Voluntary Retirement Offer – Evaluation:

For whatever reasons – voluntary retirement offers are now quite common and most people do not have a choice. However, if you do have a choice, see how to make the best of it. If you are given a VRS offer at age 45 and you have a transferable skill you could start a second career. If you join a small family run business you could even continue there till you are 65 or more – and thus it may actually be a good idea to take the VRS. Normally VRS will have the following implication:

1.    Loss of salary: the most obvious implication is the loss of salary, so there is no pay cheque.
2.    Loss of group benefits – medical insurance, accident and life insurance, discounted rates in housing (from an outside agency), etc.
3.    Loss of something worthwhile to do from 9a.m to 5 p.m.
4.    Loss of a social circle
5.    Loss of status at home as the ‘bread earner’ and ‘bread bringer’

If the company is going through a tough time and are making a VRS offer it is better to take it without much fuss. In a tough competitive environment the company may go out of business and may have nothing to offer. So taking the offer makes sense.

However, if the company has enough cash and is making a VRS offer they are likely to offer half the salary for the next 10 years (basic no allowances) and some other facilities. Here there is scope to negotiate – if not the money benefits like insurance, accidental death benefit, some group buying discounts, etc. Most companies who offer a VRS to reduce the age group will bend and give way. If you are enterprising you can offer outsourcing some of the functions that you have been doing / overseeing. Opportunities like vendor co-ordination, salary processing outsourcing, recruitment screening, recruitment back ground checking, are all functions which companies will happily outsource to retired employees with energy rather than outsource to outsiders. A few years back Tata Motors gave a free truck to its VRS employees as an incentive for taking the offer quickly – like an early bird offer. Thus being prepared for a VRS helps you take the early bird offer – and that may be substantial.

You need to evaluate your income after VRS, the chances of retaining some group insurance or a company paid medical coverage for life, chances of getting a similar job in a place of your choice, tax implications (some companies continue to pay a salary rather than a lump-sum), letting you attend some skill building programs run for employees – negotiation skills, computer skills, etc.

Based on all this you should take your decision to take the VRS. Normally it is worth it. A friend who took a VRS showed me his bald plate and said can you see the hair coming back? That is the fun of financial freedom – no boss to chew my brain!