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Tata Motors has announced a Voluntary Retirement Scheme (VRS) for its workmen. The Tata group company, however, did not specify the number of people it expects to reduce nor the outgo under the scheme.
The company said it will offer “generous benefits” to personnel opting for the scheme, its second such since January 2014. They include a monthly payout (basic + DA) from the date of separation till the employee turns 60. “This ensures an assured monthly income as opposed to just a one-time payment of a single amount,” the company said.
Tata Motors will also offer medical insurance cover for 10 years, after the separation. This is in addition to normal retirement benefits such as provident fund, gratuity, encashment of unavailed leaves and leave travel allowance.
“This is a global phenomena. Auto firms are looking to optimise costs through headcount reduction, a significant cost,” said Abdul Majeed, Partner, Price Waterhouse.
According to industry data, employee costs for automakers range between 15 and 25 per cent. Tata Motors had posted a 25.5 per cent decline in consolidated net profit at ₹3,581 crore, for the third quarter ended December 31, impacted by one-time provisions.
Ahead of the announcement, Tata Motors shares closed 2.73 per cent up at ₹575.50 on a strong BSE, which rose 1.65 per cent.
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