HR & payroll glossary
What is Full and final settlement?F&F
Full and final settlement is the last payment to a leaving employee: pending salary, leave encashment, gratuity and bonus, minus recoveries such as notice shortfall and loans.
Definition
Full and final settlement closes the financial relationship with a departing employee. The Code on Wages, 2019, in force from 21 November 2025, requires wages to be paid within two working days of separation. Company policy and older timelines of 30 to 45 days should be reviewed against it.
How it works
- Earnings: salary for days worked in the last month, leave encashment, gratuity if eligible, bonus and any reimbursements due.
- Recoveries: notice-period shortfall, outstanding loans and advances, unreturned assets and excess leave taken.
- TDS is recomputed on the final figures, and Form 16 is issued for the year.
Why HR and payroll teams care
F&F depends on clearance from several teams. Delays create disputes and, under the Labour Codes, compliance exposure.
Example
A simple F&F
- Salary for 12 days: ₹24,000
- Leave encashment: ₹18,000
- Loan balance recovered: −₹10,000
- Net payable: ₹32,000 (before TDS)
Full and final settlement in NeevHR
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