present a ion personnel law
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RETRENCHMENT,LAYOFF &VRS
ROLE OF HR IN MANAGING THESE ISSUES
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DOWNSIZING
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What is downsizing?
a company strategy to reduce the scale ( size ) andscope of its businessimprove the companysfinancial performance
a reduction in a companys workforce improveits bottom line
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Reasons behind Downsizing
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Economic downturns 25%
Mergers and acquisition 25%
Making better utilization of staff 17%
New technology 15%
Tranfer work to other plants orabroad
15%
others 3%
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Common outcomes ofdownsizing
Positive:
- increase in stock value
- Reduced the total labor costs
- Simplification of organization structure
- Improved decision making
- Improved performance of system
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Negative: Effects after downsizing
Invent the cost in the economic long-term
Negative attitude from investors
Legal Risks in Downsizing
Low Morale andInsecurity
Less Productivity
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About 68% of all downsizing,
restructuring, & reengineeringefforts are not successful
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RETRENCHMENT Section 2of the Industrial Dispute Act,1947,defines
Retrenchment as:
The termination by the employer of the service of a workman for
any reason whatsoever, otherwise than as a punishment inflictedby way of disciplinary action, but does not include-
Voluntary retirement of the workman
Retirement of the workman on reaching the age ofsuperannuation
Termination of the service of the workman as a result of the non-renewal of the contract of employment between the employerand the workman concerned on its expiry.
Termination of the service of workman on the ground ofcontinued ill- health.
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Causes of RETRENCHMENT
Changing market conditions
Growth beyond an entrepreneur's vision
Merging of two or more firms
Economic crisis Change in management
Outsourcing practice
Increase in efficient work flow and
computerized services Owners ill health
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Selection Criteria for Retrenchment Length of service
Performance record
Disciplinary record Absence record
Skills
Knowledge
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Non-DiscriminationSelection criteria for retrenchment must be based on the principle
of non-discrimination. Such as
Gender
Trade union membership Race or color
National origin or ethnicity
Religion
age
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Some Prestigious Companys
Retrenchment Rate
s.no Company Name Rate Of Retrenchment
1 City groups 52000
2 Ford 2600
3 DHL 9500
4 Google.com 10000
5 H.P 24600
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LAY-OFFS
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LAY-OFFS According to Section 2(kkk) of Industrial Dispute Act
Lay-off means refusal,failure,inability of the employeron account of shortage of coal,power,raw materials oraccumulation of stocks,breakdown of machinery or forany other reason to give employment to workman
whose name is borne on the muster roll of anindustrial establishment & who is not beenretrenched.
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CAUSES OF LAYOFFS Merger and acquisition-primary factor
Global competition
Reduction in product demand
Changing technologies
If layoffs is temporary, employee is likely to called back to jointhe ranks once again.
Employer-employee relationship temporarily suspended
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Right of Workmen for Layoff
Compensation, Section 25C Name in Muster Roll
Not be Casual Worker
Continuous Service if (1yr )
195 Days in a mine
240 Days any other case
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Circumstances disentitling a
WorkmanAlternative Employment
Same employer,same establishment
Location of alternative employment Same skill & qualification
Same amount of wages/standard
Lay-off due to strike,go slow
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VOLUNTARY RETIREMENT SCHEME.
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VOLUNTARY RETIREMENT SCHEME
VRS is a scheme whereby the employeeis offered to voluntarily retire from his
services before his retirement date.
Subject to certain conditions thecompany offers VRS to its employees It is
the golden route to cut the excess flab.
The latest mantra of many a corporateand Public sector units.
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CONTD As the name suggests the VRS is strictly voluntary i.e. one can neither compelthe workers to accept it nor apply it selectively to certain individuals.
One can however choose the levels, units and age groups among whom one
wants to offer VRS.
The company can always accept or reject the application for the VRS.
But usually this is not done in practical circumstances as it sends wrong signalsto the employees. It might imply that the VRS is not actually voluntary but a
selective procedure of downsizing.
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ELIGIBILITY
Minimum 45 years of age
Served the company for at least 10 years
Early separation- not counted as VRS legally
Early separation- no benefit of tax exemption
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THE GOLDEN HANDSHAKE The Voluntary Retirement Scheme is given tax exemption
as per the following limits:
Three months salary per completed year of service
Remaining salary
Rs. 5,00,000
Whichever is least
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BENEFITS ProvidentFund
Gratuity
Cost ofTransfer
Salary forNotice Period
EncashedLeave
MedicalInsurance
HousingLoans
Subsidies
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Hurdles in execution
Non- acceptance of the VRS
Over-acceptance of the VRS
Operational problems
Post-VRS blues
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HRS ROLE IN MANAGING
THESES ISSUES
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Role of Hr in managing these issuesConsultation
Determine whetherRetrenchmentIs necessary
Look foralternatives
Decide how tocarry out dismissals
Check nodiscrimination
Implementdismissals
Seek to reduce impact of retrenchment
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MEASURE1. Plan in Advance2. Senior leaders must become involved early and remain visible
throughout the downsizing initiative.
3. Establish Procedure
4. Be strategic about your cuts
5. Use multiple techniques for downsizing
6. Communication is very very important during downsizing hencemake sure to communicate
Trade unions and worker representatives
Government authorities
Community leaders.
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CONTD6. Offer retrenchment/voluntary retirement scheme with the best possiblecompensation.
7. Terminate the foreign workers first before terminating the local workers in thesame category.
When the retrenchment involves local workers, the LIFO principle(last-in-first-out) must be practiced for the same category of work.
However, employers may carry out retrenchments in accordance withcertain criteria's after consultation and the approval of the workers andtrade unions representing them.
8. Survivors are keyDont neglect them
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CONSEQUENCES OF RETRENCHMENT,LAYOFF &VRS
Positive effects on the organization:
Reduction in the labour cost
Enhanced corporate image
Negative effects on the organization:
Decrease in the employee morale
Excessive pressure to perform
An organization in such cases requires stimulus in the followng form:
Offer workplace challenges
Build team spirit Bring process innovation
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CONSEQUENCES ON EMPLOYEES
Existing employees will feel insecure about their job
Terminated employees might spread wrong information about company inmarket.
WHAT HAPPENS AFTER RETRENCHMENT?
Loss of dignity
Entrepreneurial skills
Poverty
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OUTPLACEMENT: It is the in-house help provided by the organization itself in order to
help the employees during the transition phase from retrenchmentto the resettlement.
The company can play an important role by providing counseling,
training, and all the other help required by the employees. It not only helps organization to convince employees to accept VRS
but also helps in maintaining the morale of the retained employees.
Moreover this exercise also helps in creating good corporate imageof the organization that can help organization in the long term like
future recruitment.
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Placement agency: Besides having outplacement facility a company can also take the
help of placement agency.
This agency can appraise, counsel and place the retrenchedemployees on deserving jobs.
Also there have been practices where company purposefully asksthe agency to tell nice things about the retrenched employees sothat they will have the " feel good " factor to keep theirmotivation even after the retrenchment.
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COUNSELING: This is an effective tool to reduce the effect of the VRS.
The retained as well as retrenched employees could becounseled to good effect to keep up their motivationlevel.
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Q&A
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THANK YOU
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