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India severance pay calculator done right

A full F&F settlement breakdown — retrenchment compensation, gratuity, notice pay, and leave encashment — built on the Industrial Disputes Act and Payment of Gratuity Act.

Employee & separation details

Type of separation
Years of service

Discretionary additions (optional)

Full & Final settlement

Statutory components

  • Retrenchment compensation 0 INR
  • Gratuity 0 INR
  • Notice pay 0 INR
  • Leave encashment 0 INR

Discretionary additions

  • Ex-gratia 0 INR
  • Pro-rata bonus 0 INR
  • Pending reimbursements 0 INR

Total F&F settlement

0 INR

The math

How each component is calculated

Built on the statutory formulas from the Industrial Disputes Act, Payment of Gratuity Act and standard Indian labour-law practice.

Retrenchment compensation

(Basic + DA ÷ 26) × 15 × Years of Service

Mandated by the Industrial Disputes Act, 1947. Applies only when termination is initiated by the employer (retrenchment) and the employee has at least one year of continuous service.

Gratuity

(Basic + DA ÷ 26) × 15 × Years of Service

Payment of Gratuity Act, 1972. Requires 5+ years of continuous service. Any service over 6 months in the final year counts as a full year. Capped at ₹20 lakhs.

Notice pay in lieu

Monthly CTC × (Notice required − served)

If the employer terminates without serving notice, they pay the shortfall. If the employee resigns and doesn't serve, the company can recover it instead — shown as a deduction.

Leave encashment

(Basic + DA ÷ 30) × Unused EL days

Standard practice across Indian employers. Some use a 26-day divisor — check your HR policy. Forfeited if termination is for cause.

Severance pay in India, what to know

What's the difference between gratuity and retrenchment compensation?
Both use the same formula but apply in different situations. Retrenchment compensation is owed when the employer terminates the employee under Industrial Disputes Act §25F, and the employee has 1+ year of service. Gratuity is owed at any exit — voluntary or involuntary — as long as the employee has 5+ years of continuous service. An employee with 6+ years who is retrenched gets both, paid out together.
Is gratuity taxable?
For employees covered under the Payment of Gratuity Act, gratuity is tax-exempt up to ₹20 lakh cumulative across all employers. Anything above that, the excess is taxable as salary. Wisemonk withholds TDS on the taxable portion at the time of payment.
Why is a gratuity ₹0 in my calculation?
Two reasons: (1) the employee has fewer than 5 years of service, which is the eligibility threshold under the Payment of Gratuity Act, 1972; or (2) the gratuity entitlement worked out to ₹0 due to a zero Basic+DA salary. The retrenchment compensation line uses the same formula but doesn't require 5 years — only one — so it may still be non-zero.
Is retrenchment compensation owed when the employee resigns?
No. Retrenchment compensation is only owed when the termination is initiated by the employer. Voluntary resignations, mutual separations, and terminations for cause don't trigger it. We default this line to ₹0 in the calculator unless you pick Retrenchment or Mutual as the separation type.
What's the timeline to pay F&F?
Once the must-pay-within 30 days of the employee's last working day per §16 of the Payment of Gratuity Act — and many state Shops & Establishments Acts mirror that. Wisemonk pays out leave encashment and notice pay typically alongside the regular payroll cycle. Most companies complete F&F in 30 days of the last working day.
Does Wisemonk handle offboarding for international companies?
Yes — that's exactly what an EOR does. If your employees are on Wisemonk EOR, we handle the entire F&F process for you: compute statutory dues, get sign-off, file Form 16, deactivate UAN and ESI, and discharge the gratuity trust. Pricing starts at ₹15,000 per one-time offboarding (for employees not on an EOR), all-in pricing starts at ₹50,000.

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