Notice Buy-out | Meaning and Definition

What is notice period buy-out?

Notice period buy-out is a clause in an employment contract that allows the employee to terminate their contract and leave the company immediately, usually in exchange for a payout. This clause of the buy-out option is often included in contracts for high-level executives or other employees whose roles are particularly difficult to fill and who would be difficult to replace.

The notice period buy-out clause allows the company to avoid paying the employee any notice period, which can be costly if the employee is highly paid. It also allows the company to avoid finding and training a replacement for the employee during their notice period.

Legal rules of notice period after the resignation in India

There are no legal rules of notice period after the resignation in India. However, it is common courtesy to give a notice period of one month. You should also receive your salary and other benefits for the notice period. If the company does not want to honor the notice period, you can approach the labor court.

Benefits of notice period buy-out

There are several benefits of a notice period buy-out:

  • It allows the employee to move on from the company more quickly without waiting for the end of their notice period. This can be especially helpful if the employee is looking for a new job or needs to relocate.
  • It allows the company to save money on severance payouts.
  • It can help avoid any conflict or bad blood between the employee and the company.

All in all, a notice period buy-out is a win-win for both parties involved.

FAQs (Frequently Asked Questions)

In case an employee has to leave the job on an urgent basis due to studies, early joining in the new job or any other reason.

There is no specific law in India that mandates notice period buyouts.

Notice period buyouts are calculated on the gross salary that an employee receives for some time.

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