India Inc to step up VRS in coming quarters: Experts

Economic slowdown, flux in business cycle cited; Tata Motors, Nokia among firms to offer golden handshake

Faced with rapid fluctuations in business cycle and looking to optimise costs, Indian companies are likely to press further with the Voluntary Retirement Schemes in the coming quarters, say experts.

The implementation of VRS has been most noticed among the electronics, drugs and pharmaceuticals, pesticides and chemicals as well steel and textiles industry, according to research by MANCER Consulting.

The VRS has been mostly offered to cut costs in wake of economic slowdown, the experts said.

Over the last few months, Ashok Leyland, Nokia, Tata Motors are among the firms that have offered VRS to its employees.

"Companies in sectors that are vulnerable to business fluctuations are investing in VRS as a part of their restructuring strategy and as an alternative to pay cuts and mass layoffs, to reduce the operating expenses in their businesses," Randstad India CEO Moorthy K Uppaluri said.

"We observe that, compared to a decade ago, VRS have gained momentum today due to frequent business cycle fluctuations and subsequent operational measures to optimise costs," Uppaluri said, adding that the trend would continue to pick up "till the business growth stabilises over the next few quarters,".

Executive search firm Lighthouse Partners Managing Partner Rajiv Burman said: "The trend will indeed pick up in the future" and that mostly mid-level executives will be targeted.

"As India globalises, public sector corporations which are reputed to be highly overstaffed and grossly inefficient, will have to shed flab and go in for aggressive VRS," he noted.

Spectrum Talent Director Sidharth Agarwal said that while VRS is being increasingly offered across sectors, the trend is majorly been seen in government organisations where down sizing otherwise is not possible.

"In one of the organisation, the management decided to consider 5000 employees under VRS scheme. However, the panel of experts suggested that 7,000 employees be brought under the VRS scheme instead of just 5,000 which meant saving of over Rs 350 crore annually for the next five years," Agarwal said without naming the company.

According to experts, companies are offering VRS as part of restructuring exercise, efforts to turn profitable, deal with non-performance, respond to decline in sales and increase in cost, reduce overhead costs, protect long-term interests of the organisation and recession in the business.

Agarwal said that firms are holding counselling sessions and offering investment related services from Citibank, Bank Of America, among others, to reduce post retirement related stress.