Quick Answer: A notice period buyout is the money you (or your next employer) pay your current company when you leave before serving your full notice period. In India, the most widely accepted formula is Buyout Amount = (Monthly Salary ÷ Days in Month) × Number of Unserved Notice Days. Most companies use your basic salary or monthly gross (not full CTC) and a 30-day month. For example, if your monthly gross is ₹60,000 and you skip 20 days of notice, your buyout is (60,000 ÷ 30) × 20 = ₹40,000. Use the free calculator below to get your exact figure.
Notice Period Buyout Calculator
Enter your basic salary or monthly gross — whatever your appointment letter specifies.
What Is a Notice Period Buyout?
When you resign in India, your employment contract usually requires you to serve a notice period — commonly 30, 60, or 90 days — so your employer has time to find a replacement and complete a handover. If you want (or are forced) to leave before that period ends, you can “buy out” the remaining days by paying compensation for the unserved notice period. This is called a notice period buyout or “notice pay recovery.”
A buyout is not a statutory right — it is a contractual arrangement. Whether you can buy out, how it is calculated, and whether your new employer reimburses it all depend on your appointment letter and a negotiation between you, your current company, and your future company.
Notice Period Buyout Formula (India, 2026)
The standard formula accepted by most Indian companies and supported by labour-court reasoning is:
Buyout Amount = (Monthly Salary ÷ Days in Month) × Unserved Notice Days
Two variables decide the final number:
- Which salary? Some contracts say “basic salary,” others say “gross salary,” and a few aggressive contracts say “CTC.” Courts have generally favoured monthly gross over CTC, because employer contributions to PF, gratuity, and insurance never reach you as cash. Always check the exact wording in your offer letter.
- How many days? A 30-day divisor is most common. Some firms use 26 working days, which makes your per-day rate (and therefore your buyout) slightly higher.
Worked Example
Suppose Priya has a 90-day notice period and a monthly gross salary of ₹90,000. She gets a new offer with a 30-day joining window, so she can only serve 30 days of notice. Her unserved notice is 90 − 30 = 60 days.
- Per-day salary (30-day basis) = ₹90,000 ÷ 30 = ₹3,000
- Buyout amount = ₹3,000 × 60 = ₹1,80,000
If Priya’s contract instead used basic salary of ₹45,000 (50% of gross), her buyout would be (45,000 ÷ 30) × 60 = ₹90,000 — exactly half. This is why the salary definition in your contract matters so much.
Buyout Amount at a Glance
The table below shows the approximate buyout payable for different monthly salaries and unserved notice days, using a 30-day basis.
| Monthly Salary | 15 days unserved | 30 days unserved | 60 days unserved | 90 days unserved |
|---|---|---|---|---|
| ₹30,000 | ₹15,000 | ₹30,000 | ₹60,000 | ₹90,000 |
| ₹50,000 | ₹25,000 | ₹50,000 | ₹1,00,000 | ₹1,50,000 |
| ₹75,000 | ₹37,500 | ₹75,000 | ₹1,50,000 | ₹2,25,000 |
| ₹1,00,000 | ₹50,000 | ₹1,00,000 | ₹2,00,000 | ₹3,00,000 |
| ₹1,50,000 | ₹75,000 | ₹1,50,000 | ₹3,00,000 | ₹4,50,000 |
30-Day vs 26-Day Basis: Why It Matters
The divisor changes your per-day rate. A smaller divisor (26) produces a higher per-day figure and a bigger buyout. Here is the difference on a ₹60,000 monthly salary with 30 unserved days:
| Basis | Per-day salary | Buyout (30 days unserved) |
|---|---|---|
| 30 days | ₹2,000 | ₹60,000 |
| 26 days | ₹2,308 | ₹69,231 |
If your contract is silent on the divisor, 30 days is the fairer and more commonly accepted default.
Standard Notice Periods in India
| Role level | Typical notice period |
|---|---|
| Intern / trainee / probation | 7–15 days |
| Junior / entry-level | 15–30 days |
| Mid-level | 30–60 days |
| Senior / managerial | 60–90 days |
| Leadership / niche skills | 90+ days |
Tax & Take-Home Impact
If your new employer reimburses your buyout, that reimbursement is generally treated as part of your taxable salary income. Meanwhile, the notice pay your old employer recovers from you is typically deducted from your final settlement on a gross basis. The net effect can be a meaningful dent in your take-home, so factor tax in before agreeing a buyout. You can estimate this with our TDS on Salary Calculator.
How to Reduce or Avoid a Buyout
- Negotiate a shorter notice — many managers will release you early if your handover is clean.
- Adjust unused leave — earned/privilege leave can sometimes offset notice days (linked to leave encashment).
- Ask the new employer to reimburse — common for in-demand roles; get it in writing.
- Use the buyout clause itself — if your contract explicitly allows buyout, the company usually cannot refuse it outright.
Frequently Asked Questions
How is notice period buyout calculated in India?
Buyout = (Monthly Salary ÷ Days in Month) × Unserved Notice Days. Most companies use basic or gross monthly salary and a 30-day divisor. For example, ₹60,000 gross with 20 unserved days on a 30-day basis = (60,000 ÷ 30) × 20 = ₹40,000.
Is buyout calculated on basic salary, gross, or CTC?
It depends on your appointment letter. Many contracts use basic salary; others use monthly gross. CTC-based buyouts are considered unfair and courts generally favour gross over CTC, because PF, gratuity, and insurance components never reach you as cash.
Can my employer refuse a notice period buyout?
If your contract has a buyout clause, the employer usually must honour it. If there is no clause, buyout is a negotiation and the employer can insist you serve the full notice period instead.
Does the new company always pay my buyout?
No. Buyout reimbursement is a perk that new employers offer for in-demand candidates, not a guarantee. Always get any reimbursement promise in writing in your new offer letter.
Is notice period buyout taxable?
Yes. If your new employer reimburses the buyout, it is generally added to your taxable salary. The recovery by your old employer is deducted from your final settlement, usually on a gross basis.
What happens if I leave without serving notice or paying buyout?
The company can withhold your relieving letter, full-and-final settlement, and experience certificate, and may deduct the notice pay from dues. This can create problems during background verification at your next job.
Can earned leave reduce my notice period?
Sometimes. Some employers let you adjust accumulated earned/privilege leave against pending notice days, reducing the days you must serve or buy out. Confirm your company’s policy in writing.
Conclusion
A notice period buyout simply converts the days you cannot serve into a rupee figure: (monthly salary ÷ days in month) × unserved days. The two things that most affect your final amount are whether the contract uses basic or gross salary and whether the divisor is 30 or 26. Read your appointment letter carefully, negotiate where you can, and use the calculator above to know your exact number before you sit down with HR.
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