Tata Motors rolls out VRS after union push; around 300 employees opt in

Mumbai: Worker unions pushed to roll out a last month though only a section of eligible employees across the passenger and commercial vehicle businesses eventually took up the offer.

The scheme, which ran from April 10 to April 30, was launched in response to demands from unions across Tata Motors’ factories, multiple people aware of the matter told ET. The VRS targeted permanent staff aged 40-55 totalling around 750 employees. It was the automaker’s first such exercise since its split in October 2025 into two listed entities housing the passenger and commercial vehicle units. The demerged CV business was listed as a separate company last November.

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Despite the nudge from the worker unions, only 275-300 employees are estimated to have finally availed the scheme, the people said. The company had 58,442 employees at end-FY25.

A company spokesperson confirmed the move. “Tata Motors Ltd and Tata Motors Passenger Vehicles Ltd remain firmly committed to the welfare and wellbeing of their employees while proactively implementing holistic measures to become more efficient, agile, and future-fit,” the spokesperson said.

Compensation structure

This was the third VRS for Tata Motors in about four years, reflecting a sustained push towards a leaner manufacturing footprint.

As the company accelerates its transition to electric vehicles, the labour intensity of its operations is structurally shifting — EVs require fewer man-hours on the shop floor compared to internal combustion engine vehicles, with automation compounding that trend.

Trainees, apprentices, contractual and fixed-term staff, and those already separated from the company were excluded from the scheme. The compensation structure was fixed based on age. Employees between 40-45 years with a minimum of 10 years of service were entitled to about 80% of their last drawn salary (basic plus DA), and those aged 45-50 got around 90%, while the 50-55 bracket received up to 100%.

What set Tata Motors’ VRS apart from traditional schemes was the payment flexibility, said the people cited earlier. It allowed employees to choose between a monthly payout till they turn 60 — ensuring income continuity — or a lump sum settlement, either as a full and final payment or in staggered tranches.

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Monthly payout model

Industry observers termed the monthly payout model as a meaningful differentiator, offering a safety net rather than a one-time windfall. Beyond the base payout, the scheme included medical benefits for up to 10 years, along with settlement of provident fund, gratuity, leave encashment, and leave travel allowance (LTA). In some cases, provisions of up to ₹1-1.5 lakh in medical support and limited family support in the event of death have also been included. Pension benefits will be as per EPFO norms.

To encourage collective participation, the company also built in a group incentive layer — an additional payout of ₹50,000 to ₹1.48 lakh depending on overall participation levels, designed to reward employees for opting in as a group rather than individually.

“Acknowledging the valuable contributions of our people, the companies introduced a thoughtfully designed and entirely voluntary VRS for eligible employees who desired to explore alternative paths in view of their personal (medical, familial, education) or professional choice,” the spokesperson said.