Implementation of vrs in India

Abstract

In today's Indian business environment, inter-organization rivalry has become intense. Most of the organizations in the erstwhile protected business environment had focused on production volumes, not necessarily on productivity. Consequently, they often got overstaffed as they tried to neutralize the adverse impact of absenteeism and unionization on production volumes by hiring new staff. Organizations are now exposed to the inevitability of improving productivity in order to survive in the competitive environment. Many of them have taken recourse to Voluntary Retirement Schemes (VRS) to reduce the employee strength. This paper examines different types of VRS offered by organizations in the year 1999-2000 in India. It also examines the effect of VRS on the profitability of these organizations. The authors adopted two approaches to the study. In the first phase, they collected the details of VRS that were announced by organizations in India in the year 1999-2000 and examined the performance implications of these schemes after a time lag of two years. They gathered 30 such responses in total and did a content analysis of these schemes. In the second phase of the study, the authors met managers in four organizations which were selected based on their willingness to discuss about the schemes. Having discussed with the managers, the employees, and the union leaders in these organizations, they developed detailed cases. These cases provided an insight about various qualitative issues relating to VRS. The discussion with managers in the companies showed that managers spent substantial time to decide the following characteristics of VRS: ? duration of VRS ? eligibility for VRS ? discretions with managers ? compensation The authors considered PAT/Total assets as a measure of success of implementation of VRS as, conceptually, VRS should result in improvement in PAT owing to reduction in labour expenses. Further, in the gap of two years after VRS, there would be no expenditure on scheme-related payments as in the first year. It should inflate the change in PAT. Hence, lack of gain in PAT/Total assets would be a clear signal of decline of financial performance of the organization in the post-VRS phase. The study reveals that: ? There is no fixed pattern of VRS among organizations and even the implementation of VRS differs significantly between organizations. ? The design of schemes that target older employees and remain conservative to work out compensation to employees should be encouraged. ? The schemes that are kept open for appropriate period of time seem to be more effective. ? The success of VRS significantly depends on how the scheme is implemented and the perception of the persons opting for VRS and the survivors. ? Factors contributing to the success of VRS are effective communication, building trust among employees about procedural justice, and involvement of multiple stakeholders. � 2003, SAGE Publications Ltd. All rights reserved.