- Work out your runway first: your savings plus the settlement after tax, divided by what you spend each month.
- The settlement is taxed as salary. The same ₹6.5 lakh payout can cost ₹0, ₹1.30 lakh or ₹1.55 lakh in tax depending on when in the year you are let go.
- Cutting non-essential spending usually buys two or three extra months, more than most people expect.
- Buy your own health cover before the company policy ends. Leave your PF alone unless your savings run short.
If you are reading this after a layoff, first: it is not a verdict on you. Layoffs in tech and services have hit strong performers and whole teams. What helps most right now is replacing a vague worry (“how bad is this?”) with a number (“I have nine months”). Once you have it, every other decision gets easier.
Days 1–3: read the paperwork before you spend a rupee
Your separation letter or full-and-final statement decides most of your numbers. Look for each of these:
- Severance: often a number of months of pay. Check whether it is paid in one go or in instalments.
- Notice pay: pay in place of the notice period you won’t serve.
- Leave encashment: payment for unused earned leave.
- Gratuity: if you have five years of service, or one year on a fixed-term contract. See how gratuity works.
- Bonus and ESOPs: whether any bonus is paid pro rata, and what happens to unvested and vested options, including the deadline to exercise.
- Health insurance: the date your group cover ends, for you and your family.
Tip: if anything is unclear, ask HR in writing. Written answers are easier to rely on later, and HR teams are usually busy but helpful during a layoff.
Days 3–5: find out how long your money lasts
Your runway is simple to state: money you can use now ÷ what you spend each month. Here it is for someone on ₹1.5 lakh a month (₹18 lakh a year), laid off seven months into the financial year, with three months of severance and three months of notice pay:
Of the ₹1,00,000 a month, ₹70,000 is essentials and the home-loan EMI. Cutting “everything else” from ₹30,000 to ₹10,000 buys two to three extra months.
Open this example →And for someone earning less, with a smaller payout and smaller savings:
Lower spending can give a runway as long as a bigger salary’s. In this case, ₹20,000 a month of freelance work or help from a partner would add another five months.
Open this example →Compare your runway with a realistic job search. In many fields six months is a fair planning number, longer for senior roles or in a slow market. If the runway is shorter than the search, you know now, while you still have time to act on it.
Why the tax on your settlement depends on the month
Severance, notice pay and leave encashment are generally taxed as salary, at your rate for the year. That means the tax depends on how much salary you had already earned in the financial year (April to March) when the payout lands. Here is the same ₹6.5 lakh payout from the first example, at three points in the year:
Laid off in May, only two months of salary plus the payout stays inside the ₹12 lakh rebate limit, so there is no tax at all. These figures assume no new job later in the same year. If you start one, the new salary is added, and some tax may come back when you file your return.
Check your full-and-final: employers deduct tax (TDS) on the settlement. Part of retrenchment compensation and leave encashment can be tax-free in some cases. If the TDS looks high, you can claim a refund in your return; ask a tax professional.
Days 5–10: protect the essentials
Health insurance comes first
Group health cover usually ends with your job, sometimes on your last day. A hospital stay without cover can wipe out months of runway in a week. Buy an individual or family floater policy before the group policy ends, and ask whether your insurer lets you convert the group policy into a personal one with continuity. Put the yearly premium into the runway calculator; it is a real cost.
EMIs: talk to your lender early
Missing an EMI hurts your credit score, which you may need later. If your runway is tight, call the lender before you miss a payment and ask what options exist. Some lenders offer a short restructuring or a longer tenure, but none of it is automatic. Keep paying while you talk.
Your PF is a last resort, not a first one
EPF rules let you withdraw 75% of your balance after one month without work, and the rest after twelve months. It is tempting, but PF is your retirement money and earns a steady, tax-free rate. In the first example, counting PF would add about five months of runway. That is a valuable safety net, best kept for the case where savings really run short. Check the current withdrawal rules on the EPFO portal before you apply.
Days 10–30: buy time and plan the search
- Make the cut-back budget real: pause subscriptions, delay big purchases, and move the spare cash into a savings account or sweep FD so it is easy to reach.
- Add small income if you can: freelance work, consulting or a partner covering some costs. Even ₹20,000 a month can add months of runway.
- Don’t lock money away: avoid long FDs, new investments or lending to friends until you have a new job.
- Keep your paperwork: Form 16, the full-and-final statement, the relieving letter and PF service details. You will need them for your tax return and your next employer.
- Revisit the number every month: as payments arrive and spending settles, update the runway. Knowing exactly where you stand helps you negotiate the next offer without panic.
If you were working abroad and the layoff means you may move back to India, the return to India calculator shows whether you could afford to return now. Our moving back guide covers the questions to answer first.
Frequently asked questions
How is severance pay taxed in India?
Severance and notice pay are generally taxed as salary in the year you receive them, at your slab rate. The tax depends on your total income for the financial year, so it is lower if you are laid off early in the year. Some retrenchment compensation can be partly tax-free; confirm with a tax professional.
How long should my emergency fund last after a layoff?
Long enough to cover your essential spending for a realistic job search, often six months or more. The layoff runway calculator shows how long your savings and settlement last at your current spending and if you cut back.
Should I withdraw my PF after losing my job?
Only if your other money runs short. You can withdraw 75% after one month without work and the rest after twelve months, but PF is retirement money that earns a good, steady rate.
What happens to my health insurance after a layoff?
Group cover usually ends with your employment. Buy a personal policy before it ends, and ask your insurer about converting the group policy so you keep waiting-period credit.
How many months do you have?
Enter your settlement, savings and spending. It takes two minutes and runs in your browser.
Calculate my runway →Estimates for salaried individuals, Tax Year 2026-27, new regime. Settlement tax assumes no other income later in the year and that severance, notice pay and leave encashment are fully taxed. Severance and notice amounts are illustrations. The runway calculator uses your real last salary month, so its tax may differ from these examples. Confirm PF rules on the EPFO portal and tax with a CA.