Lost Your Job in India? Read This Before Signing Anything

The calendar invite just says "quick sync" and it is only fifteen minutes long. By the time Rahul, a 34-year-old project manager with eight years at the same company, tries to open his laptop again after the call, his email access has already gone. The HR representative has told him that his role is being eliminated, that the company will take care of him, and that there are a few papers to sign by tomorrow evening. His chest feels tight, his mind has gone blank, and the one thought he can hold onto is the EMI due on the 5th. This is an illustrative scene, but versions of it are playing out in Indian offices right now.

It is not a rare event any more. TCS alone cut around 12,200 jobs, about 2% of its workforce, in FY26, and the top five Indian IT firms together cut nearly 7,000 roles over that period. The painful part is that the first 48 hours after a layoff matter more than the next 48 days, because most of the costly, irreversible mistakes happen under pressure: signing a paper you have not understood, losing health cover by accident, or panic-withdrawing your provident fund. This guide walks through what to check and do, in order. It is general information, not legal or tax advice, and your own appointment letter and a labour lawyer or chartered accountant are what decide your actual case.

First, Understand Which Kind of Exit This Is

The single most important question in the first conversation is how your exit is being described, because the legal protections and even the tax treatment depend on it. A retrenchment, where the employer ends your job for business reasons, is treated very differently from a resignation, a mutually agreed separation, or a termination for misconduct. If you are being asked to "resign" so that the paperwork looks cleaner, that is worth pausing on. It is the same dynamic described in the piece on quiet firing, where resignation becomes a way for a company to avoid the obligations that come with ending someone's job.

India's four labour codes came into force on 21 November 2025, according to KPMG's analysis, although many detailed rules and state-level notifications are still being finalised, so practice can differ between companies and states. Under the Industrial Relations Code, legal summaries describe the baseline for retrenchment as 15 days' average pay for every completed year of service, with a part of a year over six months counted as a full year, plus one month's notice or pay in lieu of notice. The Code also requires the employer to pay an additional 15 days' wages into a reskilling fund for the retrenched worker. Roughly half a month's pay per year means that six years of service works out to about three months' pay as a legal minimum.

The Catch Most Articles Skip: Are You Legally a "Worker"?

Here is the part that is easy to miss. Those protections apply to a "worker" as the Code defines the term. According to PRS India's summary and the government's own factsheet, the definition excludes people mainly employed in a managerial or administrative capacity, and supervisory staff drawing wages above ₹18,000 a month. Whether a software engineer, analyst or team lead counts as a worker depends on the real nature of the duties, not the job title, and this is a genuinely contested area for corporate and IT employees.

The practical takeaway is simple. Do not assume the statutory formula is your entitlement, and do not assume it is not. Read your appointment letter first, because many corporate contracts spell out notice and severance terms, and then ask a labour lawyer whether your role is covered. Companies that lay off large numbers of people often offer packages above the legal minimum, but those terms are negotiated and vary a great deal.

Days One to Three: Before You Sign Anything

Ask for everything in writing. You want a written termination or separation letter that states the reason, the last working day, and whether the exit is a retrenchment, a termination or a resignation. A verbal "we will sort it out" is not a record.

Do not sign under time pressure. A request to sign by tomorrow evening is a company convenience, not a legal deadline. Read any release or settlement document carefully, especially a clause that waives all future claims, and take it to a lawyer or a trusted advisor before you sign. A settlement that looks generous can look different once you list what you are giving up.

Collect your own documents. Download or request your offer letter, appointment letter, appraisal letters, recent payslips, Form 16, your UAN and PF details, and your insurance policy details. Do this for your own records only. Do not copy confidential company data, which can create separate legal trouble.

Get a full list of what you are owed. Ask HR to itemise notice pay, severance, gratuity, leave encashment, pending variable pay or bonus, reimbursements and any ESOP treatment. Check how unvested and vested stock options are handled and how long you have to exercise any vested ones, since these windows can be short.

What You May Be Owed, and When

The Code on Wages requires that wages due be paid within two working days of removal, dismissal, retrenchment or resignation, according to LiveLaw's analysis. How this applies in practice to the whole full and final settlement, including leave encashment, bonuses and gratuity, is still settling, and many companies have historically taken weeks. The sensible move is to ask HR for the settlement timeline in writing and to follow up if it slips.

Gratuity is the other big item. It generally applies after five years of continuous service and is calculated as 15 days' wages for each completed year of service, using the last drawn basic salary plus dearness allowance, as described in this summary of severance rules. Ask for the calculation in writing, so you can check the number yourself.

Health Insurance: The Deadline That Quietly Expires

This is the item that catches the most people off guard. Employer group health cover typically ends on your last working day, and your family's cover usually ends with it. Reporting from Business Standard on the TCS layoffs covers the main options, which include converting or porting the group cover to an individual policy and buying a fresh policy. Some insurers allow conversion only within a short window, often described as around 30 to 45 days, and they may assess your health before approving it, so it is worth asking HR and the insurer about this before your last day rather than after.

The reason this matters is waiting periods. A brand new individual policy starts its own waiting periods for pre-existing conditions, whereas a properly ported or converted one may carry credit for your earlier cover, as insurers explain in their portability guides. If you or a family member has any ongoing condition, this is the first thing to sort out. The broader question of whether your cover is actually enough is covered in the piece on health insurance in India.

Provident Fund: Resist the Urge to Withdraw Everything

The rules here changed recently, which is why old advice from friends may be out of date. According to Tribune's coverage and a Deccan Herald report on the EPFO board's October 2025 decisions, the waiting period for a premature final settlement of the provident fund was raised from two months to twelve months, and the waiting period for final withdrawal of the pension component was raised from two months to 36 months. Partial advances are still possible, with a minimum of 25% of the balance kept in the account.

Reports also differ on the exact details. Some describe up to 75% being available soon after a job loss, and a summary of the EPFO announcement says full withdrawal is allowed in certain situations including retrenchment. Because reports vary on timing and eligibility, check the current claim options on the EPFO member portal before you plan around a specific amount.

My own view is to avoid withdrawing it unless you genuinely need the cash. The balance earns a rate that has recently been around 8.25% a year, which is hard to match with a safe alternative, and transferring the account to your next employer through your UAN keeps your service record continuous. Treat the provident fund as your last line of defence, not your first.

The Tax Surprise Nobody Mentions

A lump sum of severance can push you into a higher tax slab for the year, and not every part of it is exempt. Retrenchment compensation received by a workman has traditionally been exempt up to the least of the amount actually received, ₹5 lakh, or the amount calculated under the statutory formula, and that exemption is specifically for workmen. Gratuity is exempt up to ₹20 lakh and leave encashment up to ₹25 lakh, as explained in a 2026 severance tax guide, which also notes that relief under Section 89 may be available for lump sums received in one year.

Two cautions apply. First, notice pay and ex-gratia amounts are generally treated as taxable income. Second, the new Income-tax Act, 2025 came into effect on 1 April 2026 and renumbered the sections, so check with a chartered accountant how these exemptions apply under the new Act. Because the exemption and the legal protections are tied to retrenchment, how your exit is documented can change your tax bill as well as your rights.

Your Money Plan for the First 30 Days

Work out your runway. Add up your essential monthly spending, including EMIs, rent, groceries, insurance premiums and school fees, and divide your accessible savings by that number. In an illustrative case, essentials of ₹60,000 a month and ₹3.6 lakh of savings give you a runway of six months. Knowing this number turns panic into a plan. If you have not built one yet, the piece on building an emergency fund from zero is a good place to start.

Cut discretionary spending now, not later. Pause subscriptions, big purchases and non-essential travel. Every month of runway you add early is a month of calm later.

Talk to your lenders before you miss a payment. If an EMI is going to be hard to meet, contact the bank early and ask about options. Do not use credit cards to bridge the gap, because paying only the minimum is one of the most expensive ways to borrow, as laid out in the piece on the credit card minimum-due trap.

Avoid selling long-term investments in a panic. Use cash and your emergency fund first. If you must reduce your SIPs, pause rather than break long-term holdings, and restart when income resumes.

Start the Job Search in Week One, But Do It Calmly

The emotional pull after a layoff is to apply to hundreds of jobs immediately, and it rarely works. A better first week is to update your resume, tell your network specifically what kind of role you are looking for, and ask former managers for references and recommendations while they remember your work. Ask the company for a relieving letter, an experience letter and, if possible, a positive reference as part of your exit terms. These are often easier to negotiate than money.

Expect the search to take time. Hiring can run to several rounds, as described in the piece on why interviews take so long in India, and your severance and runway should be sized with that in mind. It also helps to remember that leaving a company is not always final. The piece on boomerang employees shows how often people return to firms that once let them go. If you were already quietly looking, the habits described in career cushioning are now an advantage.

Why This Actually Matters

Most people who are laid off do not lose money because the law fails them. They lose it through small, quick decisions in the first few days. They sign a waiver they did not read, let a health policy lapse during the conversion window, withdraw a provident fund balance that was earning more than any savings account, or discover at tax time that part of their severance was not exempt. Each of these is avoidable, and none of them requires legal brilliance. They require slowing down at exactly the moment when everything feels urgent.

My Honest Take: The First Month Is About Protecting Your Position, Not Proving Anything

I think the hardest part of a layoff is not the logistics, it is the shame. People feel they should have seen it coming, or that being let go says something about them. In most large layoffs it does not. It reflects budgets and restructuring decisions made at a level far above any one person. Treating the first month as a calm administrative project, rather than a verdict on your worth, tends to produce better decisions.

I would also say plainly that a severance offer is often the start of a conversation, not the end of one, particularly if you have been with the company for years. You may not get more, but asking for clarity on the numbers, the insurance continuation, the stock options and the reference is entirely reasonable. And if something about the process feels wrong, such as pressure to resign or to sign within hours, that is a good reason to speak to a labour lawyer before anything else.

Frequently Asked Questions

Q1. Am I legally entitled to severance pay if I am laid off in India?

It depends on your role and contract. Under the Industrial Relations Code, legal summaries describe retrenchment compensation of 15 days' average pay per completed year of service plus one month's notice or pay in lieu, but this applies to a "worker" as defined in the Code, which excludes managerial and administrative roles and certain supervisory staff. Many corporate employees rely on the terms in their appointment letter, so check it and ask a labour lawyer whether the statutory provisions apply to you.

Q2. Should I resign instead of waiting to be terminated?

Not without advice. Retrenchment compensation, certain legal protections and a tax exemption are tied to the employer ending your job, so resigning can change what you are entitled to. If you are being asked to resign, ask for the terms in writing and consult a labour lawyer or chartered accountant before agreeing.

Q3. What happens to my health insurance after a layoff?

Employer group health cover typically ends on your last working day, including the cover for your family. Many insurers allow you to convert or port it to an individual policy, but the window can be short, often described as around 30 to 45 days, and the insurer may assess your health. Contact HR and the insurer before your last day to ask about conversion and whether waiting-period credit will carry over.

Q4. Can I withdraw my PF after being laid off?

The rules changed after the EPFO board's October 2025 decisions, which, according to news reports, raised the wait for a premature final settlement from two months to twelve months and kept a minimum of 25% of the balance in the account for partial advances. Reports differ on some details, so check the EPFO member portal for current options. Unless you need the cash, leaving the balance invested and transferring it to your next employer is usually the better choice.

Q5. Is severance pay taxable in India?

Partly. Retrenchment compensation received by a workman has traditionally been exempt up to the least of the amount received, ₹5 lakh, or the statutory formula amount, while notice pay and ex-gratia amounts are generally taxable. Gratuity and leave encashment have their own limits, and relief under Section 89 may help with lump sums. Because the new Income-tax Act, 2025 took effect on 1 April 2026, confirm the current position with a chartered accountant.

Layoffs rarely arrive without warning signs, and the way a company handles an exit often says a lot about how it treated you before. Quiet Firing: How Indian Companies Push Employees Out Without Firing Them looks at the earlier signs, and Career Cushioning covers how employees are preparing before the news ever comes.