Severance Pay In India: All That You Need to Know

Severance Pay In India: All That You Need to Know

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While conducting business operations in any country, every employer ought to adhere to certain labor compliance requirements applicable there. In India, labor law is a concurrent subject in the Constitution of India. Therefore, both the Central and State Governments govern the employment regulations in India. Severance pay in India is one of the labor compliance requirements that every businesses need to fulfill. It is a kind of compensation program that revolves around gratuity. It is provided to employees upon their termination, resignation or retirement.

Unfortunately, misconceptions loom large about severance pay in India. For instance, not many have clear answer to questions such as- “Is severance pay taxable in India?” or “Is severance pay mandatory in India?” Employers may land in trouble if they lack proper know-how about the right termination provisions of employees and the severance pay they need to offer to the employees.

This blog will guide you through the various severance pay laws in India so that you can stay compliant and keep your business shielded from legal and reputational risks. Let’s now delve deep into the details!

Contents

What is Severance Pay in India?

Severance pay in India refers to financial compensation or benefits package offered by an employer to an employee who has been laid off or terminated. It may also be provided to employees when they retire or near the end of their contractual agreements. Employers need to consult certain legal regulations applicable to their location, industry and nature of establishment to understand what exact severance pay laws they need to follow.

Usually, when employees are terminated due to factors upon which they don’t have control, say due to cost-cutting, downsizing, retrenchment, restructuring or layoffs, severance pay is provided. It acts as a kind of financial cushion or assistance to enable them to manoeuvre their ways out as they leave the company. However, severance pay may also be offered to employees who have resigned after a mutual agreement.

Businesses that offer severance pay to laid-off employees usually pay an average of 1-2 weeks’ pay for each year of completed continuous service.

Severance pay serves as a positive gesture and token of goodwill on the part of the employer to aid an employee in navigating the unexpected transitory stage between working and unemployment.

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What are Severance & Unemployment Benefits?

Severance benefits in India primarily refer to gratuity, which is a financial benefit provided to employees upon termination, resignation, retirement. The amount of gratuity is calculated based on the employee’s last drawn salary and the number of years of completed service using a formula prescribed under the Payment of Gratuity Act, 1972.

severance pay in india

In India, there is no universal unemployment benefit scheme like in some other countries. Employees may be eligible for certain social security benefits under specific circumstances, such as under the Employees’ State Insurance (ESI) Act or the Employees’ Provident Funds (EPF) scheme, which provide some financial support during periods of unemployment or disablement.

Example of Severance Pay in India

Let’s understand what is severance pay in India with an example.

Say, an employee X has been working at a manufacturing company for 8 years. Due to economic downturn, the company decides to downsize and lays off several employees, including X.

Supposing that the last drawn salary of X was Rs 40,000 per month and has completed 8 years of continuous service with the company, he is eligible to receive a certain sum upon his termination due to the company’s downsizing. This amount serves as severance pay to acknowledge his years of service with the company.

Why Offer Severance Pay in India?

Severance pay in India is not compulsory by law in all conditions. Depending upon the situation, employees possess the right to request for severance pay. Organisations may choose to offer severance pay packages to its employees depending on individual cases and as per the terms and conditions laid down in employment contracts.

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Not offering severance pay to the employees who are entitled to receive it may lead to the build-up of negative sentiments and discontentment among them. As a result, it may adversely impact employer reputation and branding.

Organisations follow severance policy in India to diminish the impact of a sudden layoff on an employee as well as to shield their businesses from getting embroiled in any legal conflicts in the future. Let’s have a look at why offering severance pay in India may be a good decision to take:

1. Acknowledgement of Service

Severance pay, such as gratuity, acknowledges and rewards employees for their long-term service and dedication to the organization. It reflects the employer’s appreciation for the employee’s contribution over the years.

2. Financial Security

Severance pay provides financial security to employees during the transitional period after leaving the company. It helps cover immediate expenses and serves as a cushion until the employee finds new employment.

3. Employer Reputation Enhancement

Offering severance pay can enhance the employer’s reputation as a fair and responsible employer. It can contribute to positive employer branding and help retain employee loyalty, even during challenging situations like downsizing or restructuring.

4. Mitigating Legal Hazards

Providing severance pay, especially in cases of termination or layoffs, can help mitigate potential legal risks and disputes. It demonstrates a commitment to fair employment practices and can reduce the likelihood of legal challenges from terminated employees.

5. Legal Requirement

The Payment of Gratuity Act, 1972 mandates that employers provide gratuity to employees who have completed at least 5 years of continuous service. Compliance with this legal requirement ensures that employers adhere to labor laws and protect employees’ rights.

6. Industry Norms and Competitiveness

In many industries, offering severance pay is a standard practice that helps maintain competitiveness in attracting and retaining talent. It aligns with industry norms and expectations regarding employee benefits and rights.

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When does an Employee Become Eligible to Receive Severance Pay in India?

Under the following circumstances, an employee becomes entitled to receive severance pay in India:

  • Layoff of an employee by the employer for 35 consecutive weeks or beyond
  • Layoff of all the employees owing to permanent cessation of the business
  • Initiation of constructive dismissal of an employee by an employer upon which the former resigns within a stipulated time frame
  • Termination of an employee owing to the company going bankrupt

Important Considerations for Calculating Severance Pay in India

Severance package offered to employees in India can vary from one organisation to another. While determining the compensation amount to be extended to employees, an employer needs to consider the following factors:

  • The employee’s salary during the tenure of employment
  • Employment duration
  • Designation/Position of the employee at the company
  • Performance of the employee during the term of employment
  • Other relevant factors, if applicable

How is Severance Pay Calculated in India?

Looking for a severance pay calculator? Well, severance pay in India can be easily calculated by using the following formula:

Severance Pay= (15/365​)× Average Pay × (Completed Years of Service+(Part of Year in Excess of 6 Months​/365))

What are the Constituents of a Severance Package Compensation in India?

A severance package in India consists of the following components:

  • The outstanding regular pay of the employee
  • Additional payment on the basis of the months of service rendered
  • Payment for unused leaves
  • Payment in lieu of notice period
  • Medical or health insurance
  • Continuation insurance benefits
  • Employee stock options
  • Retirement benefits/pension plans
  • Unemployment benefits (if an employee’s termination was due to other reasons that are beyond their control such as downsizing of the business)

What are the Benefits of Severance Pay in India?

Severance pay in India offers a wide range of benefits to both employers and employees. These include:

Benefits of Severance Pay for Employers

  • Positive Employer Branding: Employers who offer severance pay are perceived as fair and employee-friendly, enhancing their reputation as an employer of choice.
  • Improved Employee Relations: Fair compensation upon separation builds trust and goodwill among employees, reducing the likelihood of disputes or grievances.
  • Enhanced Productivity: By offering financial security through severance pay, employers can minimize disruptions caused by employee turnover and maintain productivity levels.
  • Retention of Experienced Workforce: Recognizing long service through severance pay encourages experienced employees to stay with the organization, leveraging their skills and knowledge for organizational growth.
  • Legal Compliance: Providing severance ensures compliance with the Payment of Gratuity Act, 1972, and other relevant labor laws, mitigating legal risks and penalties.

Benefits of Severance Pay for Employees

  • Monetary Support: Severance pay offers employees the much-needed monetary safeguarding upon retirement, resignation, or termination, helping them manage their expenses during the transition period.
  • Legal Entitlement: Employees have a statutory right to receive severance pay if they meet the eligibility criteria, ensuring they are compensated fairly upon leaving their job.
  • Employee Satisfaction and Retention: Offering severance pay enhances employee morale and satisfaction, fostering a positive work environment and encouraging long-term retention.
  • Tax-efficient Form of Compensation: Severance pay received up to a certain limit is exempt from income tax under the Income Tax Act, making it a tax-efficient form of compensation for employees.

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Is Severance Pay Mandatory in India?

Severance pay in the form of gratuity is mandatory in India under certain conditions. Therefore, it is not mandatory for all employees under the present labor laws. To determine what is the severance pay paid to an employee, it is crucial to note that the amount depends on the law that governs them and their employment contract terms.

In the present context, the central government’s Industrial Disputes Act, the state government’s Shops and Establishments Act or both can be applicable to them. However, in case an employee is not eligible to receive severance pay under these specific laws or regulations, then the terms specified in the individual employment contract will determine whether severance pay is provided and how it is calculated.

To explain in simple terms, the employee’s entitlement to severance pay, in the absence of legal requirements, hinges on what is stipulated in their employment contract.

Let’s understand whether severance pay is mandatory in India further with an example. Say, an employee is covered under the Industrial Disputes Act, 1947. According to the provisions of this Act, every employee who has continuously served the organisation for a minimum period of 1 year, is eligible to receive retrenchment compensation or severance pay. The compensation that they will receive is calculated as 15 days of average pay for every fulfilled year of continuous service or any part of that beyond six months.

At this point, it is important to note that the Industrial Disputes Act of 1947 doesn’t extend to employees in managerial roles. Therefore, in cases where an employee is not under the umbrella of any law, the severance pay will be determined by conditions mentioned in the employment contract.

severance pay india

Is Severance Pay Taxable in India?

Severance pay is taxable in India as it is considered to be a part of salary income of an employee under the provisions of Section 17(3)(i) of the Income Tax Act 1961. The received amount is taxed as ‘Profits in lieu of salary’ under this very section. This is because the severance pay would generally be in the nature of ex-gratia payment within the scope of Section 17(3)(i) of the Income Tax Act.

How Tax on Severance Pay is Calculated in India?

According to the Income Tax Act of India, any amount of any compensation due to or obtained by an employee from his employer/previous employer at/in relation with the dismissal of his employment is taxable.

As mentioned, such severance pay would be taxable under the head salary in accordance with the marginal rates applicable to the employee. Further, such tax rates may be augmented by health and education cess @4% along with any applicable surcharge.

Additionally, it is essential to note that if an employee receives severance pay from any third party, who is not the immediate employer, such amount would be labelled as “Income from Other Sources” and will therefore be taxable.

What are the Tax Exemptions Available on Severance Pay?

Tax exemptions on severance pay are available and certain employees may leverage this to save their financial resources. Let’s see what are the tax exemption options available and which employees will be be eligible to use these!

1. Tax Exemption on Retrenchment Compensation Under Section 10(10B) for Employees

Under the Industrial Dispute Act of 1947, any employee receiving compensation during the retrenchment period can claim for tax exemption on this income under Section 10(10B) of the Income Tax Act. However, when determining the exemption or tax benefit, the maximum amount that can be considered for exemption is limited to whichever of the following amounts is lower:

  • The actual amount received by the employee
  • The amount calculated in accordance with the provisions of Section 25F(b) of the Industrial Disputes Act, 1947 equivalent to average pay of 15 days for each completed year of continuous service or part after that beyond 6 months
  • The amount specified by the Central Government, that is, Rs 5,00,000

If the compensation received surpasses the above-mentioned limit, the employee would be granted relief from income tax under Section 89 of the Income Tax Act, 1961 against a tax based on their salary.

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However, there is an exception to the above-mentioned limit when this won’t be applicable.

As per Section 10(10B), if an employee receives compensation under a Central Government-approved scheme, special protection is offered to the workers in the undertaking that such scheme is made applicable for, and other pertinent circumstances exist, approval in such a case would render the entire amount to be tax-exempted and the previously mentioned limits won’t be applicable.

2. Exemption of Tax Under Section 10(10C) for Voluntary Retirement Scheme (VRS) & Termination

When an employee receives severance pay under the Voluntary Retirement Scheme (VRS) or termination of employment, tax exemption is made available. Let’s see what are the conditions for the same:

  • An employee needs to fall in the ambit of a prescribed set of employer categories such as Public Sector Company or any establishment set under Central, State or Provisional Act/Central or State Government, and others
  • The exemption limit amount is Rs 5 lakh. However, if the amount is less than this or exceeds this limit, the very amount will be levied to tax.
  • As per Rule 2BA of the Income Tax Rules, 1962, the employee who receives such compensation, needs to fulfill the following set of conditions as mentioned below:
    • Successful completion of 10 years of service or completion of the employee’s 40 years of age (the identical condition won’t be applicable to the severance pay which was received by the employee belonging to any public sector company owing to any voluntary separation)
    • The rule is applicable to all the employees including workers and executives employed at the company or working under the head of a co-operative society, excluding the company or co-operative society directors.
    • The Voluntary Retirement Scheme (VRS) was taken with the objective to achieve reduction in the current workforce strength.
    • No replacement hiring for the vacancy that has been created owing to voluntary retirement.
    • The employee who is getting retired from the company won’t seek employment in any other organization or with any related establishment having an identical type of management.
    • The compensation received upon voluntary termination of the employee is less than the amount corresponding to the salary of 3 months for every completed year of continuous service or the salary at the time of retirement multiplied with the employee’s current salary by the number of months left before their retirement date on superannuation.

3. Tax Relief Under Section 89 of the Act for Arrears and Advances With Respect to Salary

Salary received by an employee in arrears, advance or profit in lieu of salary would be eligible for tax exemption under Section 89 of the Income Tax Act. However, such a tax relief will be in conjunction with the conditions mentioned in Rule 21A of the Income Tax Rules of 1962. The required condition to claim tax exemption is that the employee ought to have provided continuous service for a minimum period of 3 years and the unexpired part of the employment terms should not be less than 3 years.

Do note that an employee can’t claim tax deduction under Section 10(10C) of the Income Tax Act if they wish to obtain relief under Section 89 of the Act.

Severance pay in India

Types of Employers and Employees in India

While understanding various severance pay laws in India, it is crucial to have clear knowledge about what defines “employer” and “employee” here as per the labor laws. Staying aware of these types will aid you in getting a grasp of several notice period and severance pay-related laws applicable in individual states in India.

1. Types of Employers

  • Establishments: This umbrella term points to all kinds of employers.
  • Factories: This specifically refers to employers in the manufacturing domain.

2. Types of Employees

  • Employees: This refers to all employees doing any job, irrespective of the designation they hold.
  • Workmen: This is a collective term particularly used to define all employees who are not employed in any managerial, supervisory or administrative roles.

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Employer Compliance Related to Severance Pay in India

To avoid landing in an uncomfortable situation of getting lost in the peril of legal battles owing to non-compliance, employers need to be aware of certain crucial legislation governing compliances with respect to severance pay in India. Let’s see what these are:

1. Payment of Gratuity Act, 1972

According to the provisions laid down under the Payment of Gratuity Act of 1972, an employer ought to pay compensation to an employee who has delivered continuous service for a minimum period of five years on the occasion of their termination by the employer.

Section 4 of the Payment of Gratuity Act of 1972 specifies the rate at which the severance pay is to be computed, that is, salary drawn by an employee in the last 15 days.

2. Industrial Dispute Act, 1947

Under the Industrial Dispute Act of 1947, an employer should pay compensation for retrenchment to the concerned employee. Specifically, Section 25F(b) of this Act has laid down that employees have the right to receive severance pay as compensation from their employer as per the set calculation formula.

In the historic judgement of M/S Muller & Phipps (India) Ltd. Vs. K.C. Sud of 1960, the Supreme Court of India gave its verdict while pointing out that retrenchment compensation is offered to absorb the shock that the unexpected situation of termination cast on the employee. To cope with the abrupt situation of termination, offering this compensation is a must.

Employees, who have been retrenched, are eligible to claim a certain amount as compensation, which is known as severance pay in India.

Other Severance Pay Laws in India

Severance pay laws in India have been incorporated in various other crucial legislation as well. Let’s find out what these are:

1. Severance Pay for Contract Laborers and Migrant Workers

In case of contract laborers and migrant workers, the employer needs to pay compensation before the expiry of the second day from the date of their termination.

Severance pay offered to contract laborers and migrant workers is governed by the following sections of diverse legislations:

  • Section 66 of CLRA 1975
  • Section 49(2) of BOCW (Regulation of Employment and Conditions of Service) Rules, 2009
  • Section 29, U.P. Inter-state Migrant Workmen (Regulation of Employment and Conditions of Service) Rules, 1983

2. Payment of Gratuity to the Safety Officers

According to Section 4 of the U.P. Factories (Safety Officers) Rules, 1984, lays down that the safety officers of a factory and the officers of the equivalent status are eligible to receive gratuity from their employer.

Severance Pay Laws in India for Workmen

Provisions governing the severance pay to be received by industrial workmen in India are as follows:

Section 13, U.P. Industrial Employment Model Standing Orders, 1991

This specific section states that, if an establishment has a branch outside the present state where an employer is recruited, the employer doesn’t possess the right to order the transfer of such workmen to another state without taking their consent in advance. If a specific department ceases to function, the employer is obligated to pay appropriate benefits to the concerned workmen as applicable under the law.

Further, if that particular section or department resumes functioning, the displaced workmen should be re-employed by the employer and restored to service as per the befitting level of seniority.

Section 6K, 6N, Industrial Disputes Act, 1947

According to this legal provision, when a regular employee (excluding substitutes or casual workers) listed on the payroll of an industrial establishment or employed continuously for more than one year by an employer is laid off, they are entitled to receive compensation from the employer. This compensation must be equivalent to 50% of the total basic wages and dearness allowance that the employee would have earned if they had not been laid off.

Do note that the compensation for all the days has to be paid excluding the weekly holidays falling in that period.

Nevertheless, the compensation for a workman over a twelve-month period should not exceed payment for forty-five days, despite the existence of this provision.

There are certain conditions related to the retrenchment of a workman and the payment of severance pay as compensation:

  • Employers are required to give employees written notice at least one month in advance, explaining the reasons for retrenchment. Alternatively, they may provide compensation if there is no agreement specifying the termination date.
  • Severance pay should amount to fifteen days’ average wages for each completed year of service or any part exceeding six months.
  • Employers must formally notify the State Government in a prescribed manner regarding these matters.

Employee Protection & Court Jurisdiction in Case of Disputes

A terminated employee has the right to appeal to their jurisdictional authority in case of the following circumstances:

  • The employer has dismissed an employee all of a sudden without offering clear reasons for the same
  • The employee has not been dismissed on grounds of misconduct
  • The employee feels that the termination process was unfair and not justified
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To address these problems and obtain an apt solution for the same, an employee first needs to register a case and gain the approval of the local labor bodies. Upon the grant of approval by the concerned authorities, jurisdictional conciliation officers, labor courts or industrial tribunals may step in and look into the issue.

It is crucial to note that, for any workforce issue in India to resolve, it may take anywhere between 6 months to 2 years.

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Notice & Severance Pay Requirement Under Various State Laws

Let’s now have a look at the crucial legal provisions governing notice period and severance pay in Indian organisations as per diverse state labor laws:

State Labor Law in Andhra Pradesh Concerning Notice & Severance Pay

As per Section 47 of Andhra Pradesh Shops and Establishments Act, 1988, all the employees who have rendered continuous service for minimum one year is eligible for service compensation/severance pay accounting to average pay of 15 days for each year of consistent employment. Employees in Andhra Pradesh are eligible to receive this compensation on the following grounds:

  • upon voluntarily retiring after reaching the age of 60
  • resignation of the employee
  • incidence of physical or mental health issues certified by a licenses medical practitioner
  • in the event of their death or disability resulting from an accident or illness

If an employee passes away, the nominee receives the severance pay. In case there is no nomination, the legal heir of the concerned employee gets the compensation. Do note that, when severance pay is due to an employee under this section, they ought to receive their wages from the date their employment is terminated or ceased until the service compensation is actually paid. However, the service compensation will not be valid if a gratuity is provided under the Payment of Gratuity Act, 1972.

Every employer, except for those of the Central and State Undertakings, ought to insure their liability amount to their workforce. Workers are eligible to receive insurance payments as applicable. A controlling authority under the Act is has the power to recover the gratuity amount due to an employee. Employers who have established Gratuity Funds for their employees, or those with more than 500 workers, may opt to set up such a fund. In such instances, the authority may choose to recover the gratuity from the Trustees of the Gratuity Fund.

State Labor Law in Maharashtra Concerning Notice & Severance Pay

According to the provisions stated under the Maharashtra Shops and Establishments Act of 1948, an employer ought to provide a minimum of 30 days of notice period to an employee who has given continuous service to the organization for more than a year.

If the concerned employee has worked with the organization for a period not exceeding one year but has worked for more than three months, the employer has to provide such an employee a minimum notice period of 14 days. However, if an employee is being terminated on grounds of misconduct, notice period may not be provided.

Further, under Section 13 of the Maharashtra Employees of Private Schools (Conditions of Service) Rules, 1981, the employer has to offer cash benefit for credit leave with the maximum limit being 180 days, to every employee upon their retirement. Employees are also eligible to receive pension or a pension-equivalent amount of death-cum-retirement gratuity, in addition to the cash payment for their leave salary.

State Labor Law in Karnataka Concerning Notice & Severance Pay

Under the Karnataka Shops and Establishments Act, 1961, an employee who has worked in an organization for a minimum period of more than 6 months, can not be dismissed abruptly without a justifiable reason. The employer has to give the employee a minimum notice period of 30 days. However, employees terminated on grounds of misconduct may not be given any notice period.

State Labor Law in Rajasthan Concerning Notice & Severance Pay

According to Section 28 of the Rajasthan Shops and Commercial Establishments Act of 1958, every employee who has worked in an organisation for a minimum tenure of 6 months, can be dismissed from service only after providing them with a month’s notice in advance or paying them the requisite compensation in lieu of the notice period.

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No employee, who has been employed in an establishment for a period not exceeding 6 months, can exit without serving a month’s notice in writing.

State Labor Law in Tamil Nadu Concerning Notice & Severance Pay

Workers in the beedi, catering, handloom industries, and establishments governed by the TN Shops and Establishments Act, who have worked for a minimum of six months, cannot be terminated without a one-month written notice. This notice requirement can be waived only if there is a valid reason. Employees terminated with less than a month’s notice, even if a valid reason is provided, have the right to appeal the dismissal to the appellate authority.

State Labor Law in Gujarat Concerning Notice & Severance Pay

Under Section 66 of the Bombay Shops and Establishments Act, 1948, an employer must not terminate the employment of a worker who has been continuously employed for over a year without providing at least thirty days’ written notice or equivalent wages in lieu of notice. For employees who have been with the company for less than a year but more than three months, the employer must give at least fourteen days’ written notice or wages in lieu of notice before termination.

State Labor Law in West Bengal Concerning Notice & Severance Pay

The employer needs to give a notice period of 30 days to an employee before terminating them. The rule remains applicable to the establishment even if no employees are eligible for gratuity payments.  

Suggested Read: Mandatory Compliance Checklist for Private Limited Company

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Final Words- Severance Pay in India

Now that you have gained a clear understanding about what severance pay in India entails, it is time to strategize things and ensure if you are adhering to the relevant sets of legislation. No one wants to get trapped in legal battles for violating legal provisions and get heaped with financial penalties. It is time to make a smart move and let ideal end-to-end HRMS platforms such as Asanify take care of all your HR and compliance-related stress. Get started now to stay compliant and keep your employer brand intact!

Frequently Asked Questions (FAQs)- Severance Pay in India

1. Is severance pay available in India?

Yes, severance pay is available in India subject to certain crucial factors. These include the employment tenure, company policies, and the grounds for termination. Severance pay is not compulsory by law for all situations. Depending on certain scenarios, an employee becomes eligible to request for this compensation.

2. How to calculate severance pay in India?

You can easily calculate compensation for severance pay in India by using a certain formula. That is, 15 days of average pay for every completed year of continuous service or any part thereof surpassing 6 months.

3. What is the compensation for termination in India?


In India, compensation for termination of employment includes several components. When an employer terminates an employee, they must provide either a notice period or payment in lieu of notice, as per the terms of the employment contract or statutory requirements. Further, depending upon the scenario, an employee is eligible to receive retrenchment compensation, that is, average pay of 15 days for every completed year of service.

4. What is the rule of severance?

The severance notice ought to be given 30 to 90 days prior to the termination of an employee. Further, employers need to give this notice in writing. They also need to state the clear reason for which the concerned employee is being terminated.

5. Is severance pay taxable in India?


Severance pay received by an employee is taxed as profit in lieu of salary under the heading salaries. However, employees can claim for exemption under Section 10(10B) subject to certain limits.

6. How do I ask for severance pay?

To request severance pay, it’s important to approach the situation professionally and clearly communicate your request to your employer. You can initiate the conversation by scheduling a meeting with your HR manager or supervisor to discuss the terms of your departure and the possibility of receiving severance pay.

During the meeting, politely explain your understanding of company policies or legal entitlements regarding severance pay, if applicable, based on your tenure and the circumstances of your departure. Emphasize your contributions to the company and express your willingness to collaborate on a mutually agreeable resolution.

7. What is the difference between severance pay and gratuity?


The difference between severance pay and gratuity lies primarily in their purpose, eligibility criteria, and their computing formula. Severance is paid when an employee is terminate owing to downsizing of the business. On the other hand, gratuity is a lump sum amount. An employee receives this from an employer if the former retires/resigns from the job.

8. Can a company fire you without severance in India?


Yes, in India, a company can terminate an employee without providing severance pay under certain circumstances. Indian labor laws do not universally require companies to provide severance pay or compensation upon termination of employment.

The conditions under which severance pay might be applicable include specific clauses in the employment contract due to retrenchment or closure under certain circumstances. However, termination without severance pay can occur if the employee is dismissed for reasons such as misconduct or poor performance.

It’s important for both employers and employees to understand their rights and obligations under applicable employment laws regarding severance pay.

9. What is the full and final settlement for terminated employees?

Full and final settlement in India refers to the process where an employer settles all outstanding dues and benefits owed to an employee upon termination. This includes payment for accrued salary up to the last working day, any unpaid wages, leave encashment if applicable, and reimbursement of expenses incurred for business purposes.

10. Can I get severance pay if I resign?

In India, severance pay is generally not applicable if an employee resigns voluntarily unless the employment contract or company policy decides otherwise. Since the employee is resigning voluntarily, employers are not bound to offer them severance pay as compensation.




Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant  or Labour Law  expert for specific guidance.

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