The document discusses voluntary retirement schemes (VRS), providing an overview and case study of VRS implemented at Steel Authority of India Limited (SAIL). It defines VRS as a voluntary scheme that offers employees early retirement in exchange for compensation. SAIL launched multiple VRS rounds from 1998 to 2001 to reduce its workforce of 160,000 as recommended by consultants. Over 10,000 employees opted for the schemes, allowing SAIL to cut costs as manpower expenses were significantly higher than competitors. The document also discusses the technical aspects, advantages, and disadvantages of VRS for both employees and employers.

1. Voluntary Retirement Scheme
A Case Study (SAIL)
Personnel Finance
MET-MFM (2012-2015)
MET’s Institute of Management 13/08/2014

2. Road Map
• What is VRS?
• Why VRS?
• VRS- The Golden handshake
• Trade Unions & VRS
• Advantages & Disadvantages
• Technicalities
• Case study on Sail
• Failure and Success case study of VRS
• Implementation
• Conclusion
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3. What is VRS?
• VRS is one of the strategies introduced in the early 1980s in
central public sector undertakings (PSUs)
• The VRS is the most humane technique to provide overall
reduction in the existing strength of the employees
• Its eligibility criteria varies from company to company
• VRS is a scheme whereby the employee is offered to
voluntarily retire from his services before his retirement date
3VRS - Case Study (SAIL)

4. Why vrs?
• Due to recession in the business
• Due to intense competition, the establishment becomes
unviable unless downsizing is resorted to
• Due to joint-ventures with foreign collaborations
• Due to takeovers and mergers
• Due to obsolescence of Product/Technology
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5. VRS-The Golden Handshake
• The most human technique to retrench the employees in the
company today is the voluntary retirement scheme
• It is the golden handshake for the employees and the only
option today for the companies to reduce organization staff
• The scheme which is formally permitted by the Department of
Public Enterprises and which provides the lucrative way for
the employees to terminate their services and accept VRS
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6. VRS-The Golden Handshake (contd..)
• As the name suggests the VRS is strictly voluntary i.e. one can
neither compel the workers to accept it nor apply it
selectively to certain individuals
• One can however choose the levels, units and age groups
among whom one wants to offer VRS
• The company can always accept or reject the application for
the VRS
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7. Trade Unions & VRS
• Trade unions play a crucial role in introducing the VRS in any
organized sector firm
• When the workers are convinced that the scheme is
sufficiently attractive monetarily and/or the company is in
deep crisis, they opt for the scheme
• Companies such as Ind Auto, SKF Bearings, and Novartis have
also been able to successfully reduce their workforce through
the introduction of VRS
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8. More on VRS
• Employers refer to VRS as 'Golden Handshake'
• Trade unions call it 'Voluntary Retrenchment Scheme'
• For the government, it is ‘Unstated Exit Policy’ which means
that an exit policy which may not exist on paper
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9. Advantages on - Employees
• Lumpsum amount at a time
• The right to accept or reject any application
• The Income Tax benefit
• Pension and Gratuity
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10. Advantages on - Employers
• Retirement benefits may give a recruiting advantage
• Achieving technological advancement
• Improves efficiency
• Responding to decline in sales and increase in cost
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11. Disadvantages on - Employees
• Down grade in stacher both at home and outside
• It may cause depression in long run
• Employees might face insecurity because of fear of losing their
job
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12. Disadvantages on - Employers
• The efficient employees would leave the company while the
inefficient may stay back
• Has high immediate costs, especially because these plans tend
to be generous
• Demands that particular care be given to the selection process;
generous plans can lead to a rapid exodus of the best workers
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13. Technicalities
• The Voluntary Retirement Scheme is a legal way
• Must have worked for the organization for minimum of 10 years
• The age of the worker must be minimum of 40
• Employees not complying with these conditions still can apply for
the early separation but it would not be counted as the VRS legally
• These employees won't be able to avail the benefit of Tax exemption
• Employees receiving VRS can get the tax exemption for the amount
of Rs.5 Lacs
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14. Technicalities (contd..)
• The Voluntary Retirement Scheme is given tax exemption as per the
following limits:
• Least of following :
• Last drawn salary × 3 × completed yrs. Of services or Last drawn
salary × remaining month of service which ever is higher
• Rs. 5,00,000
• Actual compensation received
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15. Case Study (SAIL)
SAIL – India’s Steel Giant
• SAIL was formed in 1973 as a holding company of the government
• World's 10th largest and India's largest steel manufacturer with a 33% share in the
domestic market
• Located at Durgapur (WB), Bhilai (MP), Rourkela (Orissa) and Bokaro (Bihar)
• The FY 1999-2000, the company generated revenues of Rs. 162.50 bn and incurred a
net loss of Rs 17.2 bn.
• In February 2000, the SAIL management received a financial and business-
restructuring plan proposed by McKinsey & Co
• Major worry for SAIL's CEO Arvind Pande was the company's 160,000-strong
workforce
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16. Case Study (SAIL)
• Manpower costs alone accounted for 16.69%, compared with other steel producers
such as Essar Steel (1.47%) and Ispat Industries (1.34%).
• McKinsey had advised Pande that SAIL needed to cut the 160,000-strong labour
force to 100,000 by the end of 2003, through a voluntary retirement scheme
• SAIL launched a VRS in mid 1998, scheme provided an income that was equal to
100 per cent of the prevailing basic pay and DA to the eligible employees, 5,975
employees opted for the scheme
• On March 31, 1999, SAIL introduced a 'sabbatical leave' scheme
• On June 01, 1999, SAIL launched another VRS
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17. Case Study (SAIL)
• Employees above 55 years of age would be given 105% of the basic and DA every
month.
• Employees who were between the age of 52 and 55 years would receive 95%, below
52 years would get 85%
• By September 1999, over 4,000 employees opted
• In September 2000, SAIL announced yet another round of VRS, in a bid to remove
10,000 employees by the end of March 2001
• On February 08, 2001, SAIL ended its four year recruitment freeze
• Announced its plans to fill up more than 250 posts
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18. Some of the Success & Failure
Stories of VRS
VRS - Case Study (SAIL) 18

19. Nokia India
• Introduced VRS for its Chennai plant
• 5000 employees opted for VRS out of 6700 employees
• VRS include 15 month salary & 1 lakh rupees as an
compensation
• Bridge initiative program
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20. SBI Bank Ltd.
• Why SBI went for VRS…??
• Huge NPA level
• Increased staff cost
• Increased competition from the (NPBs)
• technology as a change in banking dynamics
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21. A Comparison between SBI & Some
NPBs
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22. SBI Bank Ltd. (contd..)
• Unplanned & unwise move by SBI management…??
• The VRS was mainly aimed at reducing the clerical staff and
sub-staff, the maximum number of optees turned out to be
from the officer cadre
• And the reactive move..
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23. Effective Implementation
• Transparent and proactive communication of managerial
intent to reduce manpower
• Active exploration of other alternatives to manpower
reduction by managers
• Involvement of multiple stakeholders in VRS implementation
process
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24. Effective Implementation (contd..)
• Providing counseling to employees about their future
• Managing of funds received under the scheme
• Offering rehabilitation facilities to them
• Developing trust among employees regarding fairness,
honesty, and commitment of managers towards organization
and its employees
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25. Conclusion
• This process should convince them that the posts in the
organization have become redundant and not the person
• The organization still values the person
• Since this process involves emotions and feelings, every care
must be taken by the management that the process must be
carried out in such a manner that it keeps the dignity of the
employees but at the same time achieves the objective in a
tactful manner.
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26. Presented by
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Sr.
No.
Name Roll
No.
1 ANSHARI NAWED ABDUL VAHID 61
2 ATTRA GURUDEV RAVINDERSINGH 62
3 COUTINHO JOHN PETER 63
4 JAIN ASHISH GANPATHLAL 74
5 KHAN DANISH WAHID 80
6 RAO SWETA 105

27. Thank you & Regards
VRS - Case Study (SAIL) 27