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Voluntary Retirement, Downsizing, GoldenHandshake

The document discusses voluntary retirement schemes (VRS), also known as golden handshakes. VRS is a humane technique for companies to reduce staffing levels through generous, tax-free severance payments that encourage employees to voluntarily retire. It is commonly used during economic downturns or organizational restructuring. The key aspects of VRS are that it results in an overall reduction in employee headcount and retiring employees are barred from working for the same company or related organizations.

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Harsh Garg
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2K views12 pages

Voluntary Retirement, Downsizing, GoldenHandshake

The document discusses voluntary retirement schemes (VRS), also known as golden handshakes. VRS is a humane technique for companies to reduce staffing levels through generous, tax-free severance payments that encourage employees to voluntarily retire. It is commonly used during economic downturns or organizational restructuring. The key aspects of VRS are that it results in an overall reduction in employee headcount and retiring employees are barred from working for the same company or related organizations.

Uploaded by

Harsh Garg
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Voluntary Retirement Scheme (VRS)

• In the present globalised scenario, right sizing of the manpower


employed in an organisation has become an important management
strategy in order to meet the increased competition.

• The voluntary retirement scheme(VRS) is the most humane technique


to provide overall reduction in the existing strength of the employees.

• It is a technique used by companies for trimming the workforce


employed in the industrial unit.

• It is now a commonly method used to dispense off the excess


manpower and thus improve the performance of the organisation.

• It is a generous, tax-free severance payment to persuade the


employees to voluntarily retire from the company. It is also known as
'Golden Handshake' as it is the golden route to retrenchment.
Voluntary Retirement Scheme (VRS)

Definition:

• Voluntary retirement scheme is a method used by companies to reduce


surplus staff.

• This mode has come about in India as labour laws do not permit direct
retrenchment of unionized employees

Description:

• VRS applies to an employee who has completed 10 years of service or is


above 40 years of age.

• It should apply to all employees (by whatever name called), including


workers and executives of a company or of an authority or of a co-
operative society, excepting directors of a company or a co-operative
society.
Reasons for VRS
A business firm may opt for a voluntary retirement
scheme under the following circumstances:

• 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's of Product/Technology.


Voluntary Retirement Scheme (VRS)
• It has to result in an overall reduction in the existing
strength of employees.

• The vacancy caused by voluntary retirement is not to be


filled up.

• The retiring employee shall not be employed in another


company or concern belonging to the same management.

• Most large public and private sector companies have


implemented VRS in recent years.
VRS
• The amount receivable on account of voluntary retirement of the
employee does not exceed the amount equivalent to three months'
salary for each completed year of service

or

• Salary at the time of retirement multiplied by the balance months of


service left before the date of retirement on superannuation of the
employee.

• It is the last salary drawn which is to form the basis for computing
the amount of payment.

• The amount received from VRS is Tax Exempt uto Rs. 5 lacs
Downsizing
• In a business enterprise, downsizing is reducing the
number of employees on the operating payroll.

• Some users distinguish downsizing from a layoff , with


downsizing intended to be a permanent downscaling and
a layoff intended to be a temporary downscaling in which
employees may later be rehired.

• Businesses use several techniques in downsizing,


including providing incentives to take early retirement
and transfer to subsidiary companies, but the most
common technique is to simply terminate the
employment of a certain number of people.
Golden Handshake

• Generous bonus offered to a director, employee,


or partner as a severance payment, or an
inducement to leave the firm without making a
fuss or creating a controversy.

• A large sum of money which is given to someone


when they leave a company, especially if they are
forced to leave The manager got early retirement
and a £600,000 golden handshake when the
company was restructured.
Golden Handshake
• A golden handshake is a clause in an executive
employment contract that provides the executive
with a significant severance package in the case
that the executive loses his or her job through
firing or restructuring.

• This can be in the form of  cash, equity, and


other benefits, and is often accompanied by an
accelerated vesting of stock options.
Golden Handshake
•  Michael Eisner received $1 billion
as Golden Handshake amount

• Eisner was the Chief Executive Officer of the Walt Disney Company until
2005.

• While he was the CEO for more than two decades he transformed the
company by adding 7 theme parks (while they originally only had 4). He
also launched 10 cable channels in the US and took over ABC broadcast
network. Stock price increased 1, 646%! Employees shot up from 28, 000
to 129, 000.

• The reason why he got the push? Simply due to the fact that he clashed
with Roy E. Disney and Stanley P. Gold (two former directors), who stated
that he constantly had issues with employees and partners of the company.
• Thank You

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