What you're actually owed if you're laid off in India — and the number that matters more than any of it: how many months it buys you.
Being laid off in India is two separate shocks arriving at once. The first is the job. The second, usually about a week later, is the settlement letter — and the discovery that nobody ever explained which parts of it are a legal floor and which parts are just what HR decided to offer. The difference is often several lakh rupees, and it is entirely decided by a definition most people have never read.
This calculator works out both numbers: what you should be owed under the labour codes that came into force on 21 November 2025, and how many months that actually buys you.
Your salary
₹
₹
Your job
Decides whether you're a “worker” under the IR Code — which is what unlocks the statutory floor. Your duties count, not your job title.
Your service
total 4y 0m
encashable balance, per policy
Your runway
₹
liquid only — not PF, not equity
₹
rent, EMIs, everything
₹
optional — compares it against this
Your runway
8.2 months
₹2,73,077 on exit plus ₹3,00,000 saved at ₹70,000/mo
Notice pay1 month × gross salary₹1,00,000
Retrenchment compensation4 yrs × 15 days ÷ 26 — IR Code s.70(b)₹1,15,385
Worker re-skilling fund credit15 days' wages, credited to you within 45 days — s.83₹28,846
Gratuitynot payable below 5 years — you're at 4y 0m—
Leave encashment15 days × ₹1,923/day, on wages₹28,846
At 300+ workers, your employer needed prior permission from the appropriate government before retrenching you at all — Chapter X of the IR Code. Worth asking whether it was obtained. A retrenchment carried out without it is open to challenge.
Likely tax-free
₹1,44,231
Taxable as salary
₹1,28,846
Wage base used
₹50,000
Your basic of ₹40,000 was floored up to ₹50,000 — the labour codes require “wages” to be at least half of total pay, and every statutory line above is calculated on that. Employers are restructuring salaries at different speeds, so check your payslip before relying on the uplift.
Directional estimate, not legal or tax advice. Retrenchment compensation is tax-free up to ₹5L under s.10(10B) and gratuity up to ₹20L, both only for those who qualify; notice pay is fully taxable and this doesn't compute TDS. Whether you count as a “worker” is a question of fact that tribunals decide case by case — if the amounts are large, get it looked at properly.
The question everything hangs on
Almost every severance page in India quotes the fifteen-days-per-year formula and stops there. It leaves out the condition attached to it: the Industrial Relations Code's retrenchment provisions protect “workers”, and not everyone is one.
A worker is anyone employed to do manual, unskilled, skilled, technical, operational, clerical or supervisory work. Two groups are carved out: people employed in a managerial or administrative capacity, at any salary, and supervisory staff earning over ₹18,000 a month — a threshold the codes raised from ₹10,000, though it is still low enough that essentially every white-collar supervisor clears it.
The important part is that this turns on what you did, not what your business card said. Tribunals have consistently held that a “manager” with no power to hire, fire, sanction spending or bind the company is still a worker. Job titles in Indian tech inflate fast, and an inflated one does not remove your statutory protection — but it does give an employer an argument, which is why so many settlement letters quietly assume you are outside the definition.
Likely outside the definition
✕Genuine people-managers with hiring and firing authority
✕Heads of function with budget sign-off
✕Administrative and executive staff running the business itself
✕Supervisors earning above ₹18,000 a month
Likely a worker
✓Individual contributors — engineers, designers, analysts, support
✓Senior ICs, however well paid: seniority is not managerial capacity
✓'Technical' work is named in the definition, not carved out of it
✓Title-only managers with no authority to hire, fire or commit spend
What the statutory floor is made of
01
One month's notice, or wages in lieu of it
Section 70(a). The notice has to be in writing and has to state the reason for the retrenchment. Your contract may promise more than one month, and where it does, the higher of the two applies — the statute sets a floor, not a ceiling.
02
Fifteen days' average pay for every completed year
Section 70(b), and the line most people have heard of. Average pay works off a ÷26 daily wage, and a part-year over six months rounds up to a full year. Note what is not in the condition: unlike gratuity, there is no five-year minimum. One year of continuous service is enough, which means a three-year exit that earns you no gratuity at all still earns retrenchment compensation on the same formula.
03
Fifteen days' wages from the re-skilling fund
Section 83, and the one almost nobody claims. Your employer contributes fifteen days of your last-drawn wages to a worker re-skilling fund, and the fund credits that to your account within forty-five days of the retrenchment. It is separate from, and on top of, your section 70 compensation. If it does not appear as a line in your settlement, ask about it in writing.
04
Gratuity, if you crossed five years
Unchanged by the retrenchment: last drawn wages ÷ 26 × 15 × completed years. This one sits under the gratuity legislation rather than the IR Code, so it applies whether or not you are a “worker” — managers get it too. Our full and final settlement calculator goes deeper on the four-years-eight-months edge case.
05
Encashment of your unused leave
Calculated on wages rather than gross, which is why it always lands lower than people estimate. Your leave policy governs how much of the balance is encashable at all.
The wage base is doing quiet work here.Every statutory figure above is calculated on “wages” — not your gross, and not your CTC. The labour codes now require wages to be at least half of total pay, so a payslip that used to run basic at 30% of CTC produces a materially larger settlement than the same package did before 21 November 2025. Employers are restructuring at different speeds, so check your own payslip rather than assuming the uplift has reached you.
Retrenchment compensation vs gratuity
These two get confused constantly, partly because the arithmetic is identical. They are different entitlements with different conditions, and in a layoff you can be owed both.
Same formula, different rules
Retrenchment compensation
Gratuity
Formula
wages ÷ 26 × 15 × years
wages ÷ 26 × 15 × years
Minimum service
1 year
5 years
Applies to
'Workers' only
Employees generally
Triggered by
Retrenchment only
Any exit after 5 yrs
Tax-free up to
₹5L, s.10(10B)
₹20L, s.10(10)
Part-years over six months round up to a full year under both. The practical upshot: a three-year layoff pays retrenchment compensation and no gratuity, while a resignation at the same tenure pays neither.
P
PATHWISE
Runway tells you how long you have. It doesn't tell you how long you'll need.
The settlement figure is the one people fixate on, and it is the less important of the two. What decides how a layoff actually goes is the ratio between that money and your monthly burn — because that ratio is what determines whether you get to run a real job search or have to take the first thing offered.
Below roughly three months, the search starts making your decisions for you: you stop negotiating, you widen your criteria past the point of sense, and you accept offers you would have declined in month one. That is the mechanism by which a layoff turns into a pay cut that takes years to recover from — not the layoff itself, but the deadline it imposes. At six months or more, you are negotiating from roughly the same position you would have been in while employed.
Two adjustments worth making to the runway number honestly. Your settlement is a pre-tax figure and notice pay is fully taxable, so the cash that reaches you is smaller than the total. And the calculator uses your current expenses — a real search usually involves cutting them, which buys more time than any negotiation over severance will.
What to do in the first week
01
Do not sign anything on the day
Separation agreements are routinely presented as paperwork to be completed immediately, often with a same-day deadline attached. There is no legal requirement that you sign on the spot, and a release you have signed is very hard to reopen. Ask for it by email and read it somewhere other than that room.
02
Ask for the settlement broken out line by line
In writing. A single “severance” figure tells you nothing — packages routinely fold notice pay, gratuity and leave encashment together and present the total as generosity. Once it is itemised you can see which lines are statutory and which are discretionary, and the s.83 re-skilling credit is either there or conspicuously missing.
03
Get the letter that says 'retrenchment'
The wording matters more than it looks. A resignation you were asked to submit is not a retrenchment, and it takes the entire section 70 floor, the section 83 credit and the s.10(10B) tax exemption off the table in one stroke. Being asked to “resign voluntarily” in a layoff is a request to give up money, whatever reason is offered for it.
04
Collect the documents while people still reply
Relieving letter, experience letter, the last three payslips, Form 16, and your PF and UAN details. Internal email access disappears fast and former colleagues stop responding within weeks. The exit playbook has the full checklist — most of it applies identically whether you left or were let go.
05
Work out your runway before you start applying
Not after. Knowing you have five months changes which roles you apply for and what you are willing to accept, and it is far easier to hold a line you set in week one than one you try to draw in month four.
Where this gets uncertain
Two honest caveats, because this area is genuinely unsettled rather than merely complicated.
The first is that the labour codes are in force and the central rules were notified in May 2026, but labour is a concurrent subject and states are notifying their own rules at different speeds. Enforcement is uneven. Treat everything here as what you are entitled to ask for, in writing and citing the section, rather than what will arrive automatically.
The second is sector-specific and matters if you work in Indian tech. Karnataka has exempted IT, ITeS, startups and related knowledge industries from the Industrial Employment (Standing Orders) Act, most recently extended in June 2024 to run until 2029. That exemption is narrower than it is usually reported to be: it removes the requirement to frame certified standing orders. It is not an exemption from retrenchment compensation, which lives in a different statute entirely. In practice the exemption still weakens your position, because standing orders are what would otherwise pin down the termination procedure your employer has to follow.
These are directional estimates, not legal, tax or financial advice. Whether you qualify as a “worker” is a question of fact decided case by case, and eligibility, formulas, leave policy and tax treatment all turn on your specific contract, your employer's policy and current law. Read your employment agreement, and get professional advice for anything contested or large.
Common questions
How much severance pay am I entitled to in India?
If you qualify as a 'worker' under the Industrial Relations Code, 2020 and have at least one year of continuous service, the statutory floor is one month's notice or wages in lieu of it, plus retrenchment compensation of fifteen days' average pay for every completed year of service — with any part-year over six months counting as a full year. Section 83 adds a further fifteen days' wages, credited to you from the worker re-skilling fund within forty-five days. On top of that sit gratuity, if you have crossed five years, and encashment of your unused leave. If you do not qualify as a worker — managerial and administrative staff are excluded at any wage, and supervisory staff earning over ₹18,000 a month — none of the retrenchment provisions apply and you get only what your employment contract promises.
Is severance pay taxable in India?
Partly. Retrenchment compensation is exempt under section 10(10B) up to ₹5 lakh, but only if you qualify as a workman, so the tax break rides on the same test as the entitlement. Gratuity is exempt up to ₹20 lakh and leave encashment up to ₹25 lakh, both lifetime-cumulative caps for private-sector employees. All three exemptions survive under the new tax regime. Notice pay is fully taxable as ordinary salary income, which is why a package that looks generous can shrink noticeably after TDS.
What is the worker re-skilling fund and how do I claim it?
It is one of the genuinely new things the labour codes created, and almost nobody claims it. Section 83 of the Industrial Relations Code requires your employer to contribute fifteen days' wages, last drawn, for every retrenched worker — and the fund credits that amount to your own account within forty-five days of the retrenchment. It sits on top of your section 70 retrenchment compensation rather than being part of it. If your settlement letter has no line for it, that is worth raising in writing before you sign anything.
Can my company lay me off without government permission?
It depends on headcount. Under Chapter X of the Industrial Relations Code, an industrial establishment with 300 or more workers needs prior permission from the appropriate government before it can retrench a worker at all. The threshold used to be 100; the codes raised it to 300, which took a large number of mid-sized employers out of the approval regime entirely. Below 300, no permission is needed and the employer only has to give notice to the government. A retrenchment carried out without a required permission is open to challenge.
Am I a 'worker' if I'm a software engineer?
Quite possibly yes, and this is the single most consequential question on the page. The IR Code defines a worker as anyone employed to do manual, unskilled, skilled, technical, operational, clerical or supervisory work — 'technical' comfortably covers most engineering roles. The exclusions are people employed in a managerial or administrative capacity, and supervisory staff earning more than ₹18,000 a month. What matters is what you actually did, not what your title said: tribunals have repeatedly held that a 'manager' with no authority to hire, fire or bind the company is still a worker. Being senior and well-paid does not by itself take an individual contributor out of the definition.
How many months of runway should I have before a layoff?
The conventional answer is six months of expenses, and in the current Indian market that is closer to a floor than a comfortable target. Median time to a signed offer for mid-career professionals runs to several months, and it stretches further the more senior you are, because there are simply fewer roles at the top. What your severance buys is time to run a proper search rather than accepting the first offer that arrives — which is exactly the situation in which people take a pay cut they spend years recovering from.
Figures on this page are directional estimates based on published market data and Pathwise's own model — not financial, legal, or career advice. Individual outcomes vary.