What Are the Benefits of a Voluntary Retirement Scheme?

source: hbswk

During economic adversity, companies devise various measures to reduce costs. Reducing the workforce by offering benefits of voluntary retirement to employees is one way to increase the organisation’s profitability. Known as the Golden Handshake, it is a win-win situation for both parties. 

Keep reading to learn more about the VRS scheme and how it benefits employees and employers.

In India, the age of retirement is generally 60 years. When people reach this age, they tend to retire from work and try living their golden years, fulfilling their dreams and pursuing their hobbies. However, if someone wishes to opt for voluntary retirement, they can retire even in their 40s or 50s.

Every employee can avail of a voluntary retirement scheme benefits to devote time to other commitments or pursue their passion.

The Government of India launched the Voluntary Retirement Scheme (VRS), whereby an employee is offered to retire from services on his/her own before the retirement date.

This scheme aims to maintain the profitability of public and private sectors, make up for the decline in sales and reduce their overhead cost. Companies offer VRS to reduce the firm's overall cost, which helps in organisational restructuring.

Employees who have completed a minimum service period of 10 years and are of 40 years of age can apply to avail the benefits of VRS. Hence, the final decision to opt for the VRS lies with the employee.

Here are the benefits the employees can avail of after voluntary retirement:

• The employee receives 45 days' salary for every completed year of employment or monthly payment multiplied by the number of remaining months of work before the regular service date, whichever is lower.
• Employees opting for VRS can also benefit from their Provident Fund and Gratuity fund.
• Employees can utilise the fund to pursue anything in their field of interest or start their businesses.

Companies also offer specific benefit packages to employees. For example, it may include advice for managing the funds received under the VRS scheme, counselling sessions for helping with the future endeavours of the employee, and some companies might even offer rehabilitation facilities for their retired staff, etc.

Here’s how the VRS can benefit an organisation:

• Offering VRS is an empathetic way to relieve employees of their duties while improving the economic efficiency of the organisation. It also ensures that the relationship between the company and the employee does not turn sour.

• This scheme helps reduce the company’s overall workforce cost..

• The money saved due to the employee's early retirement can be invested in other growth ventures..

• As the scheme is voluntary and absolutely transparent, the trade union usually does not have any objection.

The Voluntary Retirement Scheme is a saviour for companies struggling to survive financially. Employees can also opt for VRS if they wish to resign from an unstable organisation and get several benefits. One of the overlooked benefits of voluntary retirement schemes is that employees also get the option to look for better employment opportunities. Nevertheless, it is ideal to review this scheme's terms and conditions before opting for it.