Is It Legal to Provide a Receipt for Notice Period Buyout? Seeking Advice on Content and Compliance

Hi all, this is regarding an employee who left the organization after buying out his or her notice period. He or she has requested a receipt mentioning the amount paid as a buyout along with the company logo. Please let me know if issuing such a receipt is legal and, if yes, what should be the content of the same? Kindly help me out on this.

Dear Vidya, rather than issuing a separate letter for the receipt of the payout amount, I recommend that you issue him a "No Due Certificate cum Employment Certificate." This will lay all his doubts to rest. Let the letter be signed by the MD of the company.

If the employee still insists on the receipt, then let him submit the cheque with a covering letter. On his file copy, he may attach a photocopy of the cheque. On this copy, your office may endorse the acknowledgment.

Thanks,

Dinesh V Divekar

There is nothing legally wrong in giving a receipt for any payment that you have received. The employee is right in asking for the same as he needs proof that he paid the money and also what it was paid for. Tomorrow, if the income tax department asks for an explanation, he needs to have such a document to show.

Receipt Requirements

The receipt needs to be on a company letterhead. The company act requires all documents issued by the company—not being an agreement on stamp paper—to be on the company letterhead and have the registered address clearly stated. Who is to sign it should be decided based on your structure, mostly the head of accounts or director (if it's a small company). The receipt should clearly state that it is received in settlement of notice pay.

I am also of the opinion of what Mr. Banerjee has stated. There is no harm in giving a receipt for the payment received by your company. The content should be as follows: "Received with thanks a sum of Rs. ________ (in words also) only vide Cash/Bank cheque No. ___________ dated _______ drawn on _______ Bank towards Notice Period Buyout."

The same can be signed by a Cashier/Accounts Authorized personnel.