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Hi Everyone,
Need help in this case - the company I work equalize notice period pay with basic pay, which means if someone does not has to serve the notice period then he/she has to pay the amount in lieu of notice period which will be equal to basic pay component of salary breakup and vice versa.
Is this fixed that it should be equal to basic pay or it varies from company to company? As I have seen some organizations deducting the amount on their gross salary or net salary/take home.
What exactly constitutes the basic pay, the basic pay component of salary breakup or net pay/CTC/gross considers as basic pay of an employee?
It will be really helpful if someone can provide useful insights on this.
Thanks :)

From India, Delhi
Labour Law & Hr Consultant
Management Consultancy
Hr Executive


Dear Divya,
As notice pay refers to the amount of salary in lieu of notice payable either by the employer or by the employee when either of them unilaterally forecloses the contract of employment, basically its calculation depends on the length of the notice period and the components of salary structure included thereof.
If it is specifically mentioned as basic pay, then the notice pay shall be equal to the amount of basic pay only for the duration of the notice period; if it is mentioned as gross pay it shall be the amount calculated on the basis of the total value of only those components in the salary structure other than such components payable/ reimbursable to defray special expenses relating to the performance of the job.
It is thus determined in the exit clause of the contract of employment pertaining to unilateral termination.

From India, Salem
Thanks Sir for the information.
Does this mean, notice period pay calculation varies from company to company, it can be either on basic pay or gross pay?
It is not specified in any law that how it will be calculated. is that right?

From India, Delhi

Dear Divya
Yes. Notice period clause varies company to company and an employee governed by appointment orders that are being signed during employee engagement. But if it is not specifically mentioned in your appointment letter about the recovery of notice period on basic pay or gross pay, The employer can recover what ever he wishes to. Legally notice period clause comes under Standing orders act which applicable to only to workers, and staff are not governed by this act. Hence as for as notice period is concerned unless it is salary component exclusively written, the employer can recover on gross salary.

From India, New Delhi

Many organisations follow the norm of Basic Pay plus DA for determining the notice pay amount. The gross pay is much more inclusive and would include allowances like incentive, conveyance/transport, telephone, education, uniform, etc so not suitable for this purpose.
From India, Mumbai

Notice Pay is always on Gross Salary, you are buying out your Notice Period which means you were suppossed to be paid the full salary if you have completed the Notice Period, since it is not possible for either or employee/employer the Notice Period Buyout should be on Gross pay to the best of my belief. Some companies more of blue collar employees to cut short their burden of Notice Pay they usually mention it in the appointment letter/employee handbook.
From India, Ahmadabad
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