What goes into it
| Payable | Recovered |
|---|---|
| Salary for days worked in the last month | Notice pay for days not served (if the contract says so) |
| Leave encashment for unused encashable leave | Advances and loans outstanding |
| Gratuity, if eligible | Company assets not returned |
| Bonus or incentives due | Excess leave taken |
| Expense claims approved |
Timeline
The Code on Wages requires wages due to be paid within two working days of removal, dismissal, retrenchment or resignation. Gratuity has its own 30-day rule. Plan the settlement before the last working day so that it can be paid on time.
Checklist
- Confirm the last working day and notice served.
- Close attendance and leave for the last month.
- Work out leave encashment and gratuity eligibility.
- List recoveries and agree them with the employee.
- Prepare the settlement statement and get it signed.
- Pay, then issue the relieving letter, experience letter and Form 16 when due.
Common mistakes
- Waiting for the next payroll run. The Code on Wages gives two working days from the last day, and the next pay date is often later than that.
- Treating every amount as one deadline. Wages due have the two-working-day rule; gratuity has its own rule of 30 days from becoming payable.
- Recovering notice pay without a basis. Recover it only if the appointment letter or policy provides for it.
- Working out leave encashment too early. Close attendance and leave for the last month first, or the balance will be wrong.
- Recoveries the employee has not seen. List advances, loans, assets and excess leave, and agree them before the statement is signed.
How HR Bingo handles it
Choose the employee and the last working day; HR Bingo suggests leave encashment, gratuity and notice recovery with how each was worked out. Edit or add lines, finalise, download the statement PDF, and mark it paid.
Sources
Frequently asked questions
How long does a company have to pay full and final settlement?
Under the Code on Wages, wages due must be paid within two working days of the employee leaving. Gratuity must be paid within 30 days of becoming payable.
Can notice pay be recovered?
If the appointment letter or policy provides for it, notice pay for days not served can be recovered in the settlement.
What is included in a full and final settlement?
Salary for days worked in the last month, leave encashment for unused encashable leave, gratuity if eligible, bonus or incentives due and approved expense claims. From this, recoveries are taken: notice pay for days not served (if the contract says so), outstanding advances and loans, company assets not returned and excess leave taken.