Termination Letter Format and Generator 2026

How to write a termination letter in India (2026 rules)

A termination letter does two jobs. It tells the employee, in plain words, that the employment is ending and on what date. And it proves to a labour officer, a tribunal or a court that the employer followed the law: the right ground, the right notice, the right money, and the right process before the decision. Since the four labour codes came into force on 21 November 2025, the rules for workers sit in the Industrial Relations Code 2020 and the Code on Wages 2019, with state Shops and Establishments Acts and your own appointment letter filling the gaps.

What the letter must contain

Notice period: what the law requires

Section 70 of the Industrial Relations Code 2020 says a worker with at least one year of continuous service cannot be retrenched unless the worker gets one month's written notice stating the reasons, or wages for that period in lieu of notice, plus retrenchment compensation, and a notice is served on the appropriate government in the prescribed manner. In non seasonal industrial establishments with 300 or more workers, Chapter X applies instead: three months' notice and prior government permission. The old Industrial Disputes Act threshold for permission was 100 workers, so many mid sized employers moved out of the permission regime on 21 November 2025.

Where the appointment letter gives a longer notice than the statute, the longer period applies. Where it gives a shorter one, the statute wins. State rules under the labour codes were still being notified through 2026, so confirm the position in your state before relying on any central default.

Money on exit: notice pay, compensation, re-skilling fund, full and final

On retrenchment, the worker gets 15 days' average pay for every completed year of continuous service, with anything over six months counted as a full year. This is on top of notice or notice pay. The IR Code also created a worker re-skilling fund under Section 83: the employer contributes 15 days of the worker's last drawn wages per retrenched worker, credited to the worker within 45 days. Average pay for a monthly paid worker is the average of the last three calendar months. Practice differs on whether 15 days is worked out on a 26 day or a 30 day month, so the estimator on this page lets you see both and the letter itself carries no figure.

Under Section 17 of the Code on Wages 2019, wages due on termination, retrenchment, resignation or closure must be paid within two working days. Gratuity keeps its own 30 day timeline and is payable after five years of continuous service (one year for fixed term employees under the labour codes). Leave encashment, pending reimbursements and statutory bonus are settled through the same full and final statement. A late or short settlement is a wage offence, so put the timeline in the letter and hold HR to it.

Process before the letter, by ground

• Probation. Check the probation clause. If it allows termination without notice, a neutral letter recording that the employee was not found suitable is enough. Do not mention misconduct, integrity or attitude, because a stigmatic termination needs an enquiry even for a probationer.
• Retrenchment. Apply last in first out within the category unless you record reasons for departing from it, give the retrenched worker preference in future hiring for the same role, serve the government notice, and budget notice pay plus 15 days per year plus the re-skilling fund plus gratuity.
• Poor performance. Document the performance improvement plan, the reviews, and the support given. Performance is not misconduct, but a letter that reads as punitive invites a challenge, so state the facts and the contractual clause.
• Misconduct. Charge sheet with specific allegations, a real opportunity to reply, an impartial enquiry officer, cross examination where facts are disputed, a copy of the enquiry report, and a show cause notice on the proposed punishment where policy or standing orders require it. Only then the dismissal letter.
• Fixed term. Genuine expiry is not retrenchment. Terminating before the end date, or renewing the same person repeatedly to avoid permanency, brings the retrenchment rules back.
• Abandonment. Send at least two written notices to the last known address and email asking the employee to report and explain, wait a reasonable time, and only then treat the absence as abandonment. Attach the notice dates in the letter.