Hi, plz help me to understand full and final settlement at the time of leaving the company. what are the factors should be kept in mind at the time of doing final settlement. Prativa
From India, New Delhi
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2From India, New Delhi
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Hi Prativa,
During the preparation of the Full & Final settlement of an employee, we have to keep in mind the payable salary and total deductions. In the payment, we have to consider the salary status, the leave status, and any applicable bonuses. On the other hand, in the deduction part, we include any advances taken, Notice period recovery if applicable, and any other liabilities the employee has with the organization.
For example, if an employee's gross monthly salary is Rs. 10,000, and he resigns on the 1st of July with a notice period until the 31st of July as his last working day with the organization, and he has 15 earned leaves in his account, then while preparing the Full & Final statement, we have to pay him the complete month's salary, the earned leaves amount, and any applicable bonus according to the HR policy.
Regarding deductions, we consider the PF amount, ESI deduction, and any applicable Notice period deductions.
I hope this clarifies the process for you.
Regards,
Amit Seth
From India, Ahmadabad
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During the preparation of the Full & Final settlement of an employee, we have to keep in mind the payable salary and total deductions. In the payment, we have to consider the salary status, the leave status, and any applicable bonuses. On the other hand, in the deduction part, we include any advances taken, Notice period recovery if applicable, and any other liabilities the employee has with the organization.
For example, if an employee's gross monthly salary is Rs. 10,000, and he resigns on the 1st of July with a notice period until the 31st of July as his last working day with the organization, and he has 15 earned leaves in his account, then while preparing the Full & Final statement, we have to pay him the complete month's salary, the earned leaves amount, and any applicable bonus according to the HR policy.
Regarding deductions, we consider the PF amount, ESI deduction, and any applicable Notice period deductions.
I hope this clarifies the process for you.
Regards,
Amit Seth
From India, Ahmadabad
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Hi Prativa.. If your company is paying incentives then definitely you should count Incentives too in the payable amount.. Regards, Amit Seth.
From India, Ahmadabad
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From India, Ahmadabad
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Hello Prativa,
While doing full and final settlement, the following steps should be taken:
1. Check his/her appointment letter for the notice period clause (level-wise may differ).
2. Then decide when to relieve him.
3. Determine whether to relieve by adjusting leave (PL) balance towards his notice period or not (in some companies, they encash the leave balance and recover the full notice period, which is actually not a good practice).
4. Next, check his leave balance - whether he has taken extra leaves or not. If yes, then recover through F&F. Calculate his PL leaves for the period he worked during the current year.
5. Check what his salary will be for the current month - if there is not enough leave balance for recovering NP, you can adjust his net salary towards NP.
6. Always calculate the amount of the notice period on the gross payment for the month (Basic+ other allowances that are paid in salary).
7. Then, check whether there are any pending amounts like LTA/Medical and also check whether by any default you paid him extra. Some companies pay LTA/Medical in advance, so in such cases, you have to deduct the amount or pay as the case may be.
8. Check the total number of years of his service for calculating Gratuity. You have to pay him only if he completed 5 years of service in your company. For this clause, please check the Gratuity Act. The formula for this is ((Last Basic + DA) / 26 days) * 15 days * number of years completed.
9. Calculate his bonus amount. For the payment of Bonus, there are two options - you can pay him a bonus in his full and final settlement or you can pay him a bonus during Diwali time. There is a clause in the Bonus Act by which you can pay a bonus to ex-employees within eight months from the date on which you paid to your current employees after taking such an application from them.
This is a really important procedure, so please handle F&F with care.
Hope this information helps you. For any further clarifications or formats, please email me at limaye.kedar@rediffmail.com or kedar@hpfl-india.com.
Best Regards,
Kedar
From India, Pune
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While doing full and final settlement, the following steps should be taken:
1. Check his/her appointment letter for the notice period clause (level-wise may differ).
2. Then decide when to relieve him.
3. Determine whether to relieve by adjusting leave (PL) balance towards his notice period or not (in some companies, they encash the leave balance and recover the full notice period, which is actually not a good practice).
4. Next, check his leave balance - whether he has taken extra leaves or not. If yes, then recover through F&F. Calculate his PL leaves for the period he worked during the current year.
5. Check what his salary will be for the current month - if there is not enough leave balance for recovering NP, you can adjust his net salary towards NP.
6. Always calculate the amount of the notice period on the gross payment for the month (Basic+ other allowances that are paid in salary).
7. Then, check whether there are any pending amounts like LTA/Medical and also check whether by any default you paid him extra. Some companies pay LTA/Medical in advance, so in such cases, you have to deduct the amount or pay as the case may be.
8. Check the total number of years of his service for calculating Gratuity. You have to pay him only if he completed 5 years of service in your company. For this clause, please check the Gratuity Act. The formula for this is ((Last Basic + DA) / 26 days) * 15 days * number of years completed.
9. Calculate his bonus amount. For the payment of Bonus, there are two options - you can pay him a bonus in his full and final settlement or you can pay him a bonus during Diwali time. There is a clause in the Bonus Act by which you can pay a bonus to ex-employees within eight months from the date on which you paid to your current employees after taking such an application from them.
This is a really important procedure, so please handle F&F with care.
Hope this information helps you. For any further clarifications or formats, please email me at limaye.kedar@rediffmail.com or kedar@hpfl-india.com.
Best Regards,
Kedar
From India, Pune
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Hi Kedar, the points gvn by u are very informative. I’ll takecare all these things at the time of doing f & f stlmnt. Prativa
From India, New Delhi
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From India, New Delhi
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Dear Vinay, Kindly find the Attached formats. With Best Regards Kedar
From India, Pune
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From India, Pune
Acknowledge(0)Amend(0)CiteHR is an AI-augmented HR knowledge and collaboration platform, enabling HR professionals to solve real-world challenges, validate decisions, and stay ahead through collective intelligence and machine-enhanced guidance. Join Our Platform.
Full n final settlement.doc