Notice Period Pay Calculation: Should It Be Based on Basic or Gross Salary?

Dear All,

Kindly let me know how to calculate the notice period pay for the employees - is it from the basic salary or from gross salary. In my company, when an employee leaves the organization, he/she is supposed to serve a 3-month notice period. If they have earned leaves, we deduct those days from the notice period.

Could you please provide information on how to calculate the notice period pay? If anyone has a policy regarding the notice period, kindly share it with me.

Regards

Dear,

The process for deducting or paying in lieu of the notice period is not clear in the law. You can have the same policy of give and take. If you pay based on the basic salary, deduct based on the basic salary, and if you pay based on the gross salary, then deduct based on the gross salary. However, you can clarify this in the appointment letter. In my last company, it was clearly stated in the appointment letter that it will be paid or deducted based on the gross salary.

Thank you,
J. S. Malik

Normally, the period of notice and payment in lieu of notice will be provided in the Standing Orders of the company. Similarly, a clear definition of the word 'pay or salary' will also be given in the Standing Orders. In the absence of Standing Orders, pay shall mean basic salary plus dearness allowance. Wherever references have been made about notice and compensation in the Industrial Disputes Act, the term is used to denote basic and dearness allowance. Lay off wage means half the daily average of basic + DA, retrenchment compensation means 15 days' wages plus DA for every completed year of service, and so on. Under the Factories Act, Shops and Establishments Act, or Plantations Labour Act, the pay for encashment of earned leave (annual leave with wages) means basic + DA. Therefore, in the context of notice pay, the pay shall have the meaning of basic salary + DA. In case you do not pay DA, then pay means basic salary only. This shall be the pay the employee should be asked to pay for leaving, and at the same time, this shall be the pay the employer should pay if he wants to send an employee out.

Regards,

Madhu.T.K

Please correct me if we should pay EPF during the notice period.