Voluntary Retirement

Allowances in Salary

The Voluntary Retirement Scheme (VRS) is a program employer offer to allow employees to opt for early retirement before the standard retirement age, typically 58–60 years, in India.

Requirements to be fulfilled by a scheme of VRS to get exemption:

1. It should apply to an employee who has completed 10 years of service or attained 40 years of age.

2. It should apply to all employees of the company except the directors of the company

3. It should result in an overall reduction in the existing strength of the employees

4. The vacancy caused by the voluntary retirement should not be filled up, nor should the retiring employee be employed at any other company or concern belonging to the same management

5. The company needs to get the approval from the government before implementing VRS.

Calculation of VRS Compensation

(i) 3 months of salary { Basic Salary + Dearness Allowances} for each completed year of service

(ii) Salary at the time of retirement multiplied by the balance months of service left before retirement

(iii) Maximum amount of Rs. 5,00,000