Chapter - VI

RETIREMENT / SEPARATION
PGDPM MMM I, SEM- I

HUMAN RESOURCE
MANAGEMENT
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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.
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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
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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.
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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.

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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.
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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
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The following reasons lead to the dismissal of an
employee-

Excessive absenteeism
Serious misconduct
False statement of qualification
Theft of companys property
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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

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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.
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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

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