Tata Steel sweetens employee separation plan, number of retirees jump

As many as 1,190 people have opted for its early separation scheme in 2015-16 in India till January, a sharp jump from just 90 people in 2014-15


Notable attractions include escalation of pension every year, provision of HRA if the person decides to return the company accommodation and provision of a switchover to job at a later date if the person decides so, based on certain conditions. Photo: Reuters
Notable attractions include escalation of pension every year, provision of HRA if the person decides to return the company accommodation and provision of a switchover to job at a later date if the person decides so, based on certain conditions. Photo: Reuters

Mumbai: Tata Steel Ltd saw a sharp jump in the number of people opting for its employee separation plan this year as it spruced up its voluntary retirement policy in the backdrop of poor market conditions, technological upgrades and cost cutting.

As many as 1,190 people have opted for its early separation scheme in 2015-16 in India till January, a sharp jump from just 90 people in 2014-15, a spokesperson of Tata Steel told Mint.

“More people opted for the scheme because it has been made more attractive based on the feedback of employees,” the spokesperson said.

The notable attractions include escalation of pension every year, provision of house rent allowance if the person decides to return the company accommodation and provision of a switchover to job for a job scheme at a later date if the person decides so, based on certain conditions, the spokesperson said.

India’s steel industry is in trouble owing to large imports of cheap steel from China that has squeezed the margins of local manufacturers, while exports have been hurt, owing to continued global economic downturn.

Tata Steel, India’s largest steel firm with a capacity of 30 million tonnes in India and overseas, had 80,000 employees at the end of 2014-15, with an employee expense of 21,407.64 crore, up 5.44% from the previous year.

“The labour cost is high… paying for a separation plan is cheaper than keeping them on the rolls,” said Kris Lakshmikanth, founder, chief executive officer and managing director of The Head Hunters India Pvt. Ltd, a recruitment company. “Going ahead, they would need to make the separation plan more attractive,” he added.

The company did not reveal the financial implications of the separation plan, but elsewhere in Europe, its pension liabilities have been seen as a negative.

“There are no financial drains as such,” the Tata Steel spokesperson said. “The payouts are till the employee attains the age of retirement.”

Tata Steel’s workers are happy with the separation plan as they will be able to draw pension and will also have the freedom to work elsewhere, two union leaders said on the condition of anonymity.

“The scheme is such that a lot of people have taken it,” said one union leader working at the Jamshedpur plant of Tata Steel, who did not want to be named due to an agreement with the management.

“This company doesn’t retrench—even when workers are in surplus, they sit around and eventually get absorbed in some other function after training,” he said.

As a part of the voluntary separation scheme, the company gives benefits of pension amount in the multiples of the last drawn basic salary plus dearness allowance or DA, depending on the age of the employee, besides other benefits, the spokesperson said.

The monthly pension is calculated between 1.0 to 1.2 times basic salary (along with DA) depending on the age of the employee. Moreover, there is an escalation of monthly pension every year, the spokesperson added.

These are given till the employee attains the age of retirement.

Other benefits include one-time non-refundable special grants, company accommodation for certain number of years, HRA after surrender of company’s accommodation and medical benefits for the employee and spouse.

Besides, the normal retirals are given at the time of separation.

“Workers are very happy taking the VRS... particularly it is a very good deal for people who are on the older side and can’t do heavy work,” said another union leader, who works in one of the mines of Tata Steel.

“Skilled workers draw a pension of Rs.60,000-1.2 lakh per month and, what’s more, they are free to do something else and draw a salary in addition,” he said.

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