Payment made in lieu of serving part or all of a notice period, by either the employee or the employer.
Notice Pay is the payment made — by either the employee or the employer — to buy out part or all of a required notice period instead of serving it. An employee who wants to leave sooner than their contractual notice period pays the equivalent salary for the unserved days, and vice versa if the employer wants an earlier exit.
Notice pay calculations are usually based on the employee's current gross salary for the unserved portion of the notice period, and get netted against final dues during Full & Final Settlement rather than paid as a separate transaction.
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