Understanding F&F: Should PF and ESI Be Included When an Employee Leaves?

Hello all,

I have recently joined a company where I need to prepare MIS, so I just want to know what all things are included in F&F. Should I include the PF and ESI in this as the employee has left, or is something else also included in it? Please guide me on this. It's really urgent.

Regards, Suhrita

Hi,

The F & F settlement report is a final settlement done by the organization for the person leaving. It will consider all the dues that are applicable to pay to him, such as:

1) Salary
2) Gratuity, if applicable
3) Leave Encashment
4) LTA and Medical benefits, if applicable
5) PF and ESI deductions

Therefore, the F & F report is of vital importance.

I hope the above reply will solve your problem.

Thanks,
Amit Shah

Hi,

Along with the list which Amit has mentioned, I would like to add that when F&F is completed, the tax liability should also be considered. Necessary investment proofs should be obtained so that an accurate tax liability can be determined and deducted in the F&F settlement.

Cheers, Harshad

I would like to add one more point to the F&F, i.e. Signatures of No dues from the IT/Finance/Reporting Manager/HR department heads should also be included.

Thank you, Amit, for the information. Still, I have a query on this. The PF and the ESI are handled by an agency hired by our company as there was no HR earlier. So, all who leave the company are directly given the agency's number for contacting. Therefore, I cannot put anything in the F&F, can I?

Hi,

For PF, you need to have the Form 10 C and Form 19 filled out by the employee and submit them to the PF department. There is nothing to be done with ESIC.

Cheers,
Harshad

Withdrawing the PF is an entirely different process. It has nothing to do with F & F. In F & F, we only show the details of our contribution for that particular month.

Don't confuse withdrawal of PF with F & F. Withdrawal of PF can only be initiated after 2 months from the date the employee leaves the service. F & F is completed at the time of an employee leaving the service.

It should also cover:

Loan Balance:
Canteen Charges:
PF Deduction
ESIC Deduction:
Advance (Tour & Other)
Notice Salary if any (+/-)
Any Other Deduction:

Hello Suhrita,

Earlier, this question was raised by Prativa in June 2007. At that time, I submitted my points. Now, I am again forwarding those points for your reference.

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. 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. Check his leave balance - whether he took 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, then you can adjust his net salary towards NP.
6. Always calculate the amount of the notice period on gross payment for the month (Basic + other allowances which 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 is (Last Basic + DA / 26 days * 15 days) * number of years completed.
9. Calculate his Bonus amount. For payment of Bonus, there are two options - you can pay him a bonus in his full and final or during Diwali time. There is a clause in the Bonus Act by which you can pay a bonus to the 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; kindly do F&F by taking all care.

Hope this will help you. If you want any further clarification or any format, then kindly email me at the address below.

With Regards,

Kedar

In addition, we have to add Professional Tax and Labour Welfare Fund contributions for arriving at the Full and Final settlement of an employee.

Hi,

I believe you have received the answer to your query regarding PF consulting. You need to send them to the consultant. Fill out forms 19 and 10C and submit them to your consultant for clearance.

Thanks,
Amit Shah

Hi all,

I need some guidelines from you all. I had 1 year of experience in recruitment before my MBA. After my MBA, I joined a global organization. I started here as an onboarding coordinator in HR. Will this role be helpful for my HR career in the future? If yes, how long should I stay in this position? Please give your suggestions.

Hi Suhrita,

Please find the sample F&F Settlement Form which we use in our company. You may include certain other things pertaining to F&F settlement.

Regards,
Pradeep K

In the final settlement, PF and ESI will not be considered. Don't get confused; it should not be included.

Raghunath Deepala

Hi Suhritaguin,

How are you? I hope you have received a lot of information. I would like to add some points that have already been discussed:

1. Check the employee's date of joining (who submitted resignation).
2. Check the probation period as per company norms, whether it is 3 months, 6 months, or 1 year.
3. Check whether the employee has served the notice period as per company norms.
4. Also, check whether he has received clearances from all departments (mobile connection, laptop/desktop handover, and other company assets).
5. Check the employee's leave quota.
6. Check whether any dues are to be recovered from the employee.
7. Based on the above details, you can prepare the Full and Final Settlement (F&F).

Thank you.

The following can also be included:

- Conveyance deduction
- Leave encashment
- Mobile deduction - paid and unpaid bills
- Welfare fund
- Any other advance

Regards,

Sameer

Hi,

Please also include the unclaimed reimbursements to be paid and taxed along with settlements, which is very crucial. Additionally, consider performance-linked pay and statutory bonuses based on management's decision.

Remember to include the necessary income tax proofs to provide income tax exemption and to tax the settlement accordingly.

Thanks and regards,
Hema

Here is the corrected text with proper spelling, grammar, and formatting:

It should include:

1. Previous Month's Salary, if any, on hold
2. Current Month Salary
3. Proportionate Leave Encashment (PL, CL)
4. Deduct Notice Period (if any shortfall)
5. Deduct PF/ESIC/PT/IT/Canteen Facility
6. Deduct any arrears (Loan)
7. Receiving back all documents/laptop/mobile (if the company provides to him/her)

Hi friends,

One thing I couldn't understand is if ESI deduction is included in full and final settlement.

Dear All,

This is Arunodaya, MSW HR - a fresher working with the Oberoi Groups. With this email, I am adding a few things that need to be included in the Full and Final settlement of an associate:

- Wages to be paid for the current month
- PL Encashment/Excess of PL
- LTA
- Other Allowances to be paid
- City Ledger (deductions like Mobile Bill, any office property (Mobile, Car) used for personal needs)
- Loan and Salary Advance Deductions
- PF & ESI for the particular month
- Notice Pay
- Arrears to be paid

Warm Regards,
Arunodaya

Hi Malik,

When you pay wages even for a day in the Full and Final settlement, we need to deduct ESI. In simple words, ESI and PF are deducted on a pro-rata basis. PF can then be claimed using Form 19 and 10c.

Hi,

In case of incentives, it also has to be included. Similarly, if any recoveries in the form of salary advances also form a part of FNF.