Notice Period Calculation: Gross or Net Salary? Seeking Advice from Experienced HRs

Hi,

Please help me with how to calculate the notice period when an employee is not serving the notice period. Is it deducted based on the gross salary or net salary? Also, how should the notice period be calculated?

I would appreciate guidance from seniors.

Regards,
Vidya

Dear Vidya,

Notice pay is to be deducted from the gross salary. The notice period calculation depends on your company policy, i.e., 15 days, one month, two months, or three months to be deducted if the person does not serve the notice period.

Regards,
Harshad

Vidya,

We consider basic pay for all statutory deductions, so the same is applicable for the notice period as well. However, there are no set rules defined. Some companies even prefer deducting it from the gross pay - both are valid. It is entirely up to how you define your policy. In the case of termination, if you pay only the basic component, then the same is applicable for the employee as well when they are not serving their notice period.

Notice period is calculated on basic salary only from the day of serving notice of termination period. No gross salary deduction applicable.

I recommend requesting Mr. Madhu. He will give you expert advice.

Regards,
Badlu

Hi Vidya,

In your HR policy, you will have well-defined terms and conditions for the notice period. In your case, if the employee wants to pay the notice period, it means he has to pay the gross salary only. If the employer wants to pay the notice period in the case of termination, they will be paying only the basic and DA.

Warmest Regards,

Mohan.M.S

"Willingness to walk the extra mile to achieve excellence"

Dear Ms. Vidhya,

Actually, the notice period will be calculated only on BASIC+DA, not on the gross salary. The calculation will be done as Basic+DA/31 * Number of days shortfall.

Okay, clear.

Thank you.

Dear Vidya,

There is a notice period in all organizations, i.e., 30 days' notice or 90 days' notice period, and we have to check the date of resignation. From that day onwards, the notice period is counted. For example, if a person gives only a 20-day notice period, then you have to calculate the remaining 10 days from the monthly salary. That means you have to withhold the 30 days' salary. The calculation is the monthly salary divided by 30 days or 31 days. Once you get the per-day salary, then multiply it by the short notice.

Biju

Even I do agree with what Biju has said, as our organization follows the same procedure to calculate the amount for the notice period. If the employee has served the complete notice period, then there is no need for any deductions; even the PF would be paid in the respective manner as it was earlier. In case the employee doesn't serve the complete notice period, then the one month's salary would be divided by 30 days and multiplied by the number of days to be recovered.

Thanks, Take care, Bye

Dear Sowmya,

Notice pay is calculated based on your basic salary or (Basic+DA) in most companies. However, in some companies, it is calculated using Basic+HRA. As far as I know, no other allowances are considered in the calculation of notice pay.

Thank you.

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It is right that only the Basic Salary is applicable for the notice period. No allowances are taken into consideration, even if the company desires to pay notice pay; they will also pay only Basic pay.

Badlu

Dear all,

Recently, I resigned from my previous job under the Ministry of Textiles. As per the institute's Service Rule, I had to serve a notice period of 3 months in case of resignation. However, due to some reasons, I fell short by 1 month and 15 days. According to the policy, I understood that I had to deposit salary in lieu of this short notice period, and I accepted this condition.

Now, the Institute has served me a notice to deposit salary including Basic Salary, Dearness Allowance, House Rent Allowance, and Traveling Allowance with DA, which amounts to Rs. 35,398. As far as I know, as per the law, I am bound to deposit the sum including Basic Salary and Dearness Allowance, as other allowances like HRA and TA are not treated as salary components. Basically, HRA is for accommodation, and when resigned, the company is not concerned about where I will live or any other related matters. The same applies to Traveling Allowance. Therefore, according to my calculation, it comes to Rs. 31,448.

I hope I have acquainted you with my problem in brief. I would appreciate any expert guidance on what the justified calculation is. If possible, could you please furnish me with the rule for the short notice period?

Thank you for your expert insights.

Regards,
Ashok K Gupta