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Old 2nd March 2015, 14:17   #1
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Default Tata Motors cutting fat. Offers VRS to workers

Over the past year, Tata Motors has tried to revive its passenger vehicle segment by offering brand new models such as the Zest and Bolt. Additionally, the brand plans to launch two new vehicles in the passenger vehicle segment annually and multiple new products and variants for its commercial vehicles business. However, low consumer demand, a steep rise in competition and a falling market share have made the brand resort to fat trimming measures. According to an official statement, Tata Motors is offering a voluntary retirement scheme (VRS) to its employees, in order to streamline its operations.

The option is being offered across multiple categories of employees, with the main focus being the workmen at Tata's plants in Jamshedpur, Pune, Lucknow, Sanand, Dharwad and Pantnagar. As per the official release, the move is part of the brands' attempt to "enhance the company's competitiveness" in a market that has seen "depressed growth of the commercial vehicle and passenger car businesses."

The VRS scheme includes a monthly pay-out (Basic + Dearness Allowance) that begins at the date of separation and continues till the employee hits the age of 60. This move provides a monthly income provision as opposed to a one time lump sum pay-out. Employees can also avail of a medical insurance cover for a period of 10 years post separation. These are in addition to normal retirement benefits such as PF, gratuity, superannuation, encashment of unavailed leaves, LTA due but not claimed, etc.

The new scheme will help cut expenses, but in order to improve the brand's financial standing, Tata Motors will have to look at serious moves to bolster sales figures. This task has become all the more difficult with the recent budget declaration that was largely indifferent towards car makers.

Tata Motors cutting fat. Offers VRS to workers-tatamotorslogowallpaper.jpg

Last edited by Rehaan : 2nd March 2015 at 14:55.
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Old 2nd March 2015, 16:35   #2
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Default Re: Tata Motors cutting fat. Offers VRS to workers

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Originally Posted by Tushar View Post
The VRS scheme includes a monthly pay-out (Basic + Dearness Allowance) that begins at the date of separation and continues till the employee hits the age of 60. This move provides a monthly income provision as opposed to a one time lump sum pay-out. Employees can also avail of a medical insurance cover for a period of 10 years post separation. These are in addition to normal retirement benefits such as PF, gratuity, superannuation, encashment of unavailed leaves, LTA due but not claimed, etc.
It's good that Tata Motors is providing a decent option to those willing to take VRS. A monthly package sounds better & more practical (for both employer & employee) than a single lump sum amount. It's also nice of them to continue the health insurance cover for 10 more years for such employees. The best thing, of course, is that this is voluntary (as the name suggests).

I guess Bombay House did not want any more controversies after the rumoured / true mass lay-off fiasco at Tata Consultancy Services which brought them bad publicity (warranted or unwarranted). I also believe TCS is free of certain vested interests who claim to stand for the employees' collective bargaining rights. A TCS-like situation would have resulted in Tata Motors' factories across the country coming to a complete grinding halt. I think one can easily understand what I mean.

On a related note, this gives one the idea that the new Chairman of Tata is not averse to taking tough, unpopular decisions when the situation warrants it - something that his predecessor would have have tried to avoid as far as possible.

Last edited by RSR : 2nd March 2015 at 16:47.
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Old 2nd March 2015, 17:40   #3
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Default Re: Tata Motors cutting fat. Offers VRS to workers

Guys,

I have a stupid question - How does this VRS work? What if too many employees leave? Is VRS only offered to employees which the company wants to remove? What if those employees do not accept it?
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Old 2nd March 2015, 19:11   #4
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Default Re: Tata Motors cutting fat. Offers VRS to workers

Cost Cutting through a reduction in headcount- yep- experienced this already in the industry that I'm working (Paper) in as well. It helps the company become leaner, bring in automation and enables the management to outsource the non-core jobs.

I have a question which I've always thought about

What is the percentage of revenue spent on employment of manpower in the automobile/ancillary manufacturing sector? In process industries, the industry standard is around 4-6 %.

Last edited by GTO : 3rd March 2015 at 15:36. Reason: Typo
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Old 2nd March 2015, 21:13   #5
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Default Re: Tata Motors cutting fat. Offers VRS to workers

Tata doesn't lack the technology to build good cars. Its just that, with the current work force, the 'on paper' technology, by the time it rolls out of the factory is.. well... what can I say?

IMO, in a way, its good that existing employees make way to the "change". If its intended in a good way.
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Old 4th March 2015, 03:24   #6
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Default Re: Tata Motors cutting fat. Offers VRS to workers

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How does this VRS work? What if too many employees leave? Is VRS only offered to employees which the company wants to remove? What if those employees do not accept it?
I guess private companies (& PSUs) can always tailor the conditions of the scheme so as to make the VRS eligible primarily for employees of certain ranks or those working in certain departments where staff re-sizing is required.

Private companies can set their own conditions for their VRS schemes, as long as it adheres to certain basic rules stipulated by the government. PSUs can also do the same, but they must obtain prior permission from the government before rolling out VRS for their employees.

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In India, the Industrial Disputes Act,1947 puts restrictions on employers in the matter of reducing excess staff by retrenchment, by closures of establishment and the retrenchment process involved lot of legalities and complex procedures. Also, any plans of retrenchment and reduction of staff and workforce are subjected to strong opposition by trade unions. Hence, VRS was introduced as an alternative legal solution to solve this problem. It allowed employers including those in the government undertakings, to offer voluntary retirement schemes to off-load the surplus manpower and no pressure is put on any employee to exit. The voluntary retirement schemes were also not subjected to not vehement opposition by the unions, because the very nature of its being voluntary and not using any compulsion. It was introduced in both the public and private sectors. Public sector undertakings, however, have to obtain prior approval of the government before offering and implementing the VRS.

A business firm may opt for a voluntary retirement scheme under the following circumstances:-
http://business.gov.in/manage_business/vrs.php

You may be able to find answers to all your queries in the above link.

Last edited by RSR : 4th March 2015 at 03:27.
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Old 4th March 2015, 08:35   #7
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Default Re: Tata Motors cutting fat. Offers VRS to workers

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Originally Posted by Saanil View Post
I have a stupid question - How does this VRS work? What if too many employees leave? Is VRS only offered to employees which the company wants to remove? What if those employees do not accept it?
VRS schemes are normally structured to target the senior-most (age-wise) employees. It can be structured for specific categories of employees - in this case, the shop floor. Hence, if the senior most workers on the shop floor take the scheme, they will move out and the same work can be assigned to younger workers who would be drawing lesser salary. You will also then have a younger & generally more agile workforce who can be trained / re-trained as required.

The structure will have a cut-off for 'x' years of service completed, the younger workers wont be able to take up the scheme. In the event that too many (senior) people leave, the company can actually recruit younger workforce from the market.

One downside - the loyalty that would be seen in senior folks would be often missing in the new generation of workers.
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