ABSENTEEISM

Absenteeism refers to the habitual non-presence of an employee at their job.

This extends beyond what is deemed to be within an acceptable realm of days
away from the office for legitimate causes such as scheduled vacations,
occasional illness, and family emergencies. Absenteeism may be the result of
job dissatisfaction, ongoing personal issues, and chronic medical problems.
Long-term absences can tarnish reputations, which may threaten long-term
employability. Some absences are legally protected and cannot result in
termination.
Understanding Absenteeism
Absenteeism refers to (a long) absence from work that extends beyond what
would be considered reasonable and customary due to vacation, personal time,
or occasional illness. Companies expect their employees to miss some work
each year for legitimate reasons. However, missing work becomes a problem for
the company when the employee is repeatedly and/or unexpectedly absent,
especially if they must be paid during their absence. Absenteeism is also a
particular problem if an employee is missing in action during busy times of the
year or when deadlines for major projects are approaching. While disability
leave, jury duty obligations, and the observance of religious holidays are all
legally protected reasons for an employee to miss work, some workers abuse
these laws and saddle their employers with unfair costs in the process.
The Costs of Absenteeism
The direct cost of absenteeism is a decrease in business productivity, which then
reduces revenues and profits. If an employee cannot work, they cannot
contribute to their company's growth and success. If the work of absent
employees cannot be covered by others, then the reason why they were hired
leaves a gap in the company's workforce. This creates more work for others who
may have to pick up the slack, which can eventually succumb to burnout.
costs of absenteeism include:
Poor quality work from overworked employees (covering for absent ones)
An additional burden for managers having to deal with absent employees
Low morale for employees filling in for absent employees
Increased costs as a result of having to pay absent employees even when they're
not working
Increased administrative costs of dealing with absenteeism
Employers may also have to deal with higher costs associated with finding
replacements for absent employees, including freelance workers. These
individuals may receive higher wages or overtime pay, which can cost more
than paying regular employees.
Employee Absenteeism – 3 Major Factors Affecting: Organizational Factors,
Social Factors and Personal Factors
The three major factors affecting employees and workers absenteeism are
discussed as below:
I. Organizational Factors:
1. Dullness, monotony and mundaneness of work cause an employee to lose
interest in work. It makes him physically and mentally tired.
2. Leniency towards absenteeism causes high rate of absenteeism.
3. Appointment of temporary or causal worker leads to high absenteeism.
4. Militant attitudes of trade unions also cause high absenteeism as workers
become frustrated because of their attitude.
5. Ineffective and defective selection and placement procedure fuel absenteeism.
6. Heavy workload leads to excessive fatigue and industrial accidents.
7. Poor illumination, ventilation, lack of housing, canteen refreshment,
dangerous work methods, lack of safety devices cause low morale among
employees. Dissatisfaction leads to dislike of work. Absenteeism and turnover
become obvious consequences.
8. Poor and bossy supervisors cause discontentment, unrest, conflict and tension
causing absenteeism.
9. Overstaffing, irregular flow of production, ineffective use of skills,
inadequate training, inadequate incentive system, ineffective grievance
procedure, low morale and lack of job satisfaction trigger absenteeism.
10. Lower pay is one of the reasons for absenteeism since workers absent
themselves to supplement their income by working elsewhere.
II. Social Factors:
1. Migratory nature of labour force in India does not engender a sense of
belonging to the workplace. Hence there is frequent absence.
2. Inadequate housing and transport facilities keep workers away from work.
3. Lack of hospital facilities for treatment also leads to absenteeism.
4. Seasonal causes like cultivation season, marriage season, amusement,
religious festivals, lead to absenteeism.
III. Personal Factors:
1. The rate of absence is high in the case of unskilled and young workers
because of their personal problems.
2. Women workers are more prone to absenteeism because of their personal and
family problems.
3. Alcoholic and drug addicts show higher tendency of absenteeism.
4. Indebtedness of workers causes absenteeism.
5. Inferiority complex, maladjustment, job dissatisfaction, neglect by family
members, etc., cause workers to lose interest in the job. This triggers
absenteeism.
Types:
(i) Authorised absenteeism,
(ii) Unauthorised absenteeism,
(iii) Willful absenteeism, and
(iv) Caused by circumstances beyond one’s control.

Type 1. Authorised Absenteeism:

If an employee absents himself/ herself from work by taking permission from
his superior and applying for leave, such absenteeism is called authorised
absenteeism.
Type 2. Unauthorised Absenteeism:
If an employee absents himself from work without informing or taking
permission and without applying for leave, such absenteeism is called
unauthorised absenteeism.
Type 3. Willful Absenteeism:
If an employee absents himself from duty willfully, such absenteeism is called
willful absenteeism.
Type 4. Absenteeism Caused by Circumstances Beyond One’s Control:
If an employee absents himself from duty owing to the circumstances beyond
his control like involvement in accidents or sudden sickness, such absenteeism
is called absenteeism caused by circumstances beyond one’s control.

Main Categories of Absentees Classified by K.N. Vaid: Entrepreneurs, Status

Seekers, Epicureans, Family-Oriented and Sick and Old
(i) Entrepreneurs
(ii) Status seekers
(iii) Epicureans
(iv) Family-oriented, and
(v) The Sick and Old
(i) Entrepreneurs – This class of absentees considers that their jobs are very
small for their total interest and personal goals. They engage themselves in other
social and economic activities to fulfill their goals.
(ii) The Status Seekers – This type of absentees enjoys or perceives a higher
ascribed social status and is keen on maintaining it.
(iii) The Epicureans – This class of absentees does not like to take up the jobs
which demand initiative, responsibility, discipline and discomfort. They wish to
have money, power, and status but are unwilling to work for their achievement.
(iv) Family-Oriented – This type of absentees is often identified with the family
activities.
(v) The Sick and Old – This category of absentees is mostly unhealthy, with a
weak constitution or old people.

Employee Absenteeism – Investigation Procedure

A regular investigation procedure for absence without leave must be instituted.
Each individual case must be handled with firmness and caution. Personnel
Department can play a great part in reducing absenteeism.
1. When an employee who was absent without leave on a working day, returns
to work, the time office must mark the time of his arrival in his time card or
register and send him to the Personnel Office.
2. Personnel Assistant must take his statement and take him to the Personnel
Manager, along with his personal file, for further investigation.
3. Personnel Manager will question him about the reasons for his absence. If the
reasons are satisfactory, leave can be granted and time card must be marked
accordingly and initialled.
4. If absence is without sufficient or satisfactory reasons, the worker must be
orally warned and sent to work. Written warning can be given for repeated
absence without leave. Habitual absenteeism may lead to charge sheet. It is
important, therefore, for the Personnel Office to keep proper records of each
case.
5. When sickness is pleaded as an excuse for the absence, the employee must be
asked to produce medical certificate, or the company’s medical officer’s opinion
must be taken.
6. After investigation and taking statements, the Personnel Office must initial
the time card and send the worker to his department for work.
7. The employee must not be penalised for the time taken for investigation at the
Personnel Office.
8. Foreman and Department Head concerned must be informed at all stages of
such enquiry.
9. When an employee absents himself without leave for over a week, a
registered acknowledgement due letter must be sent to his last known address,
calling for an explanation and informing him that if he does not report for work
within a reasonable period from the date of the letter, his absence will be treated
as resignation. There must be such a provision in the Standing Orders also. His
reply or the letter which returns undelivered must be filed in the employee’s
folder.
10. If he does not return within the specified period or produce a medical
certificate or satisfactory evidence for absence, his services can be terminated
after an ex-party enquiry and a letter of termination must be sent to him
indicating that his services are terminated for absence without leave under
provisions of the Standing Orders.
Calculate Employee Absenteeism Rate
Absenteeism can be calculated with the help of the following formula-
Absenteeism Rate = Number of Mandays lost / Number of Mandays Scheduled
to Work x 100
Absenteeism rate can be calculated for different employees and for different
time periods like month and year.

The frequency rate reflects the incidence of absence and is usually expressed as
the number of separate absence in a given period, irrespective of length of
absences. The frequency rate represents the average number of absences per
worker in a given period.
Frequency Rate = Total number of times in which the leave was availed / Total
number of Mondays scheduled to work x 100
Severity Rate: Severity rate is the average length of time lost per absence and is
calculated by using the following formula-
Severity Rate = Total number of days absent during a period / Total number of
times absent during that period x 100
A high severity rate indicates that the employee is absent for longer durations
each time. High frequency and severity rates indicate that the employee is
absent more frequently and for longer durations each time resulting in high
absenteeism even in absolute terms.

Major Causes:
Cause # 1. Maladjustment with Factory Conditions:
As employee continues to live in the city, urban life becomes distasteful to him
because of the insanitary conditions prevailing there. He finds himself caught
within great factory walls. He is by heavy traffic, by stranger’s speaking,
different languages, he is confused by different religions to cases, he is subject
to strict discipline and is ordered by complete strangers to do the things which
he cannot understand. As a result he is under constant strain which causes him
serious strain to impair his efficiency. All these factors tend to persuade him to
maintain his contacts with his village.
Cause # 2. Social and Religious Ceremonies:
Social and religious functions divert employee from work to social activities. In
large number of cases, the proportion of absenteeism due to sickness, accident
or maternity is not a high as it is due to other causes, including social and
religious causes. Absenteeism is high during local festivals, irrespective of
whether the employees are from rural areas or not.

Cause # 3. Unsatisfactory Housing Condition:

The employees who come to towns usually find that they are not wanted and
they swell the number of unemployed and casual workers. They also experience
housing difficulties. Health conditions are naturally bad leading to high
morbidity and consequent ill-health. They, therefore, make frequent visits to
their village homes to get relief from such insanitary and unhealthy
surroundings.

Cause # 4. Industrial Fatigue:

Low wages compel a worker to seek some part time job to earn some side
income. But this often results in constant Fatigue, which compels him to remain
absent for the next day and if fatigue affects him seriously, his absence may
continue for a quite some time.

Cause # 5. Unhealthy Working Conditions:

Intolerable working conditions exist in factories, heat or moisture; noise and
vibrations in the factory, bad lighting condition dust, fumes and ever crowding
and all there affect the workers’ health causing him to remain absent for a long
time.

Cause # 6. Absence of Adequate Welfare Facilities:

The National Commission on Labour observes “The statutory welfare amenities
have not been properly and adequately provided. In several cases, particularly in
medium and small sized units, the standards are distinctly poor.” The studies
made by some State in respect of the different components of welfare include
sanitation, washing and bathing facilities, first aid application ambulance room,
drinking water, canteen, rest room and creches which serene the general
impression that compliance with statutory welfare provision is half-hearted to
inadequate. Fed up with the absence of basic facilities the worker often migrates
to his rural frame.

Cause # 7. Alcoholism:
The habit of alcoholism among workers is a significant cause of absenteeism
which is high in the first week of each month. When workers, receive their
wages. They rush to liquor shops and drink to forget their immediate worries.
Once indulged in drink, the habit continues. Hangover the next day leads to
absenteeism.

Cause # 8. Indebtedness:
Most of the workers suffer from a high degree of indebtedness. Such workers
absent themselves or even resign to escape the money lenders. As a result
absenteeism is high.

Cause # 9. Improper to Unrealistic Personnel Policies:

In most cases unskilled, untrained and inexperience workers are rejected who
fail to cope with and adapt themselves to their jobs and to their industrial
environment to nepotism are rampant. These factors generate a frustration in the
minds of works which results in low efficiency, low productivity and un-
formable employee-employer relationship, which in turn lead to long periods of
absenteeism.

Cause # 10. Inadequate Leave Facilities:

Negligence on the part of the employer to provide adequate leave facilities
compels, the workers fall back on E.S.I. Leave. Under E.S.I. return they are
entitled to 56 days leave in a year on half-pay. Instead of going without pay the
workers avail themselves of this E.S.I. facility.

Adverse Effects
Absenteeism is a serious problem of the industrial world of today. It affects both
the employees and the employers adversely. Important effects of absenteeism
may be summarised as follows:

1. Absenteeism stops the entire process of production. It stops the machines and
hampers smooth flow of work.
2. As a result of loss of production, the cost of production increases. It results in
the reduced margin of profits of the industry.
3. The rate of production and the productivity remains low. The production
targets are upset.
4. As a result of increase in the cost of production, the selling price of the
commodity is to be increased. So the customers have to pay more for the
commodity.
5. Frequent absenteeism of the workers decreases their working efficiency also.
It also reduces their interest in the work.
6. Due to absenteeism of regular workers, the industry has to depend upon
casual or sub-standard employees, it causes many problems in itself such as-
breakdown of machinery, low quality of production, wastages of raw materials
etc.
7. As a result of all these factors, the enterprise gets itself unable to meet the
demand of market in full and it causes delay in the supply to the valuable
customers.
8. Frequent absenteeism of workers effects the economy of the workers also. It
reduces their incomes.
9. High rate of absenteeism upsets personnel planning policy of an enterprise.
10. High rate of absenteeism is also a reason of indiscipline among the workers.

Thus it may concluded that the effects of absenteeism are multifarious. It affects
all the workers, the employees, the government, the shareholders and the
economy of the nation.
Major Consequences of Higher Degree of Employee Absenteeism
1. Higher degree of absenteeism hinders the process of implementation of HR
planning.
2. When the nature of work is interdependent, absenteeism affects regular flow
of work.
3. Loss of man days results in loss of output.
4. Manpower shortage leads to failure in attaining production targets which in
turn causes failure in attaining sales targets which adversely impact the bottom
line.
5. Absence of workers causes the plant to remain idle. This results in
underutilization of machine capacity.
6. Manpower shortage triggered by absenteeism hinders the delivery schedule
of enterprises. This makes them vulnerable to face litigation, penalty and loss of
orders from clients.

7. Available workers need to be overloaded and overtime wages need to be paid

to complete the task. This leads to higher financial commitment on the part of
the enterprise.
8. Delayed delivery, delayed execution of orders lead to loss of customers and
thereby the company loses its reputation.
9. The precious time of the employer is wasted in initiating disciplinary action
on unauthorized absentees.
10. Absentee employees lose pay and get indebted to private money lenders.
Minimize Employee Absenteeism (Measures for Control)
The encyclopaedia of social sciences suggests the following measures to reduce
the rate of absenteeism:
1. Absenteeism is probably a natural human reaction to the routine of modern
factory life. There is a maladjustment between man’s instincts and desires and
the regular working habits that are imposed upon him. The routine can be
relaxed or modified by grant of leave with pay, by shortening or redistributing
scheduled hours, by having employees living nearer to their places of work, and
by adjusting the physical condition of the plant, especially noise and ventilation.
2. The personnel management should encourage notification, especially in cases
of sickness when the duration of absences is likely to belong.
3. In case of personnel and family circumstances, e.g., illness of children in the
case of married women employees which make absences unavoidable, leave
should be granted liberally.
4. Regularly in attendance can be encouraged to some extent by the offer of a
bonus and other pecuniary inducements.
5. To reduce unavoidable absence due to sickness and industrial accidents,
programmes of industrial hygiene and safety should by, strengthened. It should
be noted no single measure can be effective in controlling absenteeism; but a
skillful combination of various measures would definitely lead to the desired
results.

These provisions are:

1. Provision of Healthful and Hygienic Working Conditions:
In India, where the climate is warm and most of the works involves manual
labour, it is essential that workers should be provided with proper and healthy
working conditions. The facilities of drinking water, canteens, lavatories, rest
rooms, lighting and ventilation, need to be improved. Where anyone of these
facilities is not available, it should be provided. All these help in keeping the
employee cheerful and increase productivity and the efficiency of operations
throughout the plant.
2. Provision of Reasonable Wages and Allowances and Job Security for
Workers:
Some of the wages of an employee determine his as well as his family’s
standard of living, this single factor is important for him than any other. The
management should, therefore, pay reasonable wages and allowances, taking
into account the capacity of the industry to pay, the level of wages prevailing in
different units of the same industry in the same area in neighbouring areas, the
productivity of labour and the general effect of rising wages in neighbouring
industries.

The allowances that may be paid to workers should include old age allowance,
length-of-service allowance, position allowance, special job allowance, good
attendance allowance, transportation allowance and housing allowance, so that
the worker may have and know security of employment.
3. Adoption of a Well Defined Recruitment Procedure:
The selection of employees on the basis of communal, linguistic and family
consideration should be discouraged or avoided. The management should look
for aptitude and ability in the prospective employees and should not easily yield
to pressure or personal likes and dislikes. Application blanks should invariably
be used for a preliminary selection and as tools for [Link] personnel
officer should play a more effective role as a co-ordinator of information
provided that he has acquired job knowledge in the function of selection.
Employers also should take into account the fact that selection should be for
employees’ development; their reliance, therefore, on intermediaries for the
recruitment of employees should be entirely done away with.
4. Motivation of Workers – Welfare and Social Measures:
The management should recognise the needs of workers and offer them
adequate and cheap housing facilities, free or subsidised food, free medical aid
and transportation facilities to and for their residence, free educational facilities
for their children, and other monetary and nonmonetary benefits. Their genuine
difficulties—for example, their need of money at the time of marriage, death,
family illness and disablement— should be recognised by the management and
it should try to help them in this regard. As for social security measures such as
the provision of provident fund, E.S.I, facilities, gratuity and pension, all these
need to be improved, so that workers may have a sense of belonging.
5. Safety and Accident Prevention:
Safety at work can be maintained and accidents can be prevented if the
management tries to eliminate such personal factors as negligence, over-
confidence, carelessness, vanity, etc., and such material factors as unguarded
machinery and explosives, defective equipment and hand tools. Job satisfaction
and cordial relations between the workers and the employers would help
eliminate most of the personal factors. As for the hazards to which industrial
workers are exposed, supervisors should ensure that proper operational
procedures and safety instructions are followed in the course of work. Work
groups should be taught safe methods of operation. In addition to consistent and
timely safety instructions, written instructions (manual) in the regional language
of the area should be given to the work force.
6. Liberal Grant or Leave:
The management’s strict attitude in granting leave and holidays, even when the
need for them is genuine, tempts workers to go on E.S.I, leave, for under this
scheme, they can have 56 days in a year on half day. An effective way of
dealing with absenteeism is to liberalise leave rules.
7. Improved Communication and Prompt Redressal of Grievances:
Since a majority of the workers are illiterate, bulletins and written notices,
journals and booklets are not understood by them. Therefore, timely illustrations
and instructions, meetings and counseling, are called for. Written
communication becomes meaningful only when workers can read and
understand. As regards notice boards, too many notices should be avoided; only
the essential ones should be put on the board, which should be placed near the
entrance, inside the canteen and in areas which are frequently visited.
8. Cordial Relations between Supervisors and Workers:
Cordial relations between the supervisor and the workers are essential for,
without them, discipline cannot be maintained and productivity cannot be
increased. One of the consequences of unhealthy relations between supervisors
and subordinates is absenteeism. Therefore, supervisors should be given a
proper training in this field to create an atmosphere in which willing co-
operation exists between them and the work force, and workers would freely
discuss their problems with their supervisors.
9. Development of Worker’s Education:
The system of workers education should be so designed as to take into account
their educational needs as individuals for their personal evaluation; as
operatives for their efficiency and advancement; as citizens for a happy
integrated life in the community; as members of a trade union for the protection
of their interests. This educational programme, according to the National
Commission on Labour, should be to make a worker:
(a) Aware of his rights and obligations;
(b) A responsible, committed and disciplined operative;
(c) Understand the basic economic and technical aspects of the industry and the
plant where he is employed so that he may take an intelligent interest in its
affairs;
(d) Lead a calm, clean and health life, based on a firm ethical foundation;
(e) Understand the organisation and functioning of a trade union and develop
qualities of leadership, loyalty and devotion to it, work so that he may
intelligently participate in its affairs;
(f) A responsible and alert citizen.
Other Measures.
(a) A supervisor should not be regarded as another worker and should be given
definite authority to take action in all cases of absenteeism.
(b) There should be clear and definite rules and regulations on authorised and
unauthorised leave.
(c) A proper record of each worker’s attendance should be maintained on a
special daily attendance card.
(d) The rules and regulations relating to attendance must be explained to
workers.

Labour Turnover
Definition: Labour turnover can be defined as the overall change in the number
of people employed in a business entity during a particular period. It takes into
consideration the number of exiting personnel, new joinees and the total number
of workers as listed in the payroll at the end of a given period. A high labour
turnover rate is considered to be unfavourable for the organization’s stability
and can even result in a temporary shutdown or strike. The entities, therefore,
take up human resource as an integral part of the business.
1. Causes
o Avoidable
o Unavoidable
2. Effects
o Adverse Effects
o Positive Effects
3. Types
4. Strategies
5. Conclusion
Causes of Labour Turnover
When we talk about the reasons behind a high labour turnover, we come across
the factors which are under control and others which are beyond the regulation
of the organization.
Avoidable Causes
The factors that are related to the organizational facilities and working
conditions, the ones which the management could modify to retain the
workforce are considered as preventable causes.
Some of the significant issues are related to improper wages, lack of healthcare
facilities, inappropriate fringe benefits, cold relations with the management and
many others as listed below:
Unavoidable Causes
The workers are sometimes compelled to depart from the organization, for the
inevitable reasons. Neither the organization nor the employee can take any step
to avoid such circumstances .Some of these causes include death, severe
accident, marriage or retirement of the personnel.
Labour Turnover Effects
Adverse Effects
• Hampers Productivity: When a worker quits the job, the production is
temporarily ceased or slowed down until the new hire joins the organization.
• Decreases Morale: The co-workers feel demotivated when they notice
that the exiting employee is moving out for a better opportunity.
• Hikes Production Cost: The training or learning phase of the new worker,
increases expense due to slower productivity and high wastage.
• Training Expense: The wages paid to the trainee or new hire as well as
the mentor for that unproductive training period, is a considerable cost for the
organization.
• Replacement Cost: To fill the position of the exiting worker, recruitment
of a new staff involves advertising, hiring and training expenses.
Positive Effects
Labour turnover also has some benefits to the organization, which are discussed
in detail below:
• Improves Organizational Culture: Labour turnover means the entry of
new people with different values, mindsets and beliefs to enrich the
organizational culture.
• More Talented Personnel: New hires can be more efficient,
knowledgeable, sharp and active than the existing workforce.
• Less Expensive Resource: With constant hikes and promotion, the
existing workers cost more in comparison to the inexpensive trainees who
replace them.
• Infusion of Fresh Ideas: The new resources bring with them innovative
thoughts and ways of doing things, which is quite beneficial for organizations.
• Better Skills and Qualification: With evolving courses and skills training,
the organization can get fresh graduates possessing better competence.
Types of Labour Turnover
The labour turnover can be distinguished based on the employees’ spontaneity
and the effect it has on the organization. Given below are its four basic types:
1. Voluntary: When a worker willingly exits the organization, i.e., the person
resigns from the job position due to any of the circumstances, it is termed as
voluntary labour turnover.
2. Involuntary: In the case of involuntary labour turnover, the worker is
abolished from the duties by the management. It can be due to any of the reason
like failing to comply with the norms.
3. Functional: By saying functional, we mean to improve the organization’s
efficiency, the under-performing workers are terminated from work.
4. Dysfunctional: The dysfunctional labour turnover takes place when
highly efficient and skilled personnel leaves the job by hampering the overall
functioning of the organization.
Strategies to Reduce Labour Turnover
Labour turnover is an inescapable business aspect. It can be controlled by taking
timely action and improving existing human resource policies.
Other ways of lowering the number of exits:
The management should make constant efforts to promote sound employee-
superior relations in the organization. The wages and incentives plan should be
reviewed and upgraded annually to ensure fair pay to the workers. Another way
is to modify the human resource policy as per the guidelines stated by the
government and companies act. Not only fair wages but providing various other
fringe benefits like an insurance plan, medical facility, transportation, etc. can
retain employees.
Exit interviews provide the critical reasons for labour turnover, therefore to
know what all to improve, go for it. The workplace facilities like ample
ventilation, lighting, drinking water, cleanliness, etc. should be maintained. The
organization should not overlook labour welfare and implement suitable
measures for empowering its human resources. A company’s reward and
compensation plan should be progressive to motivate and value the high
performing workers.
The ideas of the ground-level workers can prove to be conducive for the
organization; therefore, they should be encouraged to share their views.
Resolving the conflicts and addressing the complaints or problems of the
workers in the workplace develops a healthy environment for everyone.
The managers and supervisors should be unbiased towards their subordinates to
deepen their bond and understanding. Every worker looks forward to the growth
prospects that the organization provides. Therefore, granting the workers with
promotion opportunities is quite favourable.

VRS
Introduction
A Voluntary Retirement Scheme or VRS is a scheme that is offered by many
companies to give employees the freedom to take voluntary retirement before
they reach the age of retirement. As we know retirement is something that is
associated with ageing, however, many individuals seek retirement at a much
younger age. Voluntary retirement Scheme or VRS allows the employees to do
just that. As far as companies are concerned, the primary goal to offer VRS to
employees is to reduce some excess staff, save costs, and improve productivity.

What is a Voluntary Retirement Scheme (VRS)?

As the name clearly suggests, VRS or Voluntary Retirement Scheme is a
scheme that is offered by companies to their employees wherein the employee
can voluntarily end their period of service and take early retirement. Many
times companies have to let go of employees for multiple reasons like cost-
cutting and reducing the burden, in such cases offering VRS to the employees is
a great way to ensure that while doing the necessary for the company, the
employees are also benefited.

In India, the average age of retirement usually is 58 to 60, however, with VRS
an employee can seek voluntary retirement in their 40s. Whether it is to relax or
to pursue some other interests, VRS can benefit both the employee and the
company. The employee gets to enjoy post-retirement benefits while pursuing
their interests while the company can reduce the excess workforce and increase
productivity. This is why many companies today offer Voluntary Retirement
Schemes or VRS. However, to avail VRS, the employee should be over the age
of 40 years and should be working with the company for more than 10 years.

How does VRS work?

As discussed above, Voluntary Retirement Scheme or VRS can be availed by
employees that have been working with the company for more than 10 years
and are above the age of 40 years. This scheme that is offered by the companies
can be availed by all employees of the company including executives, workers,
and so on.

When talking about the company, VRS benefits the company by reducing
excess overload and reducing extra costs. Before a company offers VRS to its
employees, it is required to take permission from the government. Another thing
to consider by the company is the income tax rules under section 2BA.

To avail of VRS from the company, one strict rule that is mentioned and to is
followed is that the employee should not be working with any other company at
the time.

Objective of the Voluntary Retirement Scheme

The primary objective of the Voluntary Retirement Scheme (VRS) is to provide
benefits to both employees and companies. Employees that have worked with
the company for a long service tenure can benefit from this scheme by taking
voluntary retirement and ending their service tenure early so that they can enjoy
the retirement benefits and pursue their other interests.

How did VRS start in India?

As already discussed above many companies often come across a situation
where they need to cut down costs and let go of some employees. However, as
per Indian law, direct retrenchment of employees is not allowed. In fact, the
Industrial disputes act, of 1947 clearly states that employers and companies are
not allowed to reduce the extra workforce by retrenchment. Trade unions are
strictly against it. This is why the Voluntary Retirement Scheme or VRS was
introduced in India.

VRS solves the company’s problem of excess staff while also being beneficial
to the employees. As this scheme is voluntary and not forced on the employees,
VRS did not receive many objections or opposition from trade unions.

Features of Voluntary Retirement Scheme (VRS)

Now that we have seen what VRS or Voluntary Retirement Scheme is, let's go
through some of its important features. These features must be understood by
the employees before they can apply for VRS and are as follows:

 In order to be eligible to avail of VRS, the employee should be more than

40 years of age and should have completed 10 years of service tenure
with the company.

 Once the employee applies for VRS and takes voluntary retirement, the
company has to clear all due payments and the provident fund to the
employee.

 It is also the responsibility of the company to provide assistance to the

employees in the form of tax consultation and counseling to ensure that
they have a smooth retirement process.

 When an employee retires through the VRS scheme, the company cannot
fulfil that employee’s vacancy.

 After opting for VRS, the employees can not join another organisation
with the same management.

 Employees can also receive compensation of up to 5 lakhs INR. this

compensation is tax-free but to avail of this benefit the employee should
apply for VRS in the same year as they get compensation.

Who Can Avail Benefits Of VRS?

As already discussed above, the company offering VRS and the employee that
avails the VRS both can benefit from the scheme. Let’s see the voluntary
retirement benefits availed by the employee and the company one by one.

Benefits availed by the employee after Voluntary Retirement

The benefits availed by the employee after Voluntary retirement are as follows:

 The employee gets to enjoy retirement benefits at an early age.

 The employee receives provident funds and gratuity dues.

 The employee gets counselling and tax consultation from the company to
get a smooth retirement.

 The employee can also get tax-free compensation.

  The employee can receive 45 days' payment for each completed year of
service.

Benefit for the company utilising this scheme

The benefits that the company gets after utilising VRS scheme are as follows:

 It helps the company in cost-cutting and reducing the workforce.

 The money that has been saved in the process can be used to improve the
productivity of the company.

 The company is saved from the opposition of trade unions.

 The company can let go of the employees in a healthy way without

damaging their relationships.

Eligibility criteria for a Voluntary Retirement Scheme (VRS)

To avail Voluntary Retirement Scheme (VRS) the employee needs to fit the
eligibility criteria. The eligibility criteria for Voluntary Retirement Scheme or
VRS are as follows:

 The employee should have been working with the company for more than
10 years.

 The employee should be 40 years of age or above.

 All employees of the company can avail of the Voluntary Retirement

Scheme or VRS except for the directors.

How is Compensation under a VRS calculated?

We have already discussed how employees can get compensation on VRS. So
how is this compensation calculated? The compensation on VRS or Voluntary
Retirement Scheme is calculated based on the last drawn salary of the
employee. So whatever compensation the company is offering would be equal
to three months' salary for the employee for each year. The compensation can
also be calculated by multiplying the employee's salary at the time of retirement
by the remaining months of service before the actual retirement date of the
employee.

Workers’ participation in management

Workers’ participation in management is an essential ingredient of Industrial
democracy.
The concept of workers’ participation in management is based on Human
Relations approach to Management which brought about a new set of values to
labour and [Link] the concept of Workers’ Participation in
Management (WPM) refers to participation of non- managerial employees in
the decision-making process of the organization.
Workers’ participation is also known as ‘labor participation’ or ‘employee
participation’ in [Link]’ participation in management implies
mental and emotional involvement of workers in the management of
Enterprise.
It is considered as a mechanism where workers have a say in the decision-
making
Meaning of WPM
A system of communication and consultation, either formal or informal, by
which employees of an organization are kept informed about the affairs of the
undertaking and through which they express their opinion and contribute to the
management decisions.
The concept of workers’ participation in management encompasses the
following

 It provides scope for employees in decision-making of the organization.

 The participation may be at the shop level, departmental level or at the
top level.
 The participation includes the willingness to share the responsibility of
the organization by the workers
Features of WPM
 Participation means mental and emotional involvement rather than mere
physical presence.
 Workers participate in management not as individuals but collectively as
a group through their representatives.
 Workers’ participation in management may be formal or informal. In
both the cases it is a system of communication and consultation whereby
 employees express their opinions and contribute to managerial
decisions.
Levels of Management Participation or WPM
Information participation: It ensures that employees are able to receive
information and express their views pertaining to the matter of general
economic importance

Consultative importance: Here workers are consulted on the matters of

employee welfare such as work, safety and health. However, final decision
always rests with the top-level management, as employees’ views are only
advisory in nature.
Associative participation: It is an extension of consultative participation as
management here is under the moral obligation to accept and implement the
unanimous decisions of the employees. Under this method the managers and
workers jointly take decisions.
Administrative participation: It ensures greater share of workers’
participation in discharge of managerial functions. Here, decisions already
taken by the management come to employees, preferably with alternatives for
administration and employees have to select the best from those for
implementation.
Decisive participation: Highest level of participation where decisions are
jointly taken on the matters relating to production, welfare etc.
Objectives of WPM
 To establish Industrial Democracy.
 To build the most dynamic Human Resources.
 To satisfy the workers’ social and esteem needs.
 To strengthen labour-management co-operation and thus maintain
Industrial peace and harmony
 To elevate worker’s status in industry.
 Increase productivity with joint efforts
 Promote cordial relations.
  To promote increased productivity for the advantage of the organization,
workers and the society at large.
 Its psychological objective is to secure full recognition of the workers.
Importance of WPM
• Mutual understanding
• Higher productivity
• Industrial harmony
• Industrial democracy
• Less resistance to change
• Creativity & Innovation
Forms of WPM
— Suggestion schemes
— Works committee
— Joint Management Councils
— Work directors
— Co-partnership
— Joint Councils
— Shop councils
Suggestion schemes: Participation of workers can take place through
suggestion scheme.
Under this method workers are invited and encouraged to offer suggestions for
improving the working of the enterprise.A suggestion box is installed and any
worker can write his suggestions and drop them in the box. Periodically all the
suggestions are scrutinized by the suggestion committee or suggestion
screening committee. The committee is constituted by equal representation from
the management and the [Link] committee screens various suggestions
received from the workers. Good suggestions are accepted for implementation
and suitable awards are given to the concerned [Link] schemes
encourage workers’ interest in the functioning of an enterprise.
Works committee
Works committee deals with matters of day-to-day functioning at the shop floor
level. Works committees are concerned with: Conditions of work such as
ventilation, lighting and sanitation. Amenities such as drinking water, canteens,
dining rooms, medical and health services. Educational and recreational
activities. Safety measures, accident prevention mechanisms etc.
The main purpose of this committee is to provide measures for securing and
preserving amity and good relations between the employer and the employees.
Functions: Works committee deals with matters of day-to-day functioning at
the shop floor level. Works committees are concerned with:
— Conditions of work such as ventilation, lighting and sanitation.
— Amenities such as drinking water, canteens, dining rooms, medical and
health services.
— Educational and recreational activities.
— Safety measures, accident prevention mechanisms etc.

Joint Management Councils:

Under this system Joint Management Councils are constituted at the plant
level.
These councils were setup as early as 1958.
These councils consist of equal number of representatives of the employers and
employees, not exceeding 12 at the plant level.
The plant should employ at least500 workers. The council discusses various
matters relating to the working of the industry.
This council is entrusted with the responsibility of administering welfare
measures, supervision of safety and health schemes, scheduling of working
hours, rewards for suggestions etc.
 Wages, bonus, personal problems of the workers are outside the scope of
Joint management councils. The council is to take up issues related to
accident prevention, management of canteens, water, meals, revision of
work rules, absenteeism, indiscipline etc.
Work directors
One or two representatives of workers are nominated or elected to the Board of
Directors.
— Work directors: Under this method, one or two representatives of
workers are nominated or elected to the Board of Directors.
— This is the full-fledged and highest form of workers’ participation in
management. The basic idea behind this method is that the representation
of workers at the top- level would assure Industrial Democracy,
congenial employee-employer relations and safeguard the workers’
interests.
— The Government of India introduced this scheme in several public sector
enterprises such as Hindustan
Antibiotics, Hindustan Organic Chemicals Ltd etc. However the scheme of
appointment of such a director from among the employees failed miserably and
the scheme was subsequently dropped.

Co-partnership
Co-partnership involves employees’ participation in the share capital of a
company in which they are employed. By virtue of their being shareholders,
they have the right to participate in the management of the [Link]-
partnership involves employees’ participation in the share capital of a company
in which they are employed.
By virtue of their being shareholders, they have the right to participate in the
management of the company. Shares of the company can be acquired by
workers making cash payment or by way of stock options scheme.

Joint Councils
The joint councils are constituted for the whole unit, in every Industrial Unit
employing 500 or more workers, there should be a Joint Council for the whole
unit. Only such persons who are actually engaged in the unit shall be the
members of Joint Council.
— The joint councils are constituted for the whole unit, in every Industrial
Unit employing 500 or more workers, there should be a Joint Council for
the whole unit.
 — Only such persons who are actually engaged in the unit shall be the
members of Joint Council.
— A joint council shall meet at least once in a quarter.
The chief executive of the unit shall be the chairperson of the joint council.
— The vice-chairman of the joint council will be nominated by the worker
members of the council. The decisions of the Joint Council shall be
based on the consensus and not on the basis of voting.
Functions of Joint Council
• Fixation of production norms
• Work planning
• Achieving production targets
• Training
• Reward policy
• Creative suggestions
• Health
• Security

Shop councils
Shop council represents each department or a shop in a unit. Each shop council
consists of an equal number of representatives from both employer and
employees.
— On October 30, 1975, the Government of India announced a new scheme
in WPM. In every Industrial establishment employing 500 or more
workmen, the employer shall constitute a shop council.
— Shop council represents each department or a shop in a unit.
Each shop council consists of an equal number of representatives
from both employer and employees.
— The management will nominate the employers’ representatives and must
consist of persons within the establishment.
 — The workers’ representatives will be from among the workers of the
department or shop concerned. The total number of employees may not
exceed 12.

Workers’ Participation in Management in India

Workers’ participation in Management in India was given importance only after
Independence. Industrial Disputes Act, 1947 was the first step in this direction,
which recommended for the setting up of works committees. The joint
management councils were established in 1950 which increased the labour
participation in management. Since July 1975 the two- tier participation called
shop councils at shop level and Joint councils were introduced.