Notice period and buyout: a fair, practical guide

Notice period is the time between an employee's resignation and their last working day. It exists so work can be handed over and a replacement found, and it protects both sides. How you handle notice, especially when it is cut short, shapes the exit experience and your employer brand more than almost anything else in offboarding.

How notice periods are set

Notice periods are contractual and vary by seniority, commonly 30 to 90 days. Senior or hard-to-replace roles often carry longer notice. Whatever the length, it should be stated clearly in the appointment letter and applied consistently across similar roles, so it never looks arbitrary.

Buyout, both ways

The full notice is not always served, and buyout works in both directions.

• Employee leaves early: if the employee wants to leave before serving full notice, the employer may recover the shortfall as a notice-pay recovery. The recovery is usually calculated on Basic or on gross, per policy, for the unserved days.
• Employer wants an early exit: if the employer prefers the employee to leave sooner, it may buy out the notice by paying for the unserved days.

The policy should state the recovery basis (Basic or gross) and apply it the same way for everyone. Ambiguity here is a common source of disputes.

Garden leave and early release

Some employers place a departing employee on garden leave, keeping them on payroll but away from work and systems, typically for sensitive roles. Others grant early release with a proper knowledge handover, letting a cooperative leaver go before the full notice ends. Both are legitimate; what matters is that the decision is transparent and documented.

Keeping the exit clean

A clean exit protects both sides and preserves the relationship, which matters for rehires, referrals and reputation. The essentials:

• Confirm the last working day and communicate it.
• Run a structured knowledge handover to a named person.
• Complete department clearances and asset returns.
• Settle notice recovery or buyout in the full and final settlement.
• Issue relieving and experience letters promptly.

Common mistakes to avoid

• Inconsistent notice periods for similar roles.
• An undefined recovery basis (Basic or gross).
• No knowledge handover, so the team loses context.
• Delaying the relieving letter, which hurts the leaver's next job.

Frequently asked questions

Can an employer refuse a resignation? No, but it can hold the employee to the contractual notice or agree a buyout.

Is notice recovery taxable in reverse? Notice pay recovered from an employee reduces their taxable salary in most treatments; buyout paid by the employer is taxable in the employee's hands.

Is garden leave paid? Yes, the employee remains on payroll during garden leave.

Key takeaways

• Notice periods are contractual, commonly 30 to 90 days, and should be consistent.
• Buyout works both ways; define the recovery basis clearly.
• Garden leave and early release are valid, documented choices.
• Settle notice in the F&F and issue letters promptly.

NeevHR manages notice periods by grade, supports early release with a knowledge handover, and settles notice recovery or buyout in the final settlement.