Notice Period Buyout Calculator

What is Notice Period Buyout?

Notice period buyout is a payment made to release an employee from their contractual notice period obligation early. The employee or their new employer pays the current employer an amount (typically daily/monthly salary × remaining days) to allow immediate departure.

Who Pays?

• Employee pays: Deducted from final settlement or paid separately
• New employer pays: Often offered as signing bonus to attract talent
• Negotiated split: Parties share the cost
• Current employer waives: Sometimes waived to maintain goodwill

Global Standards:

• US/Canada: Typically 2 weeks notice (14 days) – shorter buyout periods
• Europe: 1-3 months common (30-90 days) depending on seniority
• Asia/Middle East: 1-3 months standard (30-90 days)
• Senior Roles: Often 3-6 months globally (90-180 days)

Buyout is financially favorable when:

✅ New salary is significantly higher (30%+ increase)
✅ New company offers joining bonus covering buyout
✅ New role has valuable ESOP/RSU grants with immediate vesting
✅ Joining early helps you catch annual increment cycle
✅ Market opportunity is time-sensitive

Serve notice when:

❌ Salary increase is modest (less than 20%)
❌ No joining bonus to offset buyout cost
❌ Current company has significant unvested ESOPs
❌ You want to maintain relationships for future references
❌ Background verification concerns

Negotiating with New Employer:

• Ask for signing bonus: Request amount equal to buyout cost
• Structure as reimbursement: Some companies pay buyout directly
• Negotiate total package: Factor buyout into salary negotiations
• Show calculations: Use this calculator to justify signing bonus request
• Timing leverage: If role is urgent, company is more likely to help

Negotiating with Current Employer:

• Early conversation: Discuss buyout possibility when resigning
• Offer handover plan: Detailed transition reduces their concern
• Show commitment: Offer to be available for questions post-exit
• Be professional: Don’t burn bridges, maintain respectful tone
• Written agreement: Get buyout terms in writing

Strategic Tips:

• Time resignation after bonus/review cycles if possible
• Check if unvested equity has acceleration clauses
• Review non-compete and non-solicitation terms carefully
• Document all agreements and get confirmation emails
• Consider garden leave as alternative to buyout

Tax Treatment (General):

• Buyout paid by employee: May be tax-deductible as employment expense (check local laws)
• Signing bonus received: Taxable as ordinary income/salary
• Stock options: Usually taxed at grant, vest, or exercise depending on jurisdiction
• Relocation reimbursement: May be tax-free if paid by employer (varies)

Regional Variations:

• United States: Signing bonus taxed as supplemental wages (~22-37%), may withhold more
• United Kingdom: Subject to PAYE and National Insurance, can be high marginal rate
• European Union: Varies by country (20-50% typically), social contributions apply
• India: Taxed per income slab (up to 30% + cess), TDS applies
• Middle East (UAE/Saudi): Often no personal income tax, making buyouts more favorable
• Singapore: Progressive tax (0-22%), CPF contributions on salary
• Australia: Taxed at marginal rate (19-45%), superannuation separate

Legal Considerations:

• Employment contract: Review notice period and buyout calculation clause
• Non-compete agreements: May still apply even after buyout
• Garden leave: Paid leave during notice (no work) – check if allowed
• Restrictive covenants: Non-solicitation of clients/employees
• Intellectual property: Ensure all work is properly transferred

Important:

Always consult a qualified tax advisor and employment lawyer in your jurisdiction. Tax laws change frequently and vary significantly by country, state, and individual circumstances.