Understanding the concept of Notice period.
What is Notice Period?
When an employee resigns from an organization, he/she is obliged to serve a specific period, as mentioned in the offer letter. This duration of service is defined as the ‘Notice Period’.
What is notice pay and notice recovery?
Notice pay is the amount paid to the employee by the employer if the former is terminated from the job before serving the notice period.
Notice recovery is the amount recovered by the employer from the employee if the employee leaves the job without serving the notice period.
There have been a few rounds of discussion around this topic in the greytribe community very recently. Here are the answers to the queries that came in from HR professionals.
How is the notice period calculated?:
“Notice period depends on the duration mentioned earlier on the agreement or offer letter.
For example, if an employee who has resigned has 3 months of notice period, as mentioned in the offer letter.
The formula for calculating the recovery is:
In case employee resigns (Basic/30 * Number of days recovery) 90 days in the above example, this becomes recovery.
In case an employee is retrenched: (Gross/30 * Number of days payable) 90 days in the above example, this becomes payable to the employee.” As answered by Mr. Yuvraj Birje.
Click here to follow the discussion thread.
Is PF applicable on notice period payment?
Answering to this question, Mr. D. Bharath Chandra said “PF is applicable on notice period payment as the amount paid during the notice period is also salary. PF applies to any amount which is paid to an employee during his tenure in the organization as salary in regular period/notice period.” The discussion took an exciting turn when a few more intricate questions were raised. Here is the discussion thread for you read further.
How to manage a situation when an employee absconds without serving the notice period or paying the recovery amount?:
In case of such an unforeseen incident, an employer can:
- Hold the Full & Final Settlement
- No relieving letter
- Providing Negative reference
- Post a Rating & Negative review on the International Register of Employee & Employer Ratings.
- Hold Social Benefits (such as PF) payout to the possible extend
- Initiate Legal action for recovery of penalty for leaving without notice, if covered in the employment letter
- Enter employee details in a common Blacklisted employees list like the one from NASSCOM
Here is a quick snippet of the community conversation
"If 3 months salary in lieu of Notice period paid under "Salary Compensation will not attract PF. If this would have paid as regular payment could have attracted PF.
Hope this information will be helpful."
"P.F need not be paid on compensation in lieu of notice which is generally paid under the pay head ‘Notice period pay’. It is not a regular monthly wage component and is a one-time payment in the final settlement."
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