About this tool
The Notice Period Buyout Calculator shows how much you, or your new employer, must pay for not serving the full contractual notice period. When you resign, your offer letter sets a notice period, commonly 30, 60, or 90 days in India. If you leave before serving it in full, the employer recovers the unserved days from your final settlement, and that recovered amount is the buyout. The calculator turns your salary, required notice, and the notice you can actually serve into a rupee figure so you can plan the cost of an early exit or what to ask a new employer to reimburse. Most companies deduct it from the final settlement rather than billing it separately.
How it works
- Enter monthly basic salary.
- Enter required notice and notice you'll serve.
- Pick basis: Basic only (most common) or Gross.
The buyout formula
The buyout is a straightforward proration of your salary across the days you do not serve. Per-day pay comes from dividing the monthly figure by a flat 30 days, the convention most Indian payrolls use.
Shortfall days = Required notice - Notice served Per-day pay = Monthly salary (basic or gross) / 30 Buyout amount = Per-day pay x Shortfall days
The single biggest lever is the salary base. A "basic only" buyout uses just your basic pay, while a "gross salary" buyout uses your full monthly gross, which in many Indian salary structures is roughly two to three times the basic. Always confirm which base your contract names before you estimate.
Worked example
Suppose your monthly basic salary is Rs 50,000, your contract requires 60 days notice, and you can only serve 30 days. The buyout is calculated on basic only.
- Shortfall: 60 - 30 = 30 days unserved.
- Per-day pay: Rs 50,000 / 30 = Rs 1,667 per day.
- Buyout: Rs 1,667 x 30 = Rs 50,000.
Buyout by shortfall and salary base
Buyout for common shortfall lengths at a Rs 50,000 basic versus a Rs 1,25,000 gross. Per-day uses the salary divided by 30.
| Shortfall | Basic-only (Rs 50,000/mo) | Gross (Rs 1,25,000/mo) |
|---|---|---|
| 15 days | Rs 25,000 | Rs 62,500 |
| 30 days | Rs 50,000 | Rs 1,25,000 |
| 45 days | Rs 75,000 | Rs 1,87,500 |
| 60 days | Rs 1,00,000 | Rs 2,50,000 |
| 90 days | Rs 1,50,000 | Rs 3,75,000 |
Common pitfalls
- Assuming basic when the contract says gross. A gross-basis buyout can be two to three times a basic-basis one. Read the notice clause word for word before budgeting.
- Forgetting paid leave can offset the shortfall. Some employers let you adjust unused earned leave against the notice you owe, shrinking the buyout. Ask HR whether leave can be set off.
- Ignoring the tax angle. If your new employer reimburses, the amount may be taxed as salary; if you pay yourself, treatment differs. Confirm with payroll so the net cost is not a surprise.
- Expecting buyout to be a right. Some companies insist you physically serve notice and refuse payment in lieu, especially for senior roles. The option exists only if your contract allows it.
- Not getting reimbursement in writing. A verbal promise from a new employer to cover the buyout is hard to enforce. Insist it appears in the offer letter as a clause or joining bonus.
- Using actual month length instead of 30. Most payrolls prorate on a flat 30-day month. Dividing by 31 or 28 gives a slightly different figure than your employer will bill.
Frequently asked questions
How is notice period buyout calculated?
Buyout equals your per-day pay multiplied by the number of shortfall days. Per-day pay is your monthly salary (basic only, or gross, depending on your contract) divided by 30. Shortfall days are the required notice minus the notice you actually serve. So if you owe 60 days but serve 30, you pay for 30 days at your per-day rate.
Is notice period buyout calculated on basic or gross salary?
It depends on your employment contract. Many Indian companies recover buyout on basic salary only, which is cheaper for the employee, while others use gross salary, which is higher. Check the exact wording in your offer letter or HR policy before estimating, because the difference can be two to three times the amount.
Is notice period buyout taxable?
If your new employer reimburses the buyout, it is usually added to your salary income and taxed. If you pay it yourself from your final settlement, it is a deduction from salary income. The tax treatment of recovered notice pay has been disputed, so confirm the current position with your payroll team or a tax adviser.
Can my company refuse a buyout?
Yes. Some employers require you to physically serve the notice and do not accept payment in lieu, especially for senior or hard-to-replace roles. The right to buy out depends entirely on your contract, so read the notice clause in your offer letter. Most large companies do allow buyout.
Does a new employer pay my notice period buyout?
Often, yes, if it is negotiated. Many companies reimburse the buyout as part of a joining bonus or a specific relocation or notice-buyout clause, particularly when they want you to start sooner. Get any such promise in writing in your new offer letter, because a verbal assurance is hard to enforce later.