What is VRS? VRS Scheme Benefits, Features & Eligibility

what is vrs

What is VRS? – VRS is a scheme related to the retirement of employees. Under this scheme, retirement is offered by companies or employers before the due date of retirement. Here, we have gathered all the relevant information about Voluntary Retirement Scheme VRS features, advantages, disadvantages, and more.

VRS is a term related to employees which are applicable in both government and non-government jobs. Any employee whether he is associated with a government job or a non-government company can take VRS as per his wish, or companies can offer voluntary retirement for their employees under certain circumstances.

what is vrs

Many employees, due to various reasons, cannot continue their jobs. Since there is a fixed retirement age for every job sector, employees have to ask for a voluntary retirement if they still have not reached the retirement period. To know complete details about the VRS scheme, read below.

What is VRS?

VRS, Voluntary Retirement Scheme, is the plan for premature termination or retirement of any of your old employees. The VRS scheme is applicable only to those employees whose service period has been completed for at least 10 years or whose age is more than 40 years. Voluntary Retirement Scheme is not applicable to new employees. The retrenchment or retirement position done under VRS is completely abolished and no one else can be recruited to that post.

This rule comes under the Industrial Disputes Act 1947 stipulation in the Indian Law Act by the Government of India. Under this Act, a company may offer to retire an employee from his position or may lay off to reduce the number of employees.

According to the Industrial Disputes Act, 1947, direct retrenchment is not allowed under Indian labor laws, to avoid protests by trade unions due to direct retrenchment, alternative arrangements have been made for companies to undertake mass retirement in the form of VRS. . It is completely voluntary and no government or non-government organization can force the employees for VRS.

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VRS Full Form

The full form of VRS is Voluntary Retirement Scheme. VRS is a plan by a government or non-government organization to remove any of its employees from his post or say retirement.

Objective of VRS Scheme

Through VRS, the employees can also move out of the poor condition institutions and search for better options. The money received at the time of VRS can also be used by the employees to start their own business or do anything from their area of ​​interest.

VRS Scheme Details

Name of the scheme Voluntary Retirement Scheme
Launched by Government of India
The objective of the scheme To provide the employees an early retirement
To reduce the strength of employees in a company
Beneficiaries Government and Non-Government Employees
Eligibility Employees who have worked for at least 10 years

What are VRS Rules and Regulations – Guidelines

Many rules and regulations of VRS have been made by the government under which this scheme is implemented. Only by staying within these rules, a government organization or company can offer VRS to its employee. These rules are as follows:

voluntary retirement

  • The rule of VRS is applicable only to those employees who are associated with government or non-government organizations. The directors of the company or institutions are not covered under this scheme.
  • VRS Scheme can be implemented by the companies only in special circumstances such as to reduce the overhead cost, to compensate for the fall in sales, the financial condition of the company deteriorates, etc.
  • The employee should have been working in a government or non-government organization for at least 10 years.
  • The age of the employee should be more than 40 years.
  • VRS will be applicable to permanent employees, work-loaded employees, temporary employees, and transferee employees only.
  • This rule will not apply to casual employees.
  • If a Government servant wishes to take retirement voluntarily, he has to give 3 months’ notice directly to the appointing authority.
  • No fresh appointment will be made against the vacancies arising out of retirement.
  • The notice given for VRS shall be counted by the appointing authority within a period of three months from the date of receipt of the notice.
  • Before giving this information, an employee must satisfy the appointing authority that he has completed his qualifying service.
  • The VRS process should be transparent and the employee should be given the right to the final decision.
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On the basis of these rules, VRS is applied to any government or non-government employee.

Why Do People Take VRS?

VRS can be taken by the employees at their will or any such situation arises when the company is unable to pay the employees there then only then the VRS scheme can be implemented.

what is vrs scheme

Here are some of the circumstances in which a voluntary retirement scheme is considered: 

  • It can be implemented in case of recession or loss in business.
  • VRS can be given when the situation worsens and does not improve due to increasing competition in the business. Until the situation improves.
  • Because of using old methods in business.
  • Due to joint ventures with foreign affiliates.
  • Due to inability to pay more employees due to loss of business.
  • In case the employee applies for his own retirement for carrying on his own business or for any other purpose.

What are the Advantages and Disadvantages of VRS?

There can be both advantages and disadvantages of availing VRS for employees. Let us go through the disadvantages and advantages that employees get by taking VRS.

Benefits of VRS

Advantages of VRS

  • It is a sympathetic way of relieving employees as companies effectively reduce the workforce to improve their economic efficiency.
  • Employees get their earned dues, provident fund (PF), and gratuity dues at the time of retirement as per company policy.
  • Compensation paid under VRS is income tax-free up to Rs 5 lakh under Section 10(10C) of the Income Tax Act. You should claim it in the same assessment year in which the compensation was received.
  • The compensation paid under VRS is calculated on the basis of the last salary of the employee. An amount equal to three months’ salary may be paid for each completed year of service.
  • Some companies also adopt some other alternative methods. If we take the government bank SBI as an example, then on taking VRS, VRS equal to 50% of the salary is given for the remaining period of the job.
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Disadvantages of VRS

  • Employees are deprived of many allowances by taking VRS as per their wishes.
  • Income tax will have to be paid as per salary rules.
  • If any loan has been taken, it will have to be paid by the employee in advance.
  • If the people taking the scheme want to challenge the amount being given in the settlement in any way, then they will not be able to do so, their successors also cannot legally challenge.

FAQ about VRS Scheme

Can another job be done after VRS?
If you are not working with the respective market or institute then you are free to take another job after taking VRS.
Is it possible to get back into the company after taking VRS?
After taking VRS, if you apply to join the company again within 90 days, then you can join the same company again.

Is the amount received from VRS liable to tax?
The amount received at the time of VRS is taxable as income tax. However, this amount is income tax-free up to Rs.5 Lakhs.
Can VRS application be rejected?
VRS application is rejected only under certain circumstances like if there is a possibility of the company being submerged or administrative problems likely to arise due to the exit of a person, etc.
Is it mandatory to accept the offer of VRS?
VRS is a voluntary retirement scheme. It is completely optional and the employee has the right to make the final decision. However, when the option of VRS is given by the company, most of the time, the employees have to accept it.


VRS is a plan to reduce the employees from the company which the employees can also apply of their own volition. Voluntary Retirement Scheme is an important scheme for companies struggling to survive in the market. They can improve their financial position by reducing the total number of employees. In this post, you have been given complete information about what is VRS, the rules of VRS, advantages, disadvantages, etc. For any suggestions or questions related to this VRS Scheme, comment below. Janta Yojana is always happy to help.

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