Navigating Notice Period Buyouts: What Are the Legal Options for Employees?

Hi All,

Last week, I came across a situation where an employee was joining our company. He wanted to buy out his notice period and take a one-month rest. When he asked me about possible options, I said, "You have to pay your previous employer the basic salary."

His previous employer wants him to pay a gross salary for a month. The interesting part is that they do leave encashment based on the basic pay.

I would like to know if there is any law related to the buyout option.

Regards,
PD

There's no law that applies to Notice Period Buy-out. Every company has its own set of rules and policies—like you mentioned, some have the basic as the reference and others the Gross CTC.

Leave Encashment on Basic Pay

With respect to the Leave Encashment on the Basic pay, here too, it varies from company to company. However, since you mention that this individual is joining your company, please be cautious. There's something odd in his stance that he wants to take rest for 1 month. Is your company paying the buyout amount, or is he bearing the cost? This is a telltale sign for the guy to try for other offers in that 1 month and 'use' your offer as a backup or for leverage—hope you get the point. Not that it will happen, but the possibility is high. Ask him to join as soon as he gets relieved.

Regards,
TS

Hi TS,

He himself is buying out notice period, and I do understand your point. But still, is it ethically/legally right for company "X" to do leave encashment on basic and buy-out stiff on gross.

Regards, PD

Dear Prakash,

Buying out the notice period and leave encashment are two separate issues that need to be addressed independently. In this regard, a comparison can only be made with what the company would have paid in lieu of the notice period in case of terminating an employee, not what the company pays for leave encashment.

Regarding the buyout of the notice period, unless specifically mentioned in the terms of the offer/appointment order, the buyout can only be made at the basic salary rate by both the employee and the company. As for leave encashment, the employee is encashing the leave earned during the duty period, payable on a gross salary basis. Therefore, in both cases, the company is wrong in its policy.

I hope this clarifies the situation.

Best Regards

There is no law. Companies just act cheap and gouge employees who want to leave. Unless the company spent a huge amount on some specialized training.

Nobody needs to pay anyone if it's routine work.