Navigating Full and Final Settlements: Can Notice Periods Offset Leave Balances?

For the purpose of calculating the full and final settlement of an employee, can we adjust the notice period of the employee towards their existing leaves (for example: notice period = 60 days, existing leaves = 15, full and final settlement for 45 days)? If this is not possible, what are the legal aspects of full and final settlement? What is the basis for paying leave salary, whether it is only on Basic+DA or Gross salary? What are the legal issues regarding the payment of leave salary?

Regards,
Subrahmanyam

The notice period is generally there so that sufficient time is available for proper handover to be taken/given. Furthermore, it also helps in finding a replacement for the employee.

1. Basic salary + DA can be deducted from his final settlement [or any other amount as mentioned in the appointment letter]. The variable factors such as conveyance, allowances, etc., cannot be deducted from the settlement.

2. Leave days are not included in the notice period, i.e., if somebody wants to take 15 days leave after a notice period of 60 days, he would have to work another 15 days (60 + 15 = 85 days).

Ajmal Mirza
mirza_ajmal@yahoo.com

Dear Subhramanyam,

In my organization, we do not adjust the leaves that a person has during their notice period. Instead, we reimburse the leaves based on the basic salary. :)

Regards,
Prerna