FACT settles on special VRS to avoid lay-off
By James Paul | 04 Sep 2002
Kochi: In a bid to prevent a layoff as far as possible, Fertilisers and Chemicals Travancore Ltd (FACT) has introduced a special voluntary retirement scheme (VRS) for the pre-1978 category workers with the concurrence of trade unions. A conference between the management and the trade unions reached an agreement on the VRS.
The move has twin benefits for the company, which is deep in the red. The scheme allows FACT to compensate the workers in the category while complying with the government direction to reduce the retirement age of these workers from 60 years, fixed as per an earlier agreement, to 58. At the same time, FACT may also be able to prune the workforce further to keep the layoff threat at bay.
FACT reckons that since the layoff procedures may take some time, the present VRS may help it to reduce the cost. The company has sought the permission of the government for implementing layoff as it has run up over Rs 90-crore loss in the first few months of the current year. To sell its piled-up stock of fertilisers, FACT is now offering discounts.
Out of nearly 6,000 employees of FACT, the pre-1978 category of workers comes to about 700. Of this, 355 are to retire by 2006 — the year in which the agreement ends. Under the scheme, the maximum ex gratia allowed is Rs 5 lakh apart from the other benefits like gratuity and PF. Those who retire after 2006 will not get more than the fixed amount.
FACT is expecting around 500 workers to opt for this VRS. The company will be making the payment in instalments. Initially, a worker will get Rs 2 lakh and the rest will be paid through three monthly instalments.
The VRS will also be subject to abolition of posts and consequent reduction in the restructured strength. The unions gave their approval for abolition of posts at the meeting. It may be necessary to enter into an agreement with them regarding this, says a company spokesman.
FACT has targeted the pre-1978 category as it would involve lesser cash flow. If 500 workers opt for VRS, then FACT may have to spend around Rs 12-15 crore.
The retirement age of those joined after 1978 has already been rolled back to 58 by a government order. Later, a special VRS introduced, giving benefits up to 60 years, saw VRS applications over 400. Of the 313 VRS applications accepted, about 240 belonged to the pre-1978 category.