Can my employer refuse a buyout?

Often yes. A notice period is a contractual obligation and buying it out usually requires agreement rather than being a right. What the contract says governs.

Is a buyout paid by a new employer taxable?

It is generally treated as part of your income from the new employment. Treatment varies, so check rather than assume.

Salary & HRstatutoryIndia only

Notice Period Buyout Calculator

The cost of leaving before your notice period ends. Whether the contract computes it on gross salary or on basic pay changes the figure by more than half, and it is the first thing to check.

Also called: notice buyout, notice period calculator.

What the buyout costs you

₹2,00,000

₹2,00,000 to buy out 60 days of notice, of which your new employer covers ₹0, leaving ₹2,00,000 from your own pocket.

Total buyout

₹2,00,000

Days being bought out

Daily rate used

₹3,333

Salary the buyout is computed on

₹1,00,000

Covered by your new employer

₹0

How this is calculated

Computed from the published rates for the tax year you selected, which is not necessarily the current year. A calculation, not tax advice, and it does not know anything about your circumstances beyond the figures entered.

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for India change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

The buyout is a daily rate multiplied by the days not served. The daily rate normally divides the monthly figure by thirty. The one detail that matters is which monthly figure: a buyout on basic pay alone, where basic is forty percent of salary, costs well under half a buyout on gross. Many new employers will cover some or all of it, so that is subtracted to show what actually leaves your account.

buyout = (salary used / 30) * (notice days - days served)

B: Monthly salary the contract specifies (currency)
N: Contractual notice period (days)
S: Days actually served (days)

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

sixty days of a ninety-day notice, on gross

Monthly salary the buyout is based on: ₹1,00,000
Notice period: 90 days
Days you will actually serve: 30
Buyout is calculated on basic pay only: No
Basic pay as a share of salary: 40%
Amount your new employer will cover: ₹0

What the buyout costs you₹2,00,000

Worked by hand: two months of salary

Open this example

the same buyout on basic pay alone

Monthly salary the buyout is based on: ₹1,00,000
Notice period: 90 days
Days you will actually serve: 30
Buyout is calculated on basic pay only: Yes
Basic pay as a share of salary: 40%
Amount your new employer will cover: ₹0

What the buyout costs you₹80,000

40% of the gross figure; the single most valuable thing to check in a contract

Open this example

serving the full notice costs nothing

Monthly salary the buyout is based on: ₹1,00,000
Notice period: 90 days
Days you will actually serve: 90
Buyout is calculated on basic pay only: No
Basic pay as a share of salary: 40%
Amount your new employer will cover: ₹0

What the buyout costs you₹0

degenerate case

Open this example

Method and limits

What it assumes

A thirty-day month for the daily rate, which is the common contractual convention.
Days served counts calendar days of the notice period, not working days.

What it deliberately does not model

Some contracts compute the buyout on cost to company rather than salary, which is higher again.
Tax treatment of a buyout recovered from a new employer varies and is not applied.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

Can my employer refuse a buyout?: Often yes. A notice period is a contractual obligation and buying it out usually requires agreement rather than being a right. What the contract says governs.
Is a buyout paid by a new employer taxable?: It is generally treated as part of your income from the new employment. Treatment varies, so check rather than assume.