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Chapter - VI RETIREMENT / SEPARATION PGDPM –MMM –I, SEM- I HUMAN RESOURCE MANAGEMENT
Copyright © Houghton Mifflin Company. All rights reserved.7 - 2 6.1 Introduction The function of separation can be as complex and challenging as any of the preceding five functions, which served to select and merge the employee with the organization. Now we shall review three processes of separation: the retirement of older employees; the layoff or release of qualified younger employees no longer needed by the organization; and the discharge of employees who do not meet the organizations expectations.
Copyright © Houghton Mifflin Company. All rights reserved.7 - 3 6.2 Kinds of Retirement – WHAT IS RETIRMENT? It is the process of leaving the organization permanently on the ground of attaining the age of superannuation or voluntarily. Retirement has been characterized by some as a role less role Kinds of Retirement – 1. Compulsory retirement : Employee must retire compulsory on attaining on specific age. Central government Offices, the age is 58; In private firm, employees may be given extension up till they are suitable to do work. 2. Forced Retirement: If employee found on guilty either in court of law or violated conditions of organization. He may force to retire from the service without any benefit. 3. Premature Retirement: If an employee become disabled in an accident, or due to some disease, he may given option of retiring by management
Copyright © Houghton Mifflin Company. All rights reserved.7 - 4 1. RESIGNATION: When an employee himself leave the organization or initiates a separation from the organization it is termed as resignation. Although some resignation may permit an organization to rectify mistakes in procurement of personnel. Resignation may be put in voluntarily by the employees on grounds of personal problem, health, family etc.
Copyright © Houghton Mifflin Company. All rights reserved.7 - 5 2. Discharge: It is the process of terminating the service of an employee due to any serious misconduct It is a permanent separation of an employee from the pay- roll for violation of company rules or for inadequate performance. The most stressful and distasteful separation method of employee is discharge. The employee is deemed to be fundamentally unsatisfactory in terms of performance and / or attitude. Discharge for cause makes the ex-employee ineligible for unemployment compensation For non-unionized personnel, only laws and courts can serve to restrict the power of the private employer in discharging the personnel Discharges because of union activity, sex, age, color, religion, race, and nationality are legally prohibited Discharge because of disloyalty, and the like are still legal until challenged in court in specific case.
Copyright © Houghton Mifflin Company. All rights reserved.7 - 6 CAUSES OF DISCHARGE: a) FREQUENT CAUSES: Inefficiency, dishonesty, drunkenness, carelessness. b) INFREQUENT CAUSES: Accidents, insubordination, personal conduct, un-cleanliness, infraction of rules, negligence. c) OTHERS: Laziness, lack of cooperation. PROCEDURE OF DISCHARGE: Permanent records of all merit ratings made by supervisors. A memorandum bearing on the efforts made by foreman to help the defendants to overcome his weakness. A copy of warning that had been sent him. A letter of discharge, especially if letter states cause of discharge.
Copyright © Houghton Mifflin Company. All rights reserved.7 - 7 3. Dismissal: Similar to discharge, it is also process of terminating the service of an employee due to any serious misconduct but its action is more severe than discharge Dismissal is the termination of the services of an employee by way of punishment for some misconduct and prolonged absence from duty. Misconduct refers to willful violation of organization rules and norms. The main causes of dismissal are: indiscipline; insubordination and dishonesty
Copyright © Houghton Mifflin Company. All rights reserved.7 - 8 The following reasons lead to the dismissal of an employee- Excessive absenteeism Serious misconduct False statement of qualification Theft of companys property
Copyright © Houghton Mifflin Company. All rights reserved.7 - 9 Layoff: P.Subba Rao, p. 732 It is the temporary reduction in the workforce due to the inability of the employer to provide work as a result of the shortage of coal, power, raw material, machinery breakdown or a natural calamity. Employer has to pay 50% of the basic wage to the employees during the layoff period Section 25-C of Industrial Disputes Act (IDA) 1947, does not confer the right on employers to layoff workers for whatever reasons they deem fit According to section 25-M of IDA, unless the layoff is due to shortage of power or natural calamity,no work men can be laid off without the prior permission of the labour commissioner Maximum period of layoff is 45 days If employer offers alternative employment, it will not be consider a layoff even if the worker does not opt for it The penalty stipulated for not complying with the provisions of the IDA : imprisonment for period of up to one month or a fine up to Rs. 1000 or both
Copyright © Houghton Mifflin Company. All rights reserved.7 - 10 Voluntary Retirement / Separation Schemes, Golden handshake: One of the techniques of trimming the workforce is Voluntary Retirement Scheme (VRS). This is generous, tax-free severance payment to persuade the employees to voluntarily retire from the company. The scheme has its origin during early 1990s in USA. this scheme is also known as Golden hand Shake as it is the golden route to retrenchment. The VRS is most Human technique for downsizing the workforce Benefits under this scheme:- –the minimum benefits under this scheme include- The employee opted for VRS entitles for 45 days emolument for each completed year of service or monthly emoluments at the time of retirement multiplied by the remaining months of service before normal date of retirement whichever is less. In addition to these emoluments, the employee will get the provident fund and gratuity dues. The VRS originally granted tax-exemption for amount up to Rs. 5 lakhs received by public sector employee as his severance pay- package.
Copyright © Houghton Mifflin Company. All rights reserved.7 - 11 Eligibility for VRS: It varies from company to company. Incase public sector company, employees who have attained 40 years of age or completed 10 years of service are eligible for VRS Merits: It offers best and human route to retrenching excess of employee Lucrative settlement prevents resentment Voluntary nature preludes the need for enforcement It allows for lowering the overall wage bill and enables for increase in salary Demerits: It creates a sense of fear and uncertainty among the employees who stay with the organization Operation of the scheme creates bad reputation of the company
Copyright © Houghton Mifflin Company. All rights reserved.7 - 12
Copyright © Houghton Mifflin Company. All rights reserved.7 - 13 Thank You
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