Companies

In cost-cutting drive, Tata Motors offers VRS to staff

S Ronendra Singh New Delhi | Updated on December 12, 2020

The last VRS scheme of Tata Motors was announced in 2017.   -  Chris Ratcliffe

Around 50% of its 42,500-strong workforce eligible for the scheme

Tata Motors  has offered a voluntary retirement scheme (VRS) to its employees, a third in the last five years, to reduce cost and as part of its turnaround plan.

According to sources, there are a total of around 42,500 employees in the company, and as per estimate, around half of them are eligible for the VRS. “The scheme provides opportunity for permanent employees and workers to avail early retirement by drawing certain compensation and benefits.

“The compensation and benefits being offered under the VRS are amongst the best in the industry and include health insurance as well as guidance on financial and retirement planning,” Ravindra Kumar GP, Chief Human Resources Officer, said in a mail to the employees. BusinessLine has seen the letter.

He further said that ‘all permanent employees are eligible for the VRS’ and details of application procedure, benefits and guidelines can be accessed through a link.

Turnaround plans

“The details of VRS scheme  are  being communicated to our colleagues in the plants in parallel,” he said, adding that “Tata Motors continues to implement its turnaround plans effectively. Towards this, we are also reviewing our fixed cost structures while ensuring that our commitment towards employee welfare and well-being remains foremost,” he added.

Confirming the development, a spokesperson said,“Eligible employees and workers can apply for the VRS from December 11 to January 9, 2021.”

Earlier, Tata Motors had announced VRS schemes in 2015 and 2017. But many had not opted for the same.

In fact, in 2017, the scheme backfired and many employees protested against it. Only 300 employees opted for the VRS at the end.

According to analysts tracking the industry, Tata Motors has a huge burden in terms of employee cost compared with many other companies in the sector.

For instance,  Maruti Suzuki India has around 30,000 employees (regular+contract) in total and manufactures four-five times more vehicles than Tata Motors in the passenger vehicles segment.

Also, Tata Motors spends 8-10 per cent of its cost on employees, while Maruti Suzuki spends only two-three per cent, thereby deriving better profit margins.

Published on December 12, 2020

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