Full and final settlement in India: an employer's guide

A free guide. "F&F" is the final payment and paperwork when an employee leaves. Getting it late or wrong is one of the most common sources of exit disputes. This page is general information, not legal or tax advice. Confirm the details with your payroll provider or CA.

When is it due?

Under the Code on Wages, 2019 (in force since 21 November 2025), wages due to an employee who leaves, whether by resignation, removal, dismissal or retrenchment, are generally expected to be paid within two working days of their leaving. Many companies used to take 30 to 45 days. If yours still does, review it. Some components, such as gratuity, have their own timelines.

What it usually includes

Add (payable to employee)	Deduct (recoverable)
Salary for days worked in the final month	Notice-period shortfall, if the contract allows recovery
Leave encashment for unused earned leave, as per policy and law	Outstanding advances or loans
Bonus or variable pay due under the plan	Unreturned company property, at a fair, documented value
Approved reimbursements	Joining-bonus or training-cost clawback, if agreed in writing
Gratuity, where eligible	Tax (TDS) and statutory deductions

Deductions should be ones the law permits and the employee agreed to in writing, for example in the appointment letter. Keep the overall cap on deductions in mind, and don't deduct arbitrary "penalties".

Gratuity in brief

Generally payable after five years of continuous service. The five-year condition does not apply on death or disablement.
Under the Code on Social Security, 2020, fixed-term employees are generally eligible pro rata after one year.
Generally calculated as 15 days' wages for each completed year of service, using last drawn wages (basic + DA, with the 50% wage rule applied). It's subject to a statutory maximum.

Documents to issue

F&F statement showing every addition and deduction.
Relieving letter, confirming the resignation was accepted and giving the relieving date.
Experience letter, confirming dates, designation and responsibilities.
Form 16 for the tax year (issued after year-end), and PF exit and transfer support.

Don't withhold the relieving or experience letter to force agreement on a disputed recovery. Settle what the contract allows, document the rest, and take advice if there is a genuine dispute.

Templates

The relieving letter (₹149) includes wording for when F&F is done and for when it is still pending. Our employee handbook (₹1,499) has a full separation policy: notice, garden leave, exit checklist and F&F. All four employee letters: Starter Pack, ₹449.