How to Handle Early Resignation: Calculating Salary for a Shortened Notice Period

An employee of a small credit card company is a sales professional who has hardly completed one month in the company and has resigned, serving a notice of 7 days (instead of 15 days as stated in the contract). Consequently, the company has decided to relieve him in one day because, as a sales professional, he can no longer be sent to the field to build new relationships, and he is not old enough in the company to do any follow-ups or other related jobs.

My questions:

1. If he is relieved earlier, do we need to pay for the notice period?
2. If yes, then how is the calculation of salary in lieu of that remaining notice period done? Is it based on paying the amount in lieu of the notice period? How is the calculation of the salary done? Would he be paid on CTC, GROSS, or NET SALARY? For instance, if an employee's salary is Rs 20,000 CTC, Rs 18,000 Gross, and Rs 15,000 Net.

Please advise.

1. If he is relieved earlier, do we need to pay for the notice period? - NO, ask him/her if the company is ready to relieve you early. Do you want to go? If the answer is YES, then the company needs to pay any amount.

2. If yes, then how is the calculation of salary in lieu of that remaining notice period done? Is it on the basis of paying the amount in lieu of the notice period? How is the calculation of the salary done? Would he be paid on CTC, GROSS, or NET SALARY? If an employee's salary is Rs 20,000 CTC, Rs 18,000 Gross, and Rs 15,000 Net - Calculation will be as per the clauses of the Appointment Letter.

Any further queries, please do revert back.

Hi Meena,

Full and final formalities differ from company to company and are usually mentioned in the appointment letter.

1. The most important point of your question is that the employee is still under probation and has not been confirmed in the employment, so the company is not liable to pay for any notice period, and vice versa.

2. Notice period or any other calculation (i.e., leave encashment, etc.) is done by taking only the basic into consideration. For example, if the basic is Rs. 10,000 and you have to deduct or give a 15-day notice period, then the total will be 10,000/2 = Rs. 5000.

Shikha

Hi Shikha,

Are you sure the notice period is calculated only on the basic salary? If the appointment letter states that a person can leave the organization by serving one month's notice or salary in lieu thereof, in such a case, can the company deduct the notice pay from the Gross Amount?

As per your above response, it has to be only on the Basic. Is it written in the law somewhere? If yes, kindly provide the reference.

Thanks & regards,
Sudeep