VRS Full Form- Embibe
  • Written By Team_Embibe
  • Last Modified 26-07-2022
  • Written By Team_Embibe
  • Last Modified 26-07-2022

VRS Full Form

VRS full form in English is Voluntary Retirement Scheme. It is a scheme for employees who wish to voluntarily end their service tenure at the organisation before retirement. The scheme allows organisations to reduce the strength of employees and can be implemented in both public and private sectors. VRS is also known as the Golden Handshake. The full form of VRS in Hindi is स्वैच्छिक सेवानिवृत्ति योजना.

VRS applies to employees who have completed at least ten years of service or are over 40.

Except for the directors of a company or co-operative society, It applies to everyone working in a company like the authority of a co-operative society, executives, and workers. AS per the rules and regulations for VRS, it should result in an overall decrease in the overall strength of employees. The vacation formed due to the VRS is not to be filled. One of the crucial rules of VRS is that employees undergoing voluntary retirement must not become employees in another organisation belonging to the same management.

Features of VRS 

Some of the highlights of the VRS are:

  • It offers the employee their provident fund (PF) and gratuity. 
  • 45 days salary for each year of service completed or monthly emoluments at the time of retirement. 
  • The compensation paid to the employee is tax-free up to a certain amount on fulfilling certain conditions.
  • Both public and private sector organisations use the VRS. PSUs must ask the government for prior approval before offering their employees VRS. Private firms can frame their regulations. All companies must follow the government’s regulations as per Section 2BA of the Income Tax rules.
  • The employees can opt for benefits like rehabilitation and counselling to facilitate a smoother transition into retirement. 
  • The vacancy created due to VRS cannot be filled by any other employee
  • Most importantly, the person who opts for BRS cannot join another firm administered by the same management. 
  • VRS can be opted for by private and public sector firms under the circumstances like intense competition, takeover and mergers, recession in business, and joint- ventures with foreign collaborations. 

Origin of VRS in India 

 The Indian labour laws do not allow employees to be retrenched, more if they fall under a union. According to the Industrial Disputes Act of 1947, retrenchment of employees cannot be one of the ways employers use to reduce the size of their task force. As a result, VRS was introduced as an alternative legal solution to solve this problem. Because of its voluntary nature, the VRS was not opposed by the Unions. 

Advantages Of VRS 

 VRS offers a host of benefits for both the employee and the company. Some of these are:

  • It can reduce the overall costs of the company. When payroll costs are lowered, the money can be directed to boost productivity through various activities. 
  • It is a simple, empathetic and effective way of letting employees go and reducing the workforce strength of the organisation. 
  • Trade unions have no objection to VRS as it is a voluntary scheme and not a compulsory one. 
  • The organisation provides rehabilitation-like training to the employees to impart new employability skills. This helps them in getting other jobs in the future. 
  • As the rules and regulations are mentioned clearly under the Industrial Disputes ACT of 1947, there are no chances of inconsistencies in the process, and both the employer and the employee can benefit from it. 
  • At the time of retirement, the employee receives all the benefits and sues they are owed. They can use these funds to pursue other interests or start their own business. 

Points to be kept in mind for a successful VRS 

Companies should consider certain issues thoughtfully to achieve the desired results from the VRS. These are:

  • Proper Identification for  VRS- VRS should be put on offer only when the company’s management is convinced that the extra staff will remain unutilized over a long period, and the retention of this staff will not benefit the organisation greatly.  For dealing with a temporary phase of the surplus task force, VRS should not be used as staff once lost is difficult to replace,
  • Designing of the Scheme- Management should design the VRs keeping in mind certain things like the compensation package to be offered, employees to be covered under the scheme, etc.
  • Role of Employee Unions in VRS – Cooperation from employee unions is also an important thing to keep in mind. Employee unions have a powerful influence on employees to accept or reject the VRS. Unions don’t usually reject the scheme unless the package is against the employee’s interest. 
  • It is impertinent to explore as many options as possible before the introduction of VRS in a company. If the management feels that ad hoc workers can be cut down because of less demand, then there is no reason for warranting VRS. 
  • It is important to identify the employees who can be put under the VRS. Such people should be chosen who will have the least impact on operations. VR should not cover the key people of the company. 

Faqs on VRS

Here are a few commonly asked questions on VRS

Q.What is the full form of VRS?

A.The full form of VRS in English is Voluntary Retirement Scheme. It is a scheme for employees who wish to voluntarily end their service tenure at the organisation before retirement. The scheme allows organisations to reduce the strength of employees. VRS is also known as the Golden Handshake. The full form of VRS in Hindi is स्वैच्छिक सेवानिवृत्ति योजना.

Q.What are the conditions for availing of VRS?

A.VRS applies to an employee who has completed at least ten years of service or is over 40. Except for the directors of a company or co-operative society, it applies to everyone working in a company like the authority of a co-operative society, executives, and workers.

Q. What are some advantages of VRS?

A. VRS proves many benefits. It can reduce the overall costs of the company. When payroll costs are lowered, the money can be directed to boost productivity through various activities. 

It is a simple, empathetic and effective way of letting employees go and reducing the workforce strength of the organisation and many more.

Q. Which organisations can use the VRS?

A. Both public and private sector organisations use the VRS. PSUs must ask the government for prior approval before offering their employees VRS. Private firms can frame their own regulations. All companies have to abide by the regulations of the government as per Section 2BA of the Income Tax rules.

We hope this article on  VRS full form proves helpful to you. Do let us know if you have any queries regarding the same through the comments section below and we will get back to you at the earliest. To learn more about such informative articles, keep visiting www.embibe.com

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