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Ever wondered what happens when an employee resigns or is terminated, but their pending dues are delayed? This situation can frustrate employees, harm trust, and even create legal risks for your organization.
Take, for example, a consultant who completed a major overseas project but didn’t receive his salary, allowances, or relieving letters on time. The delay in his full and final settlement eventually led to legal action against the employer, highlighting how crucial it is for employers to follow proper procedures.
In this guide, you’ll learn what a full and final settlement is, the components it includes, the rules under the new labour codes, and practical steps for employers to ensure settlements are handled efficiently and compliantly.
A full and final settlement is the total amount an employee is entitled to receive when leaving an organization. This typically includes the last month’s salary, leave encashment, bonuses, reimbursements, and any statutory benefits.
It goes beyond exit formalities like relieving letters. It also covers financial and statutory obligations that must be settled before the employee’s exit is legally complete. Following proper full and final settlement rules ensures the employee leaves with all dues cleared and provides closure for both parties. For employers, understanding these rules is crucial to avoid delays, disputes, or legal complications.
The next section will break down the key components that make up a full and final settlement.
Under these codes, employers are required to complete full and final settlement rules within 2 working days of an employee’s last working day. This applies to resignations, terminations, dismissals, retrenchments, or closure of an establishment. Previously, settlements often took 30 – 45 days or more.
To comply, employers need to calculate all dues, approvals, and documentation in advance. Following these full and final settlement rules ensures smooth exits, prevents disputes, and keeps your organization legally safe.
A full and final settlement letter is an official document confirming that all dues have been paid, and the employee’s account with the organization is fully settled.
It protects the company from future claims or confusion. Issuing this letter is a key part of following full and final settlement rules. When combined with payslips, relieving letters, and experience certificates, it ensures transparency, professionalism, and legal protection in case of any disputes.
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Following the full and final settlement rules ensures a smooth exit process for employees while keeping your organization compliant. At Vishaal Consultancy Services, we focus on proper payments, documentation, and procedures to maintain trust and professionalism.
We help businesses handle settlements efficiently and accurately. With our expertise, you can issue legally sound full & final settlement letters, clear all dues on time, and avoid disputes, so you can focus on managing and growing your business confidently. Book your free compliance call today!
HR should provide the full & final settlement letter, final payslip, relieving letter, and experience certificate. Providing these documents together ensures transparency, protects the organization legally, and leaves the employee with a professional exit experience.
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