Shajini Surprise

Section 70 of the Industrial Relations Code, 2020 lets an employer retrench a worker with one year of continuous service only after three steps: a month's written notice giving reasons (or a month's wages instead), a notice to the government, and retrenchment compensation of 15 days' average pay for every completed year. Section 83 then adds a second, separate 15 days. An exit statement that shows one line for both has short-paid you.

How is retrenchment compensation calculated in India?

You multiply 15 days' average pay by your completed years of continuous service, counting any part-year over six months as a full year, where average pay is your Code wages over the last three complete calendar months.

Two definitions do the work. "Wages" in s.2(zq) leaves out items such as HRA and conveyance, but if those exceed half of total pay, the excess is added back. That is the proviso behind the 50% wage rule that cut take-home pay, and here it works for you: a thin basic no longer shrinks the base.

Timing decides which law applies. A Ministry of Labour release (PIB, 8 December 2025) confirms all four labour codes came into force on 21 November 2025, so a later retrenchment falls under this formula, not the Industrial Disputes Act of 1947. Our view: any guide still built on the 1947 Act describes the wrong payout, since that Act had no reskilling credit. Gratuity stays a separate claim; see the new gratuity rules on one year of service.

Four thresholds in the Code (Act 35 of 2020) decide whether the formula reaches you, and how big the base is:

The allowance cap moves the most money for IT staff. A lean basic with a fat flexible component used to shrink every statutory payout; now the excess flows back into wages. Check the base against your last three pay slips, not your offer letter.

What your exit should pay, by years and wage

For IT workers on ₹30,000 to ₹60,000 of monthly Code wages with two to twelve counted years, the two statutory sums together run from roughly half a lakh to four and a half lakh rupees, before notice pay.

Worked example: take an engineer in a firm below the permission headcount, retrenched after 4 years 7 months, on a monthly gross of ₹90,000: basic ₹36,000, HRA ₹18,000 and ₹36,000 of other excluded allowances. Excluded items total ₹54,000, which is ₹9,000 over half the gross, so Code wages are ₹36,000 + ₹9,000 = ₹45,000. Assume a 26-day month: ₹45,000 ÷ 26 × 15 = ₹25,961.54 per 15-day block. Seven months is more than six, so service counts as 5 years, and s.70 pays 5 × ₹25,961.54 = ₹1,29,808. The s.83 credit is one more block, ₹25,962, paid once. A month's wages in lieu of notice adds ₹45,000. On the rounded figures, the statutory floor is ₹2,00,770. A 30-day divisor pays less, so check which one your employer used.

Find your counted years, then read across at your monthly Code wages; each cell is s.70 compensation plus the s.83 credit.

The shaded cell, 5 counted years at ₹45K, is the worked example minus notice pay; each extra counted year adds ₹17,308 in the left column and ₹34,615 in the right. Your one-minute check: count the months since your last work anniversary, because anything beyond six adds a year. At or above the permission headcount, s.79 demands three months' notice, lifting the example's notice pay to ₹1,35,000 and its floor to ₹2,90,770.

Is a software engineer a "worker" under the Code?

In most cases yes, because s.2(zr) covers technical and skilled work done for hire, and for private IT staff it excludes only people employed mainly in managerial or administrative roles and supervisors whose wages exceed the notified monthly line.

The test is what you do, not what HR calls you. An engineer who codes all day is a worker at any salary; a lead who signs off leave and appraisals is likely "supervisory", and above the pay line loses both sums. The grey area, in our view: the Code never defines "mainly", so a lead who still spends most hours on delivery has a fair argument to stay inside.

The credit runs on its own clock. PRS Legislative Research's summary of the Industrial Relations (Central) Rules, notified on 8 May 2026, says the employer deposits 15 days' last-drawn wages within 10 days of retrenchment and the worker is credited within 45 days. The Code counts from retrenchment; the Rules, as PRS reads them, from the deposit. So the outer limit is day 55 (or day 45, if your state follows the Code's wording; most private IT firms answer to state rules). Firms at the permission headcount must also apply at least 60 days ahead, and s.79(7) makes a retrenchment without permission illegal.

• A "performance exit" or a resignation request is not retrenchment.
• One compensation line on the final statement usually means the credit was folded in.
• Leave encashment is separate again: how leave encashment days get paid.
• A bond deduction needs a real loss behind it: why your employment bond has a proof problem.

The decision is whether to sign, and the answer is only when both sums are on the page. If yours shows one, write to HR this week for the s.70 figure, the s.83 deposit date and the divisor used; if the credit misses the outer limit, raise it on the Ministry of Labour's SAMADHAN portal after checking your state's rules. This is wrong for you only if your role was mainly managerial, where your contract governs instead.

Your manager asks you to take client calls on your own SIM card. The bill that month is ₹900, and HR offers a flat ₹500 "towards mobile". Who pays for work phone use in India depends less on the request than on how the money reaches you, and the tax difference is real.

Who Pays for Work Phone Use, and Why the Bill Matters

None of the sources we checked says whether a law requires an employer to pay for a work phone, but if yours does pay, the tax result turns on whether it reimburses your bill or pays a flat amount.

Rule 3(7)(ix) of the Income-tax Rules, 1962 values most other perks at arm's-length cost to the employer, but its proviso takes telephone expenses, mobile phones included, that the employer actually incurs on your behalf out of that method. Pluxee's 2026 guide and ClearTax both read the proviso as an exemption when bills back the claim. For you, a bill your employer pays is not valued as a perk.

The flat route is harder to defend. Pluxee's guide says a fixed monthly stipend with no bills is added to salary and taxed, and a BYOD stipend is taxable unless an invoice backs it. That means you pay for the phone out of money already taxed as salary, with no bill to show for the work use. Our post on the wage rule's one-half test explains the threshold, and which US states make employers pay for a personal phone used at work shows how another country handles it.

Four numbers decide most of this, and each traces to a named source. Pluxee's guide, dated 13 March 2026, reproduces one firm's HR table, ₹750 a month at grades 5 to 7. ClearTax, undated and retrieved 21 October 2026, supplies the one-connection condition. A 2007 notification put the phone-expense proviso into force from 1 April 2008, and section 2(y) of the Code on Wages, 2019 sets the one-half test.

Section 2(y) asks one question: is a payment a genuine cost of the job, or pay under another name? Clause (e) excludes sums that defray special expenses of the employment, but the one-half test still counts those sums, and any excess goes back into wages. Past that point, a phone allowance is salary by another route.

Bill Claim or Flat Stipend: How They Differ

A bill claim and a flat stipend differ on four points: tax, amount, proof and whose line counts, and each row below takes one of them.

Read each row against the offer you have. The middle column gives both routes, and the right column says what it means for your pay.

Take last month's phone bill and the amount your employer offers, and put the two side by side. The exemption follows the smaller figure, so anything the offer adds above your bill is salary. Then check the proof: is the line in your name, and does the bill show your number? Those two answers tell you which column you are in.

Ask for the bill, not a flat phone amount, because bill-backed claims can stay outside salary and flat stipends cannot. Source: Pluxee's 2026 guide and ClearTax, both summarising Rule 3(7)(ix).

Where Phone Claims Go Wrong

A phone claim can fail on paperwork rather than on the rule, because the bill may sit in someone else's name or cover a family plan. Check both before you ask for reimbursement.

The connection rule is the one to check first. ClearTax describes the exemption as covering usually one connection, in the employee's name, with a bill shown and business use. A family plan or a second SIM sits outside that, even if you use it for work calls. If you use a voice-only recharge, read how a voice-only recharge changes your bill.

Watch the amount too. Pluxee reproduces one firm's HR table, and a flat sum like that is the kind that gets taxed unless a bill backs it. My read, not a sourced finding, is that whether an employer can insist you use your own phone is still an open question, so get the policy in writing rather than rely on a verbal promise.

• Your employer calls a flat amount a "phone bill".
• Your claim covers a family plan.
• Your bill is in a colleague's name.
• Your phone has no record of work use.

Ask for the bill you actually pay, not a flat phone amount, because a bill-backed claim is the route the exemption covers. So the decision in front of you is a bill claim or a flat stipend, and the bill wins on tax. Ask HR this week to reimburse the bill in writing, and ask for the policy before you accept any allowance.

Section 32 of the Occupational Safety, Health and Working Conditions Code, 2020, in force since November 2025, lets a worker carry no more than 30 days of annual leave into the next calendar year. Day 31 is not forfeited. Under the new leave encashment rules, the excess can be paid out in cash when the year closes, but the clause puts the burden on you: the money follows a request, not the calendar.

How many earned leaves can be carried forward under the new labour code?

A worker can carry forward up to 30 days of annual leave into the next calendar year, and any leave that was applied for and refused rides on top of that cap with no limit at all.

That second half is the clause worth printing. JSA Law's April 2026 analysis of section 32 reads it plainly: refused leave escapes the cap, and the balance above the cap is encashable on demand at year end. A manager who rejects your December leave has moved those days outside the ceiling. Keep that email; it proves the days were refused, not simply untaken.

The cap itself is the least interesting part of the rule. What is new for IT staff is a national floor no policy can undercut, and a payout trigger the employee controls.

It sits beside the pro-rata gratuity rule for fixed-term IT staff and the 50% wage rule that cut take-home pay, and shares their weakness: each protects only the people the Code calls workers. Four numbers decide whether you have leave to encash at all. Outlook Money (25 March 2026) and People Matters (14 April 2026) report the threshold, accrual rate and wage line; the annual floor is this article's arithmetic over a full working year.

The accrual rate is the one to check against your offer letter. Most IT policies already beat it, which is fine: the Code sets a floor, not a ceiling. It bites for the employee on a lean contract, whose policy cannot quietly drop below it.

Leave encashment rules at a glance

The rules split into two payouts: a year-end encashment of leave above the cap, paid only when a worker asks, and an exit payout of the whole balance, owed on any exit whatever the tenure.

Exit timings come from Simpliance's section 32 summary (undated, retrieved 16 October 2026, not the Gazette text); the tax line is the CBDT's 2023 change to section 10(10AA). The joiner cut-off is this article's own reasoning: at five days a week the eligibility threshold takes about 36 weeks of work, so a joiner after roughly the end of April cannot reach it by 31 December.

The exit payout protects you automatically; the year-end payout protects you only if you act. One caveat: excess days cashed in December are taxed at your slab, whereas the same days paid at exit would fall inside the exemption. Unclaimed days may lapse under company policy, so ask anyway.

Does the new labour code apply to IT employees?

It applies to IT employees who qualify as workers, which typically covers individual contributors, but managerial and administrative staff, and supervisors earning above the wage line, fall outside the leave protections in section 32.

Titles in IT are inflated, so ignore yours. A lead with no reports may still be a worker; an associate manager who signs off appraisals may not be. Check your job description for supervisory duties.

Outlook Money and People Matters both report that several states have not notified final rules; where yours has not, its Shops and Establishments Act still sets your leave terms. Whether a policy that lapses leave above the cap survives for workers is, in my view, the open question. My reading is that it should not, since a lapse clause and an encash-on-demand clause cannot both be honoured (at least not until a labour court says which wins).

On exit, the leave payout runs on the same clock as India's 48-hour full and final settlement deadline, so a month-long settlement cycle is late on this line item too. Watch for these:

• A policy line saying leave above the cap lapses on 31 December.
• A refused leave request that exists only as a verbal no.
• A settlement statement that leaves out leave wages for a short-tenure exit.

The decision is whether to ask, and for any worker heading past the cap the answer is yes. This week, check your balance against the ceiling, save every refused-leave email to a folder you control, and send HR a two-line written request to encash the excess on 31 December.