If the engineer you want has a 90-day notice period, you have three real options. You can wait it out, pay a notice period buyout so they can join sooner, or change the hiring model. For employers in India, the buyout is often the cheapest of the three. That’s only true if you price it before the offer and put it in writing, instead of improvising it after the candidate resigns.
This guide covers how buyouts work, what the law does and doesn’t let a former employer do, how to structure the payment, and what to do during the weeks a candidate is serving notice. That last part is where tech offers tend to fall apart.
What a notice period buyout is, and who pays
A notice period buyout is a payment that lets an employee leave before their notice period ends. The amount is usually salary for the days they don’t serve, in place of serving them. The employee pays it to the outgoing employer, or the outgoing employer deducts it from the full-and-final settlement. The hiring company often reimburses it afterwards, as part of the offer.
Notice periods are long in Indian tech. Instahyre’s 2026 guide puts the range at 15 days at startups to 90 days at large companies and IT services firms, with 30–60 days most common at product companies. A 90-day notice on a senior backend role means a quarter of a year in which the candidate is still on someone else’s payroll, still being courted by recruiters, and still open to a counter-offer.
There are three ways to split the cost:
| Who pays | How it usually works | What it signals to the candidate |
|---|---|---|
| The candidate | Paid out of their own pocket or deducted from the final settlement | Weak commitment from you. They’re paying to join you. |
| You, the new employer | Reimbursement or a joining amount against proof of payment | “We want you here, and soon.” |
| Shared | A cap, with the candidate covering anything above it | A fair middle ground for mid-level roles |
What Indian law says, and what it doesn’t
The notice period is a contract term, not a legal minimum. For most salaried tech employees, the length and the buyout terms come from the appointment letter. India’s four Labour Codes came into force on 21 November 2025. In our reading, they haven’t changed the basic position for white-collar tech staff: the employment contract still sets the notice terms. If a contract or a state rule seems unusual, check it with employment counsel.
An employer can’t make someone keep working. Indian courts have held that resigning is an employee’s right. In a 2023 ruling, the Calcutta High Court restated that an employee cannot be forced to serve against their will, unless the rules, the terms of appointment or a pending disciplinary matter say otherwise. What the outgoing employer can do is recover notice pay as the contract allows.
The relieving letter is where the outgoing employer has the upper hand, and courts don’t always back the employee. Joining formalities at many companies include a relieving letter from the previous employer. That gives the outgoing employer a pressure point. On 5 May 2026, in Bharat Aviation v. Rahul Sudhindra Soni, the Bombay High Court held that an employer couldn’t be compelled to issue a relieving letter or service certificate. The employee had resigned in breach of his service bond without serving the required 60 days’ notice. The court treated the relieving letter as a consequence of a validly accepted resignation, not an automatic right.
For a hiring company, the lesson is practical. A candidate who walks out without settling their notice may join you without a relieving letter and with a dispute behind them. Settle the notice properly through a buyout or an agreed early release, and that risk largely goes away.
Should you pay the buyout? A quick test
Paying is worth it when the cost of waiting is higher than the buyout. That usually happens in four situations:
- The role blocks delivery: a platform lead, a security engineer before an audit, the first data engineer.
- The candidate has a competing offer with an earlier start date.
- Your own project or client timeline can’t absorb another 60–90 days.
- You have no realistic second choice from the same search.
It’s usually not worth it when the role can wait or the candidate has said their employer may release them early. It’s also not worth it when a 30-day gap would be covered just as well by a short contract hire or an interim specialist (more on that below).
A rough way to decide: put the buyout amount next to what one more quarter without this person costs you. Count the delayed release, the overtime for the rest of the team, and the chance of losing the candidate during a long wait. You’ll rarely get a precise number. You’ll usually get a clear answer.
How to structure a buyout offer
1. Ask about notice at the first conversation, not at offer stage
Notice period, the exact buyout clause and whether early release has ever been granted all belong in the first screening call. That’s where we cover motivation, notice period and pay with every candidate before they reach a shortlist. You can read more in how we run a technology search. Finding out about a 90-day clause after the final interview is how offers go sideways.
2. Try early release before paying
Ask the candidate to request an early release first, offering a clean handover plan and their remaining leave against the notice. Some outgoing managers agree when they see a structured plan. If they don’t, you’ve lost a week, not the candidate.
3. Decide the money in advance and cap it
Agree internally what you’ll cover: a full reimbursement, a cap, or a fixed joining amount. Get it approved before the offer goes out. A buyout negotiated live, after the candidate has already resigned, puts you in the weakest possible position.
4. Pay against proof, and put it in the offer letter
The usual pattern is reimbursement after joining, against the outgoing employer’s settlement statement or payment receipt. Write the amount, the condition and the timing into the offer letter. “We’ll take care of it” tends not to survive a budget review three months later.
5. Consider a clawback, and take advice on it
If you pay a large buyout, some employers attach a repayment condition if the employee leaves within an agreed period. Keep it proportionate and in writing. Get employment counsel to check that it’s enforceable for your contracts, because a clause that looks like a penalty may not hold.
Tax and GST: what HR and payroll should know
Reimbursing a buyout is generally taxable income for the employee. Zoho Payroll’s guide notes that when a new employer reimburses the buyout, the reimbursement is taxable as a perquisite, and the employee can’t deduct what they paid the old employer. A candidate who pays ₹2 lakh and gets ₹2 lakh back as taxable salary ends up out of pocket. That’s why some employers “gross up” the amount. Decide whether you will before you promise a figure, and confirm the treatment with your tax adviser for the current assessment year.
Notice pay recovered by the outgoing employer isn’t subject to GST. The CBIC settled this in Circular No. 178/10/2022-GST dated 3 August 2022. Recovering notice pay from an employee is compensation for breach of the contract, not payment for a service. Some online buyout calculators still add 18% GST to the amount, so if a candidate’s settlement includes GST on notice pay, it’s worth querying before you reimburse it.
The real risk is the wait, not the buyout
The buyout is a one-off cost you can plan for. The weeks between resignation and joining are harder to control, and that’s where tech offers tend to fall apart. During that window:
- The counter-offer arrives. The outgoing employer has weeks to make the candidate a better offer, and a long notice period gives them plenty of time to do it.
- Other recruiters keep calling. A strong engineer serving notice is still on the market. Their LinkedIn status didn’t change when they signed your offer.
- Your team’s priorities move on. The role you sold in week one can look different by week ten, after a reorg or a new client.
What helps:
- Agree a joining date, not a range. “Mid-February” invites drift. “Monday 15 February, confirmed once your resignation is accepted” doesn’t.
- Give them reasons to stay in touch. A call with their future manager about the first project, early access to the team’s docs or repo where your security policy allows it, or an informal lunch with the people they’ll work with. A “just checking in” email every week does little.
- Raise the counter-offer before it happens. Ask plainly: if your manager matches the money, what would still make you leave? A candidate who can answer that clearly is on firmer ground when the counter-offer comes.
- Keep your second-choice candidate warm until the first one has joined. Closing the search the day the offer is accepted is an easy mistake to avoid.
When contract or contract-to-hire is the better answer
If no buyout and no early release can get the person in on time, change the model rather than the deadline. A contract or contract-to-hire engagement can put someone in the seat in weeks, while the permanent hire works through their notice. Sometimes it’s the same person on a shorter-notice contract, more often a separate interim specialist. It’s not right for every role. For delivery-critical ones it’s often cheaper than waiting.
We help employers decide this, and plan the timeline, as part of every technology search across our technology recruitment specialisms.
Planning a hire with a long notice period?
If you’re about to make an offer to someone on a 60- or 90-day notice, it’s worth 30 minutes to plan the notice period buyout, the joining date and the fallback before the offer goes out. Book a hiring review with our team and we’ll go through it with you.
This article is general guidance for employers, not legal or tax advice. Notice terms depend on each employment contract and the applicable state rules. Take professional advice for specific cases.
