajasthan 710 291 163 1164
7. Gujrat 5318 1229 628 7175
8. M aharashtra 6551 3077 1328 10901
9. M adhya Pradesh 3396 740 137 4281
10. Tam llnadu 83 41 127 251
11. Pondicherry 60 - 38 98
12. U ttar Pradesh 4021 1292 590 5903
13. W e s t Bengal 2013 165 321 2499
14. A ssam 47 - 6 53
15. Bihar 335 6 39 380
16. Orissa - - 4 4
Total 24378 7641 3647 35716

( S o u rc e -rrte Hindu,April 9,1995)

210
G raph 6 : T re n d s o f th e w o rk e rs o p te d fo r VRS

1992-93
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 T h e a b o v e ta b le rev ea ls that, th e total V R S a t all India level in N T C w e re

3 5 7 1 6 . O u t o f w h ic h , 2 4 3 7 8 V R S w e re g ran ted in th e y e a r 1 9 9 2 -9 3 only. M ost

o f th e V R S w e r e g ra n te d in M a h a ra s h tra , M a d h y a P ra d e s h , G u j r a t , U tta r

P ra d e s h a n d W e s t B e n g a l s ta te s . T h e s e V R S w e r e g ra n te d b e c a u s e o f

a u to m a tio n in te x tile industries a n d recurring loss position o f th e textile mills in

th e s e s tates. B e s id e s th e s e , glo b alizatio n w a s a ls o re sp o n sib le fo r dow nsizing

th e su rp lu s la b o u r fo rc e by w a y o f d eclarin g V R S .

In th e p u b lic s e c to r units, th e V R S w a s k e p t o p e n fo r e v e ry year. T h e

n u m b e r o f e m p lo y e e s o p ted for V R S w e re 7 6 4 1 a n d 3 6 4 7 in th e y e a r 1 9 9 3 -9 4

a n d 1 9 9 4 - 9 5 res p e ctiv e ly. T h e s h a re o f V R S in N T C is m o re a s c o m p a re d to

o th e r P u b lic S e c to r Units.

Companies from Private sector:-

S a n d o z a t its K o ls h e t w o rk e d re d u c e d 415 w o rk e rs o u t o f 921

e m p lo y e e s in 1 9 9 4 .

H in d u s ta n L e v e r :-S e w r e e p lan t o ffe re d V R S in 1 9 9 8 but o p p o s e d by th e

u n io n s on th e g ro u n d th e re m u n e ra tio n w a s too low.

S ie m e n s ;- C o m p a n y w a s p lan n in g to re d u c e 2 0 % w o rk e rs in 1 9 9 7 , 1 3 0 0

w o rk ers o p ted fo r V R S , but in A p ril-M a y 1 9 9 8 th e union o p p o sed claim ing

th a t c o m p a n y is n o w in a good condition e x c e p t s o m e d e p a rtm e n ts . O n ly

2 5 0 w o rk e rs o p te d fo r V R S a t th a t tim e .

Standard Chartered Bank introduced:-

VRS in 1994, 1996 and in 1999. T h e bank w as p lan n in g to

re d u c e 2 0 4 6 e m p lo y e e s including 100 m a n a g e rs . Such red u ctio n in

e m p lo y e e s w a s required d u e to introduction o f satellite-linked co m p u terized

facilities b u t h ard ly 1 1 2 2 fo r th e latest s c h e m e an d in a n o th e r s c h e m e up

to 1 9 9 9 , 1 4 0 0 w o rk e rs will re d u c e a t all In d ia level. T h e la te s t p ro p o sal

w a s th ree m onths p ay fo r every years of service left up to norm al retirem ent.

O n a n a v e ra g e su ch p a y m e n t w a s 17 lakh s p e r p e rs o n a n d 2 4 lakh s p e r

m a n a g e rs . T h e a ls o run th e training period but 1 5 o u t o f th e m could be

a b s o rb e d in o th e r o rg a n iz a tio n s . T h e to tal s p e n d in g w a s e s tim a te d up to

214
2 0 0 crores.

B a n k o f A m e r ic a o ffe r e d in 1998:-

O ffe re d th e b e n e fit fo r V R S fo r its ( m id d le le v e l) e x e c u tiv e s a t

a b o u t th re e m o n th s s a la ry fo r e a c h y e a r o f c o m p le te d y e a rs o f service

an d o n e m o n th s s a la ry fo r e a c h y e a r left. T h e c o m p e n s a tio n w a s reaching

up to thirty la kh s . T h e b a n k a ls o d e c id e d to pull th e e n tire stren g th from

retail b a n k in g o p e ra tio n s in so uth a n d s o u th -e a s t A s ia .

Citi Bank:-

E s ta b lis h e d in 1 9 0 2 o ffered th e p a c k a g e in 1 9 7 6 , 1 9 8 6 , 1 9 9 3 and

1 9 9 9 . T h e b a n k w a s a im e d to re d u c e th e 1 0 % o f In d ia n staff.

BOC (India) Ltd

R educed its all In d ia m a n p o w e r fro m 5400 in 1 9 8 9 to 1 4 2 5 in

J a n u a ry 1 9 9 8 w ith a ta rg e t of 1 0 0 0 by th e y e a r 2 0 0 0 .

Blue star

Announced its 5'" V R S p a c k a g e s in N o v e m b e r 1 9 9 8 , th e ta rg e t

w as 25% re d u c tio n o f existing stren g th of 1000 w o rk m e n an d 1800

m a n a g e rs .

Apollo Tyres:-

A n n o u n c e d V R S a t its P e ra m b ra (K e re la ) w ith 2 0 0 w o rk e rs . T h e

ta rg e t w a s 6 0 0 re d u ctio n s an d in S e p te m b e r 1998, 100 had a lre a d y

o p ted .

SKF '.-B e a rin g s a im s to cut 2 4 % w o rk fo rc e th ro u g h V R S in 1 9 9 8 .

Maruti Udyog Ltd:-

A n n o u n c e d V R S in 2 0 0 1 , d u e to w o rk s to p p a g e s a n d falling sales.

It’s w o rk fo rc e w a s 6 0 0 0 . It o ffe re d 9 0 d a y s s a la ry fo r e a c h c o m p le te d

y e a rs o f s e rv ic e or for rem ain in g y e a rs , for su p erviso rs 6 0 d ays salary for

m a n a g e rs 4 5 o r 3 0 d a y s salary.

GEC Alstam:-

A c h ie v e d 1 8 0 0 red u ctio n in th e first V R S in its five units. In 2"'^

V R S 4 0 0 0 w o rk e rs re sp o n d ed out of 1 6 0 0 w o rkers of P a h a rp u r (C alcu tta),

215
TISCO

R e d u c e d its w o rk fo rc e by 3 5 9 9 w o rk e rs in 1 9 9 7 - 1 9 9 8 & p aid R s

1 1 2 .1 9 c ro re s a s c o m p e n s a tio n . T h e to tal w o rk fo rc e h ad re d u c e d from

7 7 4 4 8 in 1 9 9 3 - 1 9 9 4 to 6 4 7 5 3 in 1 9 9 7 -1 9 9 8 . T IS C O h a d b u d g e te d 112

in 1 9 9 8 - 1 9 9 9 R s. 1 8 0 cro re s fo r V R S aro u n d 5 5 0 0 0 w o rk e rs up to 2 0 0 0 .

In g e n e ra l it a p p e a rs th a t th e w o rk e rs a re a c c e p tin g V R S if th e y a re

gettin g a ttra c tiv e p a c k a g e o f c o m p e n s a tio n or if th e y a re co n vin ced a b o u t

th e crisis in th e c o m p an y.

Table 6.5 : The VRS Implemented in Private Sector in India

Sr.No. Unit Years V R S Granted Total V R S
1. Appolo Tyres 1996,1998 100 & 220 320
2. GKW 1998 4 50 450
3. G E C Alstom 1998 1800 & 4 0 0 2200
4. T IS C O 1993,1998 7 8 0 0 0 & 12695 90695
5. Binny 1998 40 0 0 4000
6. ACC 1996,1999 5000 5000
7. Dunlop Tyres 1998 3000 3000
8. P rem ier Autom obiles 1980 3000 3000
9. lnd-Auto,Fiat Prem ier 1998 1320 1320
10. Shri R am Mills N.A. 1400 1400
11. G uest Keen W iliam s 1988 900+250 1150
12. Bharat B IJLEE N.A. 247 247
13. Blue Star N.A. 500 500
14. Crom pton G reaves N.A. 218 218
15. Atlas Copco N.A. 400 400
16. M ahindra & Mahindra N.A. 740 740
17. PAL N.A. 2700 2700
18. RHO NE POULENC N.A. 400 400
19. Ciba G eigy 1993 907 907
20. Motilal Engineerings N.A. 900 900
21. Kelvinator N.A. 10000 10000
22. B oehringer Pharm a N.A. 100 100
23. Hoest Marion Rouse! Pharma N.A. 82 82
24. Glaxo N.A. 300 300
( SouTce-Seminar at Marratha Chamber o f Commerce & International Relations in
India Shifting Paradigms by Ratna Sen . )

F ro m th e a b o v e ta b le , it is c le a r th a t m o s t o f th e p riv a te c o m p a n ie s

h a v e im p le m e n te d th e V R S in th e y e a r 1 9 9 8 . B esid es this, s o m e o f co m p a n ie s

im p le m e n te d th e V R S in 1 9 8 0 ,1 9 8 8 , 1 9 9 3 ,1 9 9 6 an d 1 9 9 9 also. T h e purpose

216
o f V R S w a s to m in im is e th e la b o u r co st by red u cin g e x c e s s m a n p o w e r. T h e
te c h n o lo g ic a l u p g ra d a tio n an d a u to m a tio n m e a s u re s a re n o w h a v e b e c o m e

n e c e s s a ry p a rt o f th e in d u stries in o rd e r to h a v e q u ality p ro d u ctio n a t lo w cost

o f prod u ctio n fo r facin g in tern atio n al com petition.

Public sector undertakings;-

S o m e p u b lic s e c to r units d e c la re d th e V R S in o rd e r to m a tc h th e

new dem and o f th e 5'^ p a y c o m m is s io n s re c o m m e n d a tio n s or cen tral

g o v e rn m e n t e m p lo y e e s . F o r e x . th e S A IL , C o a l India & H in d u stan c o p p e r

(H C L ) etc. c o a l In d ia ’s ta rg e t is to re d u c e 3 4 0 0 0 w o rk e rs . H C L pro p o sed

to c lo s e u n e c o n o m ic m in e s . S o m e P S U s w e re in c o m fo rta b le position &

h a d a w a g e h ike s in c e th e ir la b o u r p ro d u ctivity w a s c o m fo rta b le . T h e y

w e re in a position to d e c la re th e V R S for it’s officers, w h o had co m p leted

2 0 y e a rs s e rv ic e o r w e r e o v e r 5 0 y e a rs o f a g e .

Table 6.6:The Public Sector Enterprises in which employees granted

VRS.
Sr. No Units No. of persons No.of % of VRS
1990-1991 1991-1992 1992-1993 persons granted VRS.
employed granted to taker
to total work
force in 1990-91
1. SAIL 190608 189193 188352 16928 8.90
2. DTC 40684 40193 39478 3799 9.34
3. MMTC 3836 3648 3246 715 18.64
4. FCI 68502 67788 66631 18 0.03
5. MR 2685 2584 2543 75 2.86
6. EIL 3373 3426 3541 54 1.60
7. NTCCTN) 11990 12015 11702 2137 17.82
8. HI 2748 2722 2722 117 4.25
9. HIVfT 28508 27771 27015 1588 5.57
10. MFL 1473 1566 1579 89 6.04
11. BCPL 1668 1467 1369 311 18.65
12. ECIL 7892 7874 7653 192 2.43
13. MECON 3817 3794 3748 37 0.10
14. CIL 672866 761550 663349 13328 1.98
15. NFDC 282 277 248 40 14.18
16. BPT 30185 29903 26614 1481 4.91
17. EID PARRY NA 2828 2957 1112 *39.32
18. PHILIPS NA 7884 7675 @ -
19. lOL# NA NA 2134 1156 *54.17
(Source;- Annual Reports o f O rganisations )
Notes : * ; C onsidered base year 1991-92 @ :VR S yet to be implemented

# ; R elated to calendar year.

217
 Graph 9 : The Public Sector Enterprises in which employees granted VRS

“D
a
c
2
(!)
(O
ir
>
00
—X

lU
Public S ector Enterprises
 F ro m th e a b o v e ta b le it is c le a r th at th e statistics relates to only 16

public s e c to r units an d th e fig u re s a v a ila b le a re o f o nly 3 y e a rs i.e. 1 9 9 0 -

9 1 , 1 9 9 1 -9 2 , 1 9 9 2 -9 3 .

A m o n g s t th e s e , 16 units w h o h a v e g ra n te d h ig h e s t V R S a re M M T C

1 8 .6 4 % , N T C ( T N ) 1 7 .8 2 % , B C P L 1 8 .6 5 % & N F D C 1 4 .1 8 % .

T h e units in w h ich th e V R S g ran ted a re v e ry less i.e. P C I 0 .0 3 % ,

M F I 2 . 8 6 % , E I L I . 6 0 % , E C IL 2 .4 3 % , M E C O N O .1 0 % a n d C IL 1 .9 8 % .

The p riv a te o rg a n iz a tio n s like B ID P A R R X a n d lO L re d u c e d th eir

w o rk fo rc e by 3 9 .3 2 % a n d 5 4 .1 7 % respectively.

BHEL announced

A VRS b y k e e p in g a ta rg e t o f 5 0 0 0 e m p lo y e e s . T h e o ffe r w a s

o v e rs u b s c rib e d and aro u n d 8000 w o rk e rs had a p p lie d fo r V R S . The

c o m p a n y h ad to c lo s e th e s c h e m e by tw o m o n th s in a d v a n c e .

Steel Authority of India Ltd:-

Reduced 1 7 0 0 0 w o rk fo rc e In th e first V R S in 1 9 9 3 . B hilai steel

p la n t re d u c e d , th e w o rk fo rc e fro m 6 1 0 0 0 in 1 9 8 0 s to 5 1 0 0 0 in 1 9 9 0 s .

S o m e w e r e h avin g a p ro b le m o f skill d e p le tio n . T h e B hilai policy w a s to

p ro vid e on th e jo b train in g fo r six m o n th s to ta k e c a re o f th e p ro b lem s.

S A IL S im m e d ia te ta rg e t w a s to re d u c e 60000 w o rk e rs o u t o f w hich

4 0 0 0 0 w e r e V R S a n d 2 0 0 0 0 w e re n atu ral re tire m e n t.

Mazgaon Docks:-

T h e w o rk e rs w e re not going to o p p o s e to th e d e c la re d s c h e m e .

In d ia n A irlin e s re d u c e d 2 2 0 0 0 w o rk e rs in 1 9 9 6 a n d 1 9 9 8 by V R S .

A ro u n d 27 b a n k s w e re also jo in e d in th e V R S schem e. These

b an ks o ffere d 1 m illion e m p lo y e e s w h o had c o m p leted 15 y e a rs of service

an d 4 0 y e a rs o f a g e . T h e c o m p e n s a tio n w o u ld b e 6 0 d a y s s a la ry for

e a c h c o m p le te d y e a rs o f s e rv ic e o r n u m b e r o f y e a rs left, w h ic h e v e r is

less. T h e B a n k o f M a h a ra s h tra , P u n ja b N a tio n a l B a n k a n d S y n d ic a te

Banks re c e iv e d 14500 a p p lic a tio n s out o f to tal 115000 a p p licatio n s

receive d . In a n o th e r 8 b an ks in w hich 1 6 3 0 0 0 w o rk e rs w e re em p lo yed for

219
th e m th e s c h e m e w a s op en up to 2 0 0 0 . S B I received so m a n y applications

w h ic h a fte rw a rd s re je c te d . V R S A n o th e r tw o b a n k s e m p lo y in g o n e lakh

e m p lo y e e s , d e c la re d th e s c h e m e in 2 0 0 1 , out of th e m , 1 2 6 0 0 0 e m p lo y e e s

o p te d fo r VRS including v e ry s e n io r m a n a g e rs a ls o & th e ir total

c o m p e n s a tio n w a s a m o u n te d to R s 1 5 0 0 0 cro re s . T h e in dustry m in ister

d e c la re d th e s c h e m e in R a jy a s a b h a on D e c .10, 1 9 9 8 fo r M ining & Allied

M a c h in e ry c o rp o ra tio n , C y c le c o rp o ratio n o f In d ia, B h a ra t O p h th a lm ic

G la s s ltd, N a tio n a l in d u stries ltd, W e ig h bird In d ia ltd, N a tio n a l bicycle

c o rp o ra tio n o f In d ia, T a n n e ry & fo o t w e a r c o rp o ra tio n o f In d ia ltd, and

R eh ab ilitatio n Industries, having a co m b in ed strength o f 1 0 5 0 0 em p lo yees.

It s e t a s id e R s 5 1 7 cro re s fo r th e p u rp o s e o f V R S . N in e o th e r P S U s in

h e a v y e n g in e e rin g w e re a w a ite d fo r V R S w ith s o m e c a s h c o m p e n s a tio n

from th e g o v e rn m e n t an d san ctio n s of B IF R .

A ll th e tra d e unions initially opposed th e schem e. The s ta te

co rp o ra tio n o f W e s t B e n g a l w a s also a d d e d in th e list o f V R S o f P S U s .

T h e m a h a ra s h tra s ta te g o v e rn m e n t d ecid ed in th e y e a r 2 0 0 0 , to cut dow n

th e 2 0 lakh w o r k fo r c e to bring d o w n th e s a la ry bill 1 7 6 9 9 crore an n u a lly

or by 5 3 % a t lea st.

T h e V R S s c h e m e w a s initially o p p o s e d by th e un io n s b ut n o w th e

u n io n s a re w illin g ly a c c e p tin g th e V R S b e c a u s e o f a ttra c tiv e p a c k a g e of

c o m p e n s a tio n fo r th e retiring w o rk e rs & a ttra c tiv e pay s c a le s to th e

re m a in in g w o rk e rs in th e PSEs. T h e re w e re m a n y p ro b le m s in th e

im p le m e n ta tio n o f V R S . E .g . in T IS C O th e m a n a g e rs w e re refu sin g th e

ap p licatio n s o f V R S o f th e w o rkers & so m a n y reports a re th e re a b o u t th e

VRS in P S U s a re a b o u t th e unofficial p re s s u re s u po n th e w o rk e rs to

a c c e p t th e V R S .

O u t o f th o s e w h o a re opting for V R S a re re a lly skilled p e o p le s or

m ay be h ighly skilled m a n a g e rs o p te d fro m VRS will c a u s e th e skill

d e p le tio n . S u c h highly skilled p e o p le s will g e t th e high positions in o th er

o rg a n iz a tio n s a fte r taking V R S w hich is g e n e ra lly not a ffo rd a b le from th e

220
p o in t of v ie w of in cre a sin g th e e ffic ie n c y of th e o rg a n iza tio n . The

C h o la m a n d a la m D istrib u tio n S e rv ic e s ltd c o n d u c te d a s u rv e y in 2 0 0 1 &

as p e r its re p o rt 3 8 % o f th e total e m p lo y e e s opting fo r V R S w e re b elo w

th e a g e o f 5 0 .

T h e g o v e rn m e n t s p e n t R s 7 0 0 cro res o f th e N a tio n a l re n e w a l fund

in 1 9 9 2 -9 3 or w h o s e p e o p le s w h o w e re opting fo r V R S . A s w ell as

s p e n d in g e v e ry y e a rs co llectio n o f N R F fo r th e V R S c o m p e n s a tio n . T h e

a m o u n t s p e n t by o th e r c o m p a n ie s a re G ra s im in d u stries R s 11 crores,

O tis e le v a to rs R s 12 co res , T elco R s 17 c ro res, P hilips In d ia 3 6 crores,

B a ja j A u to 8 0 c ro res , T a ta S te e l s p e n t R s. 2 0 2 cro re s in 2 0 0 0 . T h e S B l

s p e n t R s 8 5 3 c ro re s, B a n k o f In d ia s p e n t R s 3 3 0 c ro re s etc.

T h e V R S in p ublic s e c to r units is in tro d u c e d by th e p erm issio n o f

a d m in is tra tiv e m inister.

T h e N a tio n a l re n e w a l fund w a s s e t up on 3"'* F e b ru a ry 1 9 9 2 with

7 0 0 cro re s. T h is w a s rais ed up to R s 1 0 2 0 cro re s in 1 9 9 3 -9 4 R s 2 0 0 0

c ro re s in 1 9 9 4 - 1 9 9 5 , Rs 2 4 0 cro res in 1 9 9 6 - 1 9 9 7 and 3 0 0 cro re s in

1 9 9 7 -1 9 9 8 . A ro u n d 8 6 8 0 4 o f c e n tra l P S U s o p ted fo r V R S b e tw e e n 1®'

April 1 9 9 2 to 29"^ F e b 1 9 9 6 w ith p a y m e n ts a m o u n tin g to R s 1 4 3 0 co res

A s on 31®' M a rc h 1 9 9 8 , 1 0 9 4 2 1 public s e c to r w o rk e rs w e re co v e re d with

a total p a y m e n t o f R s 2 0 1 9 8 4 cores. T h e existing b e n e fit w a s red u ced to

1 5 d a y s w a g e s fo r e a c h c o m p le te d y e a rs o f s e rv ic e . T h e V R S w a s also

e x te n d e d to te le c o m , c o m m e rc e , d e fe n c e , p e tro le u m , c h e m ic a ls an d

fe rtilize rs in d u stries etc.

F iv e e m p lo y m e n t a s s is ta n c e c e n te rs w e re o p e n e d in 1 9 9 3 -9 4 in

B om bay, C a lc u tta , Kanpur, A h m e d a b a d and In d o re a n d w e re e xten d to 4 9

locations in 16 s ta te s to help th e retired w o rkers and to find a lte rn a te jobs

to F e b ru a ry 1 9 9 6 , th e c o u n s e le d w o rk e rs w e re 13000. The re train ed

w o rk e rs w e r e 7 3 0 0 a n d 9 3 0 w o rk e rs w e re re d e p lo y e d . T h e fu n d w a s to

b e u se d fo r retrain in g , co u n selin g an d a lte rn a tiv e e m p lo y m e n t etc.

T h e w a s to b e u sed fo r revival but it w a s used fo r closing th e units

221
in 1998. The s tra te g ie s s u g g e s te d w e re up g ra d a tio n o f technology,

d o w n s iz in g o f w o rk fo rc e including m a n a g e rs a n d id en tificatio n of joint

partners. T h e g o v e rn m e n t also sug g ested to profit m akin g units to p rep are

VRS schem es w ith o u t s e e k in g g o v e rn m e n t a s s is ta n c e fo r re tire m e n t

p aym en ts. T h is w a s only for to reduce th e surplus m a n p o w e r in both P S U s

a n d p rivate secto rs also m o st o f th e c o m p a n ie s w e re stip u lated th a t th e re

will b e no fre sh re c ru itm e n t fo r v a c a te d post nor will b e a n y e m p lo y m e n t

a v a ila b le in o th e r c o m p a n ie s of th e s a m e group. T h e statu to ry p a y m e n ts

or u su al p a y m e n ts will not b e a ffe c te d .

T a b le 6 .7 : P u b lic S e c t o r U n its

Sr. No. Unit Y ear V R S G ra n te d Total

1. In d ia n A irlin e s 1 9 9 6 ,1 9 9 8 22000 22000

2. N a tio n a lis e d B an ks N.A. 99000 99000

3. In d ian railw ay h a v e p lan n ed 3 0 0 0 0 w o rk e rs e v e ry y e a r

4. BOC. 1 9 8 9 ,1 9 9 8 5400 & 1425 6825

5. H in d u stan L ever 1989 558 558

6. ITC. 1 9 8 7 ,1 9 8 9 854 854

( S o u rce- 1. Seminar, Maratha Chamber o f Commerce and 2. International

Relations in India Shifiting Paradigms by Ratna S e n . )

T h e V o lu n tary R e tire m e n t S c h e m e is im p lem en ted in Public S ecto r Units

as w ell as in th e private sector co m p an ies. T h e public secto r units as a re ow ned

by th e g o v e rn m e n t m a y b e e ith e r C en tral or S tate. D u e to surplus labour force,

th e s e g o v e rn m e n ts a ls o im p le m e n te d th e V R S s c h e m e . T h e N a tio n a lis e d

B an ks g ra n te d V R S to 9 9 0 0 0 e m p lo y e e s , as w ell as Indian A irlines g ran ted for

2 2 0 0 0 , th e B O C , H in d u s ta n L e v e r a n d IT C a ls o re d u c e d th e ir w o rk fo rc e by

V R S in o rd e r to m in im is e th e la b o u r cost fo r th e p u rp o s e o f m inim ising th e

lo sses a n d to a c h ie v e in th e co m p etitio n .

222
T a b le 6 .8 : U tilis a tio n o f N a tio n a l R e n e w a l F u n d s fo r V R S in P u b lic S e c to r

U n its .

Sr. No. Year Total funds utilized V R S o p te d

(R s.in crores)

1. 1992 700 Total V R S in c e n tra lP S U s from

2. 1 9 9 3 -9 4 1020 1 /4 /9 2 to 2 9 /2 /9 6 w e re

3. 1 9 9 4 -9 5 200 8 6 3 0 4 e m p lo y e e s & p a y m e n t

4. 1 9 9 5 -9 6 240 1 4 3 0 cro res.

5. 1 9 9 7 -9 8 300

6. 1 9 9 8 -9 9 720 2 ,0 1 ,9 8 4 e m p lo y e e s V R S

( Source-Industrial Relations in India Shifting paradigm s by Ratna S e n )

F ro m th e a b o v e ta b le , it is obvious th a t G o v e rn m e n t India h a v e c re a te d

th e N a tio n a l R e n e w a l F u n d sin ce 1 9 9 2 . T h is fund w a s utilised fo r th e p u rp o se

o f g ra n tin g V R S to th e e m p lo y e e s fro m th e P u b lic S e c to r U nits. Total V R S in

P u b lic S e c to r U n its fro m 0 1 .0 4 .1 9 9 2 to 2 9 .0 2 .1 9 9 6 w e re 8 6 3 0 4 a n d R s. 1 4 3 0

c ro res w e r e utilized fo r m ak in g th e p a y m e n t o f V R S .

F u rth e r, th e to tal n u m b e r o f e m p lo y e e s w h o h a v e o p te d fo r V R S w e re

2 ,0 1 ,9 8 4 a n d R s . 7 2 0 c ro re s w e re u tilised fo r m a k in g th e p a y m e n t o f

c o m p e n s a tio n in th e y e a r 1 9 9 7 -9 8 .

A lt e r n a t e A p p r o a c h e s : -

T h e c o m p a n ie s in p u n e h a v e ad o p te d th e a ltern atives . E .g .:-In A lfa

L a v a l ltd it initially re d u c e d 1 4 0 0 w o rk fo rc e , th e n 500 a n d fu rth e r 2 0 0

w o rk e rs . It a rra n g e d train in g p ro g ra m m e to e d u c a te th e w o rk e rs a b o u t

in v e s tm e n t options.

T h e r m a x ltd h avin g to tal w o rk fo rc e up to 3 0 0 0 o p te d th e surplus

w o rk e rs fo r d e p lo y m e n t but a fte r w a rd s fo llo w e d th e s tra te g y o f cost

cutting w ith o u t red u cin g th e w o rk fo rc e . July 1999 150 w o rk e rs w e re

d ep lo ye d .

P raj In d u stries fo u n d o u t o f 3 0 0 w o rk e rs 4 5 surplus w o rkers. S o m e

p ro d u c ts w e r e d is c o n tin u e d d u e to lack o f d e m a n d . T h e w o rk e rs fo u n d

223
 Graph 10 : Utilisation of National Renewal Funds for VRS in Public Sector Units

(A
£
2
o
K^) c
4
■o
c
3
u.
5

Year
alternate jobs through networking.

B irla g ro u p c o m p a n ie s in stead of red u cin g w o rk e rs th e y re d u c e d

w orking hours.

T e x m o c o m p a n y in w e s t B en g al in stead o f red u cin g th e w o rk e rs it

red u ce d 3 w orking d ays in w e e k and paid 5 0 % re m u n e ra tio n for reduced

days.

Reasons of VRS for companies:-

i) L o w pro d u ctivity refu sal to c h a n g e or tran sfer.

ii) D e c is io n o f su b co n tra ctin g or outsourcing.

iii) D is c o n tin u e existin g p ro d u ct or p ro cess.

iv) U s e o f s u b s titu te ra w m a te ria l.

v) Insertion o f n e w m achinery.

vi) In ab ility o f m a n a g e m e n t to ad ju s t th e c h a n g e .

vii) H ig h w a g e s o f th e w o rk fo rc e .

viii) R e fu s a l o f w o rk e r to a c q u ire skill & k n o w le d g e .

ix) In effic ie n c y o f w o rkers.

x) R e s is ta n c e o f unions fo r c h a n g e .

xi) R e s tric tiv e w o rk p rac tic es.

xii) O v e r m an n in g .

xiii) H ig h c o st o f land.

xiv) M e rg e rs an d acq u isitio n s

xv) C o u rt p ro c e d u re s by existing unions.

Reasons of accepting the VRS by workmen:-

h) III health,

i) U s e o f p a s t s a v in g s

j) P o ss ib ility o f a n o th e r jo b

k) In ab ility to a c q u ire n e w k n o w le d g e a n d skills

I) F e a r o f loss o f jo b by clo su re

m) O p p o rtu n ity of n e w b u sin ess ven tu re

n) W a n t to c o n c e n tra te on th e sid e b u sin ess

o) D o n o t w a n t to w o rk fu rth e r

p) W a n ts m o n e y fo r m a rria g e , e d u c a tio n o f ch ild ren etc.

q) P re s s u re fro m frien d s unions or m a n a g e m e n t

r) W a n te d to c o n c e n tra te on h o m e.

225