SAIL's Voluntary Retirement Scheme

Details

Themes: HR Practices and Policies
Period : 1999-2001
Organization :SAIL
Pub Date : 2001
Countries : India
Industry : Metals & Mining

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Case Code : HROB002
Case Length : 07 Pages
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Reduction of white-collar manpower required a change in the systems of office work and record keeping, and a very high degree of computerisation. Officers across the organisation employed dozens of stenographers and assistants. Signing on note sheets was a status symbol for SAIL officers.

From the beginning, SAIL had to contend with political intervention and pressure. Many officials held that SAIL had to overcome these political pressures. One top official commented, "Many employees do not have sufficient orders or work on hand to justify their continuance, and yet political pressures keep them going. It is time that the top management takes a tough stand on such matters. One does not have to call in McKinsey to decide that many SAIL stockyards and branch offices are redundant."

The Voluntary Retirement Scheme

As a part of the restructuring plan, McKinsey had advised Pande that SAIL needed to cut the 160,000-strong labour force to 100,000 by the end of 2003, through a voluntary retirement scheme.

Pande was banking on natural attrition to reduce the number by 45,000 within two years, but GOI's decision to increase the retirement age to 60 further delayed the reduction. Subsequently, SAIL had requested GOI to bail it out with a one-time assistance of Rs 1,500 crore and another subsidized loan of the same size for a VRS, to achieve the McKinsey targets. In a bid to 'rationalize' its huge workforce, SAIL launched a VRS in mid 1998, for employees who had put in a minimum service of 20 years or were 50 years in age or above. The scheme provided an income that was equal to 100 per cent of the prevailing basic pay and DA to the eligible employees. About 5,975 employees opted for the scheme. Of them, 5,317 were executives and 658 non-executives. Most of those who opted were above 55 years.

On March 31, 1999, SAIL introduced a 'sabbatical leave' scheme, under which employees could take a break from the company for two years for studies/employment elsewhere, with the option of rejoining the company (if they wanted to) at the end of the period. The sabbatical allowed the younger members of the SAIL staff to leave without pay for "self-renewal, enhancement of expertise/knowledge and experimentation" which broadly translated into higher studies or even new employment.

On June 01, 1999, SAIL launched another VRS for its employees. Employees who had completed a minimum of 15 years of service or were 40 years or above could opt for the scheme. The new VRS, which was opened to all regular, permanent employees of the company, would be operational till 31st January 2000. Its target groups included:

Those who were habitual absentees, regularly ill and those who had become surplus because of the closure of plants and mines;

Poor performers.

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