Waiting for Final Settlement After Resignation: How Long Should It Really Take?

Hi, I am Babu. I have not received my settlement even though I resigned three months ago. I had completed all the formalities before leaving the organization, and they had relieved me as well. However, my settlement has still not been processed. May I know what the time limit is for an employer to make the settlement? Understanding this would help me determine if I should take legal action against them. Thank you.

Hi, there is no legal time limit. However, three months after completing all the formalities is a good time to make a full and final settlement for any reputable company. If you have completed all formalities, especially related to dues and income tax declaration, then send them a formal written request by courier. If there is no response to the same, then do send a legal notice and proceed.

Kind regards,
Dayanand L. Guddin

Settlement Timeframe for Employee Resignation

The time within which the settlement of an employee who leaves an establishment should be made shall be provided in the certified Standing Orders of the company. Since relieving is the termination of a service contract, the provision in section 5(2) of the Payment of Wages Act, 1936, shall also be interpreted as applicable. Accordingly, any amount due in the form of salary shall have to be paid within 2 days. In the case of gratuity, the payment shall have to be made within 30 days, failing which interest will have to be paid.

However, there may be some other reasons for not settling the amount, like the employee not getting an NOC from various departments, not furnishing necessary proof in support of income tax-saving investments on the basis of which only the employer can issue Form 16 later on, and so on. Therefore, before issuing a legal notice, please write to the employer and put your grievances in black and white.

Regards,
Madhu.T.K

For full and final settlement, 3 months is sufficient. If you have completed all formalities related to dues, you can email your HR department mentioning all details to expedite your settlement process.

I agree with Madhu's reply. All payments due related to salary should be released within 2 days as per the Payment of Wages Act. Regarding Full and Final settlement, every organization has its own timeframe, ranging from the same day (last date of leaving) to 90 days.

Dear All,

Kindly re-verify the applicability of the provisions of the Payment of Wages Act. There are several citations available regarding the non-applicability of these provisions in judgments by many high courts. Hence, it is advised to send a plain legal notice and then proceed.

Kind regards,

Dayanand L. Guddin

I agree with Mr. Madhu. If your employee is covered under workmen as per the definition in the Payment of Wages Act, it is legally binding to settle accounts within 2 days. (None of the companies do it, and it's not possible too).

If not, and if your organization is covered under the Employees' Standing Orders Act, you have to go by the date mentioned in your organization's employee standing order.

If your organization is not covered under both acts (i.e., employee strength less than 50 and full and final settlement of persons at managerial or supervisory levels), there is no time limit. Ideally, organizations settle within 1 to 3 months.

It depends on the organization. For example, some companies will settle within 45 days, while others will settle in 1 month.

Thank you.

It depends on the organization. For example, small companies may take 45 days to clear, while bigger organizations might clear in 30 days.