India notice period & severance cost estimator

1What you owe, line by line

Every head of claim, with the statutory basis for each figure — including the ones that come to nothing on your inputs.

• Notice pay in lieu {days} days on gross · statutory floor {statutory}, contract {contract} ₹3,00,000
• Retrenchment compensation IR Code s.70(b) · 15 days × {years} yr ₹1,29,808
• Re-skilling contribution IR Code s.83 · 15 days’ wages, within 45 days ₹43,269
• State service compensation not owed in this state ₹0
• Gratuity vests at 5 years ₹0
• Leave encashment {days} days × day-rate on wages ₹51,923

2The same employee, exited in nine states

Identical tenure, salary and reason. Only the state changes.

3Cost of exiting this person at each year of tenure — Karnataka

The cliffs are the point: gratuity vesting at five years, and s.47(5) switching state service compensation off at the same moment.

4What a generic India severance calculator misses

Most tools price three things: notice, gratuity and leave. Here is what sits outside that, on your inputs.

• Retrenchment compensation IR Code s.70(b) · 15 days × {years} yr +₹1,29,808
• Re-skilling contribution IR Code s.83 · 15 days’ wages, within 45 days +₹43,269

On this combination of state, reason and tenure there is nothing beyond notice, gratuity and leave. That is a real answer, and it is why the tool checks rather than assumes. Change the state to Telangana, or the reason to a redundancy, and the picture moves.

Why the older tools are wrong, not just incomplete: almost every severance calculator online still cites Section 25F of the Industrial Disputes Act, 1947. That Act was repealed on 21 November 2025. The live provision is Section 70 of the Industrial Relations Code, and the Code added a Section 83 re-skilling contribution — 15 days’ wages, credited within 45 days — that has no equivalent in the statute those tools are quoting.

5The wage base everything is calculated on

Under the Code on Wages, Basic + DA must be at least half of remuneration. Structures built to keep basic at 30–40% no longer reduce the exit bill.

Actuaries are reporting gratuity liabilities up 25–50% on portfolios that were structured with low basic. If your India entity carries a gratuity provision, it is probably understated on the balance sheet, not just in this calculation.

The sequence, and the clocks attached to it

Three separate deadlines run from the last working day, and they are not the same length. Missing the two-day one is now a statutory offence rather than an HR embarrassment.

1. 1 Before you tell anyone Fix the classification Decide, in writing, whether this person is a worker under the IR Code. Managerial and administrative roles are out; supervisors above ₹18,000 a month are out. Everyone else is likely in, including most engineers. This one call moves the number more than the salary does.
2. 2 Day 0 Serve notice, or pay it Written notice in the form the state Act requires, or wages in lieu. Where the exit is a retrenchment of a worker, notice also goes to the appropriate Government in the prescribed manner — not just to the employee.
3. 3 Day 0 Apply last-in-first-out, or record why not For an ordinary retrenchment the IR Code keeps the LIFO principle within a category. Departing from it is allowed, but the reasons have to be recorded in writing at the time, not reconstructed later.
4. 4 Within 2 working days Settle the wage components Section 17(2) of the Code on Wages is now live: unpaid salary, leave encashment, pro-rata bonus and notice pay are due within two working days of the last working day. The old 45-day settlement cycle is a statutory breach.
5. 5 Within 30 days Pay gratuity Gratuity runs on its own clock under the Code on Social Security. Late payment attracts simple interest from the due date.
6. 6 Within 45 days Credit the re-skilling contribution Retrenchment only. Fifteen days’ wages under s.83 of the IR Code, credited to the worker’s account. New in the Codes, absent from the old Act, and routinely missed.