Notice Buyout

Notice Buyout Definition

A notice buyout occurs when an employee, who is required to serve a notice period before leaving their job, opts to pay the employer a sum of money in lieu of completing the notice period. This practice allows the employee to terminate their employment immediately or after a shortened notice period, without serving the full term originally stipulated in their employment contract. It’s a common feature in many employment agreements, offering flexibility for both the employer and the employee under certain circumstances.

Notice Buyout Key Features

Contractual Agreement: The option for a notice buyout is typically outlined in the employment contract or agreement, specifying the terms under which it can be executed.
Compensation Equivalent: The buyout amount is usually equivalent to the salary the employee would have earned during the notice period.
Mutual Consent: In most cases, the buyout requires agreement from both the employer and the employee. Employers have the right to refuse a buyout if the employee’s immediate departure could harm the business.
Legal and Tax Implications: Notice buyout practices are subject to local employment laws and may have tax implications for both parties.
Flexibility: Provides flexibility for employees seeking to exit their employment sooner than allowed by their notice period, and for employers who prefer to expedite the transition.

How Does It Work?

Initiation: An employee wishing to leave their job sooner than the notice period allows proposes a buyout to their employer, or an employer may offer it as an option to the departing employee.
Calculation of Buyout Amount: The amount is calculated based on the employee’s current salary, typically covering the entire notice period that would otherwise need to be served.
Agreement: Both parties agree to the terms of the buyout, including the amount and the termination date.
Payment: The employee pays the agreed sum to the employer, which can be done through a lump sum payment or deductions from the employee’s final salary or entitlements.
Termination of Employment: Once the buyout is completed, the employment is terminated, and the employee is relieved from their duties without serving the full notice period.


An employee may opt for a buyout to start a new job sooner, relocate, or for personal reasons that require an immediate exit from their current position.

Generally, an employer cannot force a buyout without the employee's consent, unless specifically stipulated in the employment contract.

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