In the present globalized scenario, right sizing of the manpower employed in an organization 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 used method to dispense off the
excess manpower and thus improve the performance of the organization. It is a generous, tax-
free severance payment to persuade the employees to voluntarily retire from the company.
Therefore, this paper endeavours to discuss challenges associated with Voluntary Retirement
Scheme (VRS). However, the paper begins by defining key concepts such as retire, voluntary
and voluntary scheme, and thereafter discuss the main purpose of the paper.

The word ‘retire’ has been defined in the concise Oxford Dictionary as cease from office or give
up the office or profession or employment.

“Voluntary” means without compulsion or willingly. Therefore Voluntary Retirement is an act

on the part of the employee to give up the employment willingly and without compulsion from
the employer. It is an unilateral act on the part of an employee to cease the contract of
employment with the employer. The word “Voluntary Retirement” has received the legislative
recognition in 1953 when section 2 (00) was included in the Industrial Disputes Act. The said
section 2 (00) asserts that retrenchment does not include Voluntary retirement of the workmen.
There is no need of disclosing the reason for Voluntary Retirement Scheme.

The voluntary retirement is a condition of service gives an option to the public servant to retire
voluntarily qualifying age or qualifying service. Here the servant makes a request to retire
voluntarily and the employer acceptance, but in case of absence of rules or no much scheme is
declared by the government, then the employee have no right to ask for voluntary retirement.

Employers who want to reduce the employee strength give some employees the option to retire
before normal retirement age. The employees may or may not accept this option. Those who
accept the option are Voluntary Retirement Scheme employees. The Voluntary Retirement
Scheme employees get the compensation. They receive lump sum from the employers including
Voluntary Retirement Scheme compensation, Provident Fund, Gratuity, Leave Encashment etc.
The Voluntary Retirement Scheme employees have to depend on income from the investments
of the lump sum for their future life.