Notice Period Pay and Recovery Calculator

Methodology, assumptions and sources

Scope: Computes notice-period pay (employer paying in lieu of notice) or notice-period recovery (employee shortfall recovery), based on the employment contract's notice terms and last-drawn salary.

Calculation logic

1. Shortfall days = Required notice days − Notice days actually served (floored at zero).
2. Daily salary rate = Monthly salary base ÷ Selected divisor (30 calendar days, 26 working days, or a custom actual-days divisor, as chosen).
3. Notice pay/recovery amount = Daily salary rate × Shortfall days.

Inputs and assumptions

• The same salary-and-divisor basis is assumed for both employer notice pay and employee recovery, consistent with standard practice, unless the employment contract specifies a different basis for each direction.
• "Monthly salary base for notice" should reflect whatever component the employment contract defines as the notice-pay basis (commonly basic + DA, sometimes full CTC) — this varies by contract and the calculator uses whatever figure is entered.

Exclusions and edge cases

• Recovery is generally limited to the value of the shortfall in notice actually served, calculated on the same salary basis as the employment contract specifies — recovering more than this shortfall is not standard practice and may be challengeable under the contract or applicable state Shops and Establishments law.
• Notice pay received is generally taxed as salary income at the recipient's regular slab rate, not as a special category of income — this calculator computes the gross amount only, not the resulting tax.

Sources

Notice-period terms are governed by the individual employment contract and, where applicable, the state Shops and Establishments Act or the Industrial Employment (Standing Orders) Act — no single central statutory formula applies uniformly; verify against the specific contract and applicable state law.

Review status: reviewed and approved by CA Nikhil Gupta on 18 July 2026.