Notice period buyout calculation process

Hello Everyone,
Happy new year to all!!!
Kindly guide on if an employee not completed notice period, then we deduct his/ her balance notice period from salary. Whether it should be calculated on gross salary or on basic salary. What is correct as per law. Currently we are deducting on gross salary. Please suggest.
Regards
Amruta R

7 Likes

Hi,

Usual industry practice is to deduct based on Gross/CTC.

8 Likes

Hi @AmrutaR

Welcome to the community.

Agree with @amiths. It should usually be done on Gross/CTC and not on the basic alone.

5 Likes

Thanks Amith and Dinesh.

Regards,
Amruta

5 Likes

Hi,but recently the notice period recovery was calculated on basic salary in greythr application for one of our employee who did not service the notice.Is np recovery and buyout are one and the same???can anyone help out In elaborating with proper formula???

3 Likes

Yes, you are right, I also experience same and hence raise the question.
I did manual working on gross salary and update as other deduction available in greythr. Also remove the the balance notice days in the final settlement otherwise it calculated on basic and gross also.

You can try this.

Regards,
Amruta

4 Likes

In the greytHR we have a provision to configure as per the client-specific requirements.
We can change the configuration to calculate it on either Basic or on CTC.

Formula : (Monthly CTC/No of days in the month) * No of Notice recovery days
It can be any component instead of Monthly CTC depending on the company policy.

In greytHR application, we have the complete flexibility to configure.

4 Likes

Hi Amruta,

Ideally, If you re paying Leave Encashment on Basic Salary then your Notice Period deduction will be on Basic Salary. To be fait with employees.

But companies do deduct on Gross as well.

5 Likes

I agree with Ankit. It depends on the policy of the organisation. If the ‘Leave Encashment’ is calculated on ‘Basic Salary’ then the ‘Notice Period’ deduction must be on ‘Basic’ and vice versa.

5 Likes
Powered by | India's No.1 Payroll and HR Software.
9000+ Clients
150 Cities
10 Lakh+ Users