HR glossary
What is full and final settlement?
Full and final settlement (FnF) is the last payment an employer makes when someone leaves. It covers salary for the days worked, leave encashment, notice pay, bonus and gratuity, minus recoveries such as unserved notice or advances. Under the Code on Wages, wages must be paid within two working days of the exit.
What goes into FnF
- Earnings: salary for the days worked in the last month, leave encashment (as per your leave policy), notice pay in lieu if the employer asked you to leave early, bonus or incentive due, reimbursements, gratuity if eligible
- Deductions: notice shortfall (only if your appointment letter allows it), advances or loans, income tax (TDS)
- Provident fund is not part of FnF - you claim it from EPFO yourself using your UAN
Timeline (2026)
- Wages: within 2 working days of resignation, dismissal, removal or retrenchment (Code on Wages, s.17(2))
- Gratuity: within 30 days of becoming payable, with simple interest if late (Code on Social Security, s.56(3) and (4))
- Gratuity is not "wages" under the Code on Wages, so it follows its own 30-day timeline. Whether leave encashment counts as wages for the two-day rule is not yet settled.
Example
- Last working day 15 October 2026, gross ₹62,000 a month, basic + DA ₹31,000, 12 days of leave, joined 1 April 2019
- Salary for 15 of 31 days: ₹30,000
- Leave encashment 12 days x ₹31,000 / 30: ₹12,400
- Gratuity for 7 years 6 months (counted as 7): ₹1,25,192
- Total: ₹1,67,592. Wages by two working days after 15 October; gratuity by 14 November 2026.
FAQ