An Analysis of Impact and Implications of Voluntary Retirement Scheme

Abstract

The government of India adopted a new economic policy whereby it relaxed and in certain cases removed restrictions on import and export. This resulted in significant changes in industrial and business sectors. One of his important aspects of the liberalized economic policy is the Exit Policy.

Under this policy the government has allowed business and industrial establishment, to reduce their excess staff and employees. The reduction of excess staff is a result of restructuring of organizations due to modernizing, applying new technology and new methods of operation so that the industrial organizations could operate economically and withstand the competition with companies and organizations which have accepted foreign collaborations, innovative methods and technology up gradation, rendering some employees surplus.

Since the procedure under Industrial Disputes Act 1947, for retrenching involves a lot of legal hurdles and complex procedures, the government authorized schemes of voluntary retirement of employees after offering them suitable voluntary retirement of employees after offering them suitable voluntary retirement benefits, and giving some tax relief on such payments to employees who are eligible to retire voluntarily under the guidelines issues by the government and Income Tax authorities.

In the five-year plans which were doped and implemented by the Government it had established and developed public sector undertaking to create employment and also to augment the increased demands of industrial goods, fertilizers and other core industries. The encouragement given to public sector was so significant that it crated employment opportunities on a mass scale. Most of the public sector undertakings were not cost effective. The trade unions have been opposing retrenchment under the exiting labor laws. The government, therefore, found a solution to the problem of surplus staff by allowing voluntary retirement both in public and private sectors. The human resource in the industrial sector have become surplus on account of (a) exiting level of technology (b) will become surplus with adoption of newer technologies and technological up gradation. If the textile industry adopts latest technology in manufacturing units, 15 million workers in the industry would be out of their jobs, around 2-4 million workers are found surplus in the various sick industrial units all over India. Similarly, millions have been found surplus in government undertakings.