Full and Final Settlement Rules Explained: Exit Salary Payout In 2 Days From April 1
New labor codes in India mandate that companies complete full and final settlements with employees within two working days of their last day, starting April 1.Summary
The new Code on Wages, 2019, addresses the long-standing issue of delayed full and final (FnF) settlements for employees in India. Effective April 1st, companies are legally required to pay all outstanding dues to departing employees – including final salary, leave encashment, bonuses, gratuity, and reimbursements – within just two working days of their last day of employment. This applies to all separation types: resignation, termination, retrenchment, retirement, or death during service. The new rules, consolidated from 29 existing labor laws, aim to reduce financial stress and build trust between employers and employees. FnF settlements are comprehensive, covering not only the final month’s salary but also accounting for any deductions or liabilities. Key components include final salary (pro-rata basis), leave encashment, bonuses, gratuity (potentially after one year of service under revised provisions), reimbursements, and legally permissible deductions. The regulations mandate gratuity payment within 30 days of qualification and exit.
(Source：Goodreturns)