Voluntary Retirement Scheme: Many people are opting for Voluntary Retirement Scheme (VRS) these days. The decision to opt for VRS often stems from a combination of factors, including health concerns or medical issues that may make continuing to work challenging or detrimental to one's well-being.
People also choose VRS to maintain financial stability, especially if they believe that the offered incentives can provide them with a secure financial cushion for retirement. Moreover, factors such as job dissatisfaction, organizational changes, and a desire for better work-life balance can also influence the decision to opt for VRS. Ultimately, individuals weigh these various factors to determine if VRS aligns with their personal and financial goals, providing them with a pathway to a more fulfilling and secure future. Let's learn about what is VRS and how a person can apply for it.
What is voluntary retirement?
Generally, the retirement age is regarded as 60 years, at which point individuals can retire from work commitments and enjoy their retirement years engaging in hobbies and interests. However, with voluntary retirement, individuals choose to retire in their 40s or 50s, opting to leave the workforce earlier than the standard retirement age. This decision is often driven by a variety of factors, including personal preferences, financial considerations, health concerns, or a desire for a better work-life balance.
By opting for voluntary retirement, individuals seek to transition into a new phase of life earlier, allowing them to pursue their passions, spend more time with family, or explore new opportunities outside of the traditional work environment.
What is VRS?
A Voluntary Retirement Scheme (VRS) is a strategic initiative offered by organisations to employees who voluntarily choose to retire, typically aimed at reducing the workforce or restructuring operations. It provides eligible employees with incentives such as monetary compensation, extended benefits, or pension enhancements in exchange for their early departure from the company.
It can be implemented by both the public and private sectors. It is also referred to as the golden handshake and is a cordial way for companies to let go of some of their employees. However, to avail VRS, the employee should be over the age of 40 years and should be working with the company for more than 10 years.
How does VRS work?
The VRS is applicable to employees who have served for at least 10 years or are above 40 years of age. It encompasses workers, executives of companies, or members of a cooperative society, excluding directors of companies or cooperative societies.
According to rules, the VRS should lead to an overall reduction in the current employee count, and the resulting vacancies cannot be filled. Public Sector Undertakings (PSUs) must obtain government approval before implementing a VRS. While firms can design various schemes, they must adhere to the guidelines outlined in section 2BA of the Income-Tax Rules. To avail of VRS from the company, one strict rule that is mentioned and to is followed is that the employee should not be working with any other company at the time.
What are criteria for voluntary retirement scheme?
- The employee should be at least 40 years old.
- The employee should be working with the company for at least 10 years.
- The scheme can be applicable to all employees of a company. The only exceptions are directors of a company or a co-operative society.
- A Government servant shall give notice in writing to the appointing authority at least three months before the date on which he wishes to retire.
- The appointing authority may also give notice in writing to a Government servant at least three months before the date on which he is required to retire in the public interest or three months' pay and allowances in lieu of such notice.
- The government servant may make a request in writing to the appointing authority to accept notice of voluntary retirement of less than three months giving reasons.
- On receipt of a request, the appointing authority may consider such request for the curtailment of the period of notice of three months on merits and if it is satisfied that the curtailment of the period of notice will not cause any administrative inconvenience, the appointing authority may relax the requirement of notice of three months on the condition that the Government servant shall not apply for commutation of a part of his pension before the expiry of the period of notice of three months.
What are the benefits of VRS?
Voluntary Retirement Schemes (VRS) offer various benefits for both employees and employers:
- 45 days salary for each completed year of service or monthly emoluments at the time of retirement multiplied by the remaining months of service before the normal date of service, whichever is less.
- Employees get provident fund (PF) and gratuity dues.
- Compensation received at the time of VRS is tax-free up to the prescribed amount on fulfilling certain conditions.
- Companies also offer benefit packages to the employees who opt for VRS. For example, the scheme may also include counselling sessions for the employee's future, advice on managing funds received under VRS and firms may offer rehabilitation facilities to staff, among others.
Also Read: 'We need to be physically fit...': Assam Police to offer VRS to obese personnel
