Retrenchment Compensation and Notice Pay Calculator

Q: Is retrenchment compensation the same as gratuity?

They use the same 15/26 × wage × years formula, but are separate, independently payable entitlements — an employee whose service is retrenched can be entitled to both retrenchment compensation and gratuity (if gratuity conditions are separately met), not one instead of the other.

Q: What is the re-skilling allowance in retrenchment?

A separate additional payment (calculated similarly, at 15 days' wages) that applies in specific retrenchment situations under labour law reforms aimed at supporting displaced workers' transition to new employment.

Estimate retrenchment dues

The calculation does not decide whether termination legally constitutes retrenchment.

Retrenchment compensation

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Notice pay

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Measure	Amount
Service years used	—
Re-skilling fund contribution	—
Total employer cash estimate	—

How This Is Calculated

Retrenchment compensation is computed using the same 15/26 × last drawn wage × years-of-service formula as gratuity, separate from and in addition to notice pay (for any shortfall between required and actually-served notice) and, where applicable, a re-skilling allowance.

Frequently Asked Questions

Is retrenchment compensation the same as gratuity? ▼

What is the re-skilling allowance in retrenchment? ▼

Evidence and verification checklist

Confirm the current, in-force text governing Retrenchment Compensation and Notice Pay Calculator on the official source linked above - the summary on this page is an implementation aid, not a substitute for it.
Record the exact event/transaction date, since the applicable version of the law, form or threshold can change between the date of the underlying event and today.
Preserve the primary documents (notices, applications, orders, acknowledgements) that would let a reviewer reconstruct how the facts were classified and what was actually done.
Check for a State-specific rule, later amendment or binding judicial decision that may modify how this applies on your facts.

Before relying on this page

This page is a structured implementation summary, not the operative legal text. Portal or process acceptance of a filing does not by itself establish legal compliance - the underlying classification, authority, evidence and timeline still have to be independently correct. Where the facts are contested, high-value, or time-barred if delayed, verify the current position with the official source and, where appropriate, a qualified professional before acting.

Methodology, assumptions and sources

Scope: Computes retrenchment compensation payable under Section 25F of the Industrial Disputes Act, 1947 (now within the Industrial Relations Code, 2020 framework), and checks the procedural preconditions for a valid retrenchment.

Calculation logic

Retrenchment compensation = 15 days' average pay for every completed year of continuous service (or any part thereof in excess of 6 months, rounded up), computed using the 'average pay' definition specific to this provision (average of the wages payable for the preceding 3 months, per the standard convention for this computation).

Procedural preconditions for valid retrenchment: 1 month's notice (or pay in lieu of notice) to the workman, notice/prior permission to/from the appropriate government (required for larger establishments meeting the currently prescribed employee-count threshold under Chapter V-B equivalent provisions), and adherence to the 'last-in-first-out' principle for the specific category of workmen being retrenched (unless a different, justifiable reason is recorded).

Inputs and assumptions

Applies specifically to 'workmen' as defined under the Industrial Disputes Act/Industrial Relations Code (a specific, narrower category than 'employee' generally, generally excluding those in purely managerial/supervisory/administrative roles above a wage threshold) — the calculator's applicability check should be read against this specific workman-status test, not just general employment.

The employee-count threshold for requiring government permission before retrenchment (as opposed to mere notice) has been revised across amendments — the calculator applies the currently prescribed threshold.

Exclusions and edge cases

This calculator computes statutory minimum retrenchment compensation — an employment contract or settlement may provide for higher compensation, which would govern instead of (in addition to) the statutory minimum if more beneficial to the employee.

Distinct from termination for misconduct (disciplinary dismissal, which does not attract retrenchment compensation) and from voluntary resignation/retirement (which have separate, distinct entitlement computations) — this calculator is scoped specifically to retrenchment (workforce-reduction-driven termination).

Sources

Review status: reviewed and approved by CA Nikhil Gupta on 5 July 2026.