How Should We Calculate Notice Pay: Gross Salary or Basic Plus DA? Seeking Examples

Dear Friends,

Last month, we terminated one of the workers in our company to reduce manpower. We now need to settle their Full and Final (F&F) dues.

Notice Pay Calculation

I have a question: Do we need to provide notice pay equivalent to one month's salary? If so, should this notice pay be calculated based on the gross salary or the basic salary plus Dearness Allowance (DA)?

Could you please provide an easy example to illustrate this?

Thanks in advance.

Regards,
Venkatesh J

Notice Pay Calculation

The notice pay shall be based on the gross salary, i.e., Basic + DA + HRA + Conveyance allowance + any other allowance = total, unless the contract itself defines notice pay otherwise.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

If no appointment letter is issued by an employer and an employee's appointment is suddenly terminated verbally, can management pay notice pay only on the basic pay from the date of verbal notice? Is there any relevant leading case law on an identical matter?

There is no fixed rule followed by people; it depends on:

1. What is your current practice.
2. What are the terms & conditions defined in the appointment letter.

- Few companies pay on gross salary.
- Some companies pay basic + DA + HRA.
- Some companies pay basic + DA only.

He is now claiming his 20 days' salary. Should we pay or not? Please advise.