Sangeetha 20 November 2017

Buy out - even when i am ready to serve notice

Hi, I work for an IT and I am on probation. I have not asked for an early release. I did try to reach my manager in Parent company before resigning. But there was no response. I resigned And then I also sent FYI mail to Client (I work on CTH) . HR first called and told me that she will try for early release to which I agreed. Then next day I was told that I will have to pay for short fall. When I questioned, she told she will check and get back and then I was told that I will have to pay to get my reliving letters, as I did not discuss with manager before informing stake holders/client. Should I be paying the buy out amount? If so, it should be on Gross or Basic Salary ?

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(Guest)

You may check the terms of termination of service in your appointment letter and act accordingly.

Sankalp Tiwari 16 November 2024

Dear Reader,

The determination of whether a buy-out payment applies is derived from the terms of the employment contract. Section 27 of the Indian Contract Act, of 1872 lays down that the covenants in restraint of trade or to protect a trade should not, either directly or indirectly be so remote as to be deemed unreasonable.
Sunil Kumar Jain v. National Aviation Co. of India Ltd., here the courts held that in case the contract contains any ambiguous and vague terms, it should go with the benefit of the employee. If your contract does not clearly state whether the buyout amount should be gross or basic salary, you may argue that such ambiguity cannot be working against you but in your favor. You also tried communicating with your manager and were willing to serve your notice, this intent may become yet another reason for them. You should ask for a formal, in-writing explanation from HR. If the problem persists, then you should consult a labor law attorney who can guide you better on your available options.

Please let me know if you have any questions at sankalpt44@gmail.com

S Jadhav 98336 98330 (Jadhav & Associates) 05 May 2025

If you have not requested for an early release and the company does it on their own, you need not pay any amount for the early release since you are ready to serve the notice period as per the appointment letter.

In case the company deducts, you may send them a legal notice and take them to the court asking for the amount in addition to the costs of the legal action. You may also use social media to put down your facts and let the company face the repurcussions of its illegal actions.

However, if it is you who have asked for any early release and then instead of granting you a concession and releasing early the company is right in asking for the amount of notice period shortfall pay.

And as Mr Sankalp stated, the amount is generally on basic salary or at the most basic plus DA and monthly allowances if applicable.

Mr Sankalp has also provided an amicable approach that you should consider.