How the buyout amount is calculated
The appointment letter or notice policy decides the basis. Some companies recover notice pay on basic salary, others on gross salary, and the daily rate may use a 30-day month or actual calendar days. The formula itself is simple: unserved notice days multiplied by the daily rate. The recovery is adjusted in the full and final settlement, and if the settlement is not enough to cover it, the employee is asked to pay the balance as per policy.
- Notice period as per the letter: 60 days
- Notice actually served: 35 days
- Unserved days: 25
- Daily rate on a basic of ₹36,000 with a 30-day month: ₹1,200
- Buyout amount: 25 x ₹1,200 = ₹30,000
Employee buyout vs employer buyout
When the employee wants to leave early, the employee buys out the notice, and the recovery appears as a deduction in the settlement. When the company wants the employee gone at once, for example after a resignation to a competitor, it can pay notice pay in lieu and relieve the employee the same day. A third case is common in Indian hiring: the new employer agrees to reimburse the buyout cost, often through a joining bonus, so the candidate can join sooner.
Rules to keep buyouts clean
Write the buyout basis into the appointment letter, so nobody argues about basic versus gross at exit. Approve early release in writing, with the agreed last working day and the amount. Accept a buyout only when handover can still happen. Recoveries must stay within the deductions the Code on Wages permits, so structure them through the settlement as your policy provides. Some employers do not allow a buyout for critical roles and insist that the notice is served.
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Who pays the notice period buyout?
Usually the employee pays, through a recovery from the full and final settlement. Sometimes the new employer reimburses the amount, directly or through a joining bonus, to get the candidate sooner. When the current employer wants the employee to leave immediately, the employer pays notice pay in lieu instead. The appointment letter and a written agreement should state who pays and how much.
Is notice period buyout calculated on basic or gross salary?
It depends on the appointment letter or notice policy. Some companies calculate it on basic salary, others on gross salary, and a few on total CTC. The daily rate may use a fixed 30-day month or the actual days in the month. If the letter is silent, ask HR for the policy in writing before agreeing to a buyout, because the difference can be large.
Can the company refuse a notice period buyout?
Yes. A buyout is an option the employer may accept, not something the employee can insist on, unless the appointment letter says otherwise. Companies often refuse it for critical roles or when handover is incomplete. If early release matters to you, raise it with your manager early, offer a handover plan, and get the agreed last working day in writing.