Verified · 29 Sept 2026
Retrenchment Compensation Calculator – IR Code
Calculate retrenchment compensation, notice pay and the reskilling fund contribution under the Industrial Relations Code.
✓ Verified against official notifications · 29 Sept 2026 · How we verify →
Recent change: Central Rules under all four Labour Codes notified (8 May 2026)
Compensation
₹1,21,154
7 years × 15 days
Notice pay
₹30,000
1 month or pay in lieu
Reskilling fund
₹17,308
15 days' wages
Total cost
₹1,68,462
- Retrenchment compensation: 15 days' average pay for every completed year of service, or part above six months.
- Reskilling fund: the employer pays 15 days' last drawn wages per retrenched worker, credited to the worker within 45 days.
4 Codes in force 21 Nov 2025 · Central Rules 8 May 2026 (G.S.R. 342–344(E))Verify on EPFO / ESIC →Share on WhatsApp
For estimation only. This calculator applies the rules as we understand them on 29 Sept 2026. It is not legal or tax advice. Verify with the official notification or consult a Chartered Accountant / labour-law professional before filing or changing payroll.
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What a retrenched worker is owed
Retrenchment under the Industrial Relations Code brings three payments for any worker with at least one year of continuous service. Take a worker on ₹30,000 a month with 6 years 8 months of service, given no notice:
| Payment | Rule | Amount |
|---|---|---|
| Compensation | 15 days' average pay per year; 8 months rounds up to a 7th year | ₹1,21,153.85 |
| Notice pay | One month's notice, or pay in lieu | ₹30,000 |
| Reskilling fund | 15 days' last drawn wages, credited to the worker within 45 days | ₹17,307.69 |
| Total | ₹1,68,461.54 |
Compensation is paid at the time of retrenchment, not with the next payroll. Gratuity is separate and payable too, if the worker has five years of service. The gratuity calculator gives that figure.
What is not retrenchment
- Voluntary retirement.
- Retirement on reaching the age of superannuation.
- A fixed-term contract that ends and is not renewed.
- Termination for continued ill-health.
- Dismissal as punishment after a disciplinary inquiry.
None of these triggers retrenchment compensation or the reskilling fund.
Procedure
- Give written notice with reasons, and send a notice to the appropriate government.
- Follow last come, first go within the category of workers, unless you record reasons for departing from it.
- For factories, mines and plantations with 300 or more workers, get government permission first. The old threshold was 100.
- If you hire for the same work within a year, offer the job first to the workers you retrenched.
Closing the whole establishment follows similar payments with its own notice rules. Put all the dues together in the full and final settlement calculator.
Official sources
Frequently asked questions
How is retrenchment compensation calculated?
15 days' average pay for every completed year of continuous service, or part of a year above six months.
What is the reskilling fund?
Employers contribute 15 days' last drawn wages for each retrenched worker, credited to the worker within 45 days.
When is government permission needed?
For factories, mines and plantations with 300 or more workers.