Honda 2Wheelers India launches VRS keeping an eye on business sustainability 

by Murali Gopalan 06 Jan 2021

Honda Motorcycle & Scooter India (HMSI) has introduced a voluntary retirement scheme which will be effective from January 5 to 23.

According to the company, this will be “applicable to all permanent associates” who are on the company’s rolls on the date of launch of this scheme. They will need to have completed 10 years of service or attain the age of 40 years or more on or before January 31 this year. HMSI has reiterated that directors are not eligible for the scheme.

The VRS compensation will involve a package of three months’ gross salary multiplied by completed years of service. In addition, there will be one month (basic + variable dearness allowance) x remaining years of service as well as an ex gratia of Rs 22,000 x completed years of service.

Apart from this package, HMSI has said that associates who apply for VRS will be eligible for other benefits. In the case of permanent workmen, it will be “either the existing Mediclaim coverage equal to AE (adverse event) Mediclaim policy and existing GPA (group personal accident) policy” till the retirement age of 58 years or, in lieu of that, a one-time amount of Rs 300,000.

In the case of the JE (junior engineer) level and above, they will similarly be eligible for either the existing Mediclaim coverage and existing GPA policy till the retirement age of 58 years or a one-time amount of Rs 3 lakh.  

The first 400 accepted applicants will get an early bird incentive of Rs 500,000 each. HMSI has also indicated that if the VRS applications exceed 400, an additional Rs 400,000 will be paid to all the applicants. 

The maximum amount of eligible application under this scheme for permanent workmen and JE (& above), which is the sum if all the benefits indicated above, will be as follows: 

For senior manager - vice president levels, the cap will be Rs 72 lakh while this is Rs 67 lakh for managers.  It is Rs 48 lakh for deputy managers and Rs 36 lakh for assistant managers. Senior executives will be entitled to a maximum of Rs 31 lakh and executives to Rs 27 lakh. In the case of assistant executives, the maximum payout will be Rs 15 lakh.

Permanent workmen will get Rs 72 lakh which makes the amount payable at par with vice-presidents. In addition to the above dues, HMSI has said that the eligible associate will also be paid the separation month’s earned salary, earned leave, gratuity and other legs dues as per the rules. Leave encasement of up to Rs 300,000 and gratuity up to Rs 20 lakh will not be taxable.

HMSI to realign production strategy
On the background for the VRS, the company has said that the auto industry is going “through an exceptionally challenging phase” considering the prolonged demand slowdown and economic fallout from the coronavirus crisis.

“In these uncertain times, we are realigning our production strategy for improved overall operational efficiency with the objective of long-term business sustainability,” the company has added. In order to maintain its existence in this competitive two-wheeler market, “it is essential to continue with high efficiency and cost competitiveness”. 

The VRS has, therefore, been initiated for those associates who want to voluntarily retire before their fixed retirement age “so that they can be relieved from the company gracefully”. HMSI has four manufacturing facilities spread across Haryana, Rajasthan, Karnataka and Gujarat with a combined installed capacity of 6.4 million units annually. It now remains to be seen what percentage of its workforce opts for the VRS.

Autocar Professional reached out to HMSi for an official comment but there was no comment till the time of this news being published online. 

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