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International Compensation

Unit 5
Voluntary Retirement Scheme
Meaning: Voluntary retirement scheme is a method used by companies to reduce surplus
staff. This mode has come about in India as labor laws do not permit direct retrenchment of
unionized employees.
Norms:
1. VRS applies to an employee who has completed 10 years of service or is above 40 years
of age.
2. It should apply to all employees, including workers and executives of a company or of an
authority or of a co-operative society, excepting directors of a company or a co-operative
society.
3. The amount receivable on account of voluntary retirement of the employee does not
exceed the amount equivalent to three months' salary for each completed year of service,
or salary at the time of retirement multiplied by the balance months of service left before
the date of retirement on superannuation of the employee. It is the last salary drawn which
is to form the basis for computing the amount of payment.
International Compensation
Objectives for Organization Objectives for Employees
The compensation policy be in line He expects proper compensation against
with the structure, business needs and his competency and performance level.
overall strategy of the organization
The policy should aim at attracting and He expects substantial financial gain for his
retaining the best talent own comfort and for his family also.

It should enhance employee satisfaction He expects his present and future needs to
be taken care of including children’s
education, medical protection and housing
facilities.
It should be clear in terms of The policy should be progressive in nature
understanding of the employees and also
convenient to administer.
International Compensation – Package
Foreign service
Base salary
Inducement Premium

Allowances Benefits

Incentives Taxes

Long Term Benefits or Stock Benefits


Problems/Challenges with
International Compensation

Exchange
Rate Varying Tax
Fluctuations Rates

Varying Cost Varying Consistency


of living Inflation rate and Equity

Employee Country
expectations Perspective
Recent Changes in Compensation
Strategy
Alignment of the compensation plan with business strategy of the
organization

Valuing internal equity

Valuing culture (cross-culture management)

Top-down approach to maintain compensation norms

Focus of organizational branding for talent attraction

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