Need Help with Final Settlement Calculations and PF Deductions – Any Advice?

Dear All,

One of our employees has submitted their resignation, and their last working day was 10th April 2007. I need your assistance with their full and final settlement.

THE FULL AND FINAL SETTLEMENT FOR 10 DAYS IN APRIL
Basic: Rs. 5400.00 for 10 Days - Rs. 1800.00
HRA: Rs. 3600.00 for 10 Days - Rs. 1200.00
Conveyance: Rs. 2000 for 10 Days - Rs. 667.00
Reset Allowance: Rs. 1000.00 for 10 Days - Rs. 333.00
P.F. Deduction (10 Days): Rs. 432.00
Leave Encashment (44 Leaves): Rs. 11700.00
PF Deduction on leave encashment: Rs. 1404.00

Please advise if the above calculation is correct and explain why we deduct PF on leave encashment. Additionally, most companies typically announce increments in April, but our organization has not done so yet. Should we reflect the increment in the Full and Final settlement?

Your prompt response would be highly appreciated.

Regards,
Nirmal

Hi Nirmal,

Thanks for sharing this problem. May I know why you deduct the 24% PF from his salary? The PF part of the employee is only 12%, and you are deducting 24% from his gross salary. 24% PF should be deducted from CTC. Please solve the query.

With regards,
Prem

Dear Nirmal,

You have come up with a good problem. According to you, the details are as follows:

Basic: Rs. 5400.00 for 10 Days, Rs. 1800.00

HRA: Rs. 3600.00 for 10 Days, Rs. 1200.00

Conveyance: Rs. 2000 for 10 Days, Rs. 667.00

Reset Allowance: Rs. 1000.00 for 10 Days, Rs. 333.00

P.F. Deduction (10 Days): Rs. 432.00 but PF will come to 216 only.

Leave Encashment (44 Leaves): Rs. 11700.00. Can you clarify more how you have calculated the same?

PF Deduction on leave encashment: Rs. 1404.00

Here also, it amounts to 950 only, as you have to deduct PF for 44 days only. So it will be 12% of the total basic payable for 44 days, i.e., 7920, and accordingly, the PF deduction amount will be 950 only.

No, it is not required to provide him with an increment too as he has not received any of the increment letters. He must have served the notice period, i.e., he must have given resignation in the last month. So definitely, he will not be eligible to avail the same.

Please clarify the method you have applied to calculate the Leave encashment.

Regards,

Amit Seth.

Dear Mr. Amit,

Thank you very much for your quick reply and valuable advice. Your calculation (PF for 10 days, leave encashment, and PF on leave encashment) is absolutely correct. The method I am using for leave encashment is: Basic/30 Days x No. of EL.

I would like to inform you that in our organization, for those whose salary is more than 10000.00, their PF deduction consists of 12% Employee's Share and 12% Employer's Share deducted from the employees' salary. In this scenario, PF deduction for 10 days and PF deduction on leave encashment will be applicable.

Secondly, why do we deduct PF on leave encashment? Please guide me in detail.

Regards,
Nirmal

Hi Nirmal,

Sorry for replying to you late.

Leaves are encashed based on the basic salary in some companies, while in others, it is calculated on the gross salary. Since these are paid leaves, the company needs to contribute to the PF department when submitting, which is deducted from the employee's amount and deposited into their PF fund. Additionally, these days are considered part of their employment.

I hope this clarifies things for you.

Regards,
Amit Seth

Dear Mr. Amit,

Thank you for your reply.

As I mentioned earlier, both employee and employer contributions have been deducted from the employee's salary. Therefore, PF deduction on Basic salary and Leave encashment is mandatory for us at the time of full and final settlement.

Secondly, regarding the bonus, since the employee left the company in April 2007, should we show the Bonus amount as "ADVANCE BONUS" in the full and final settlement?

Your prompt response would be highly appreciated.

Regards,
Nirmal

Hi Nirmal,

Sorry for the delayed response.

We encash leaves based on the basic salary, or in some companies, it is paid based on the gross salary. Since these are paid leaves and the company has to pay the contribution over the same at the time of submission to the PF department, it is deducted from the employee's amount as well. This amount is then deposited into their PF fund.

Moreover, these are considered parts of their working days of employment.

I hope this clarifies the matter for you.

Regards,
Amit Seth.

Dear All,

I have recently joined a construction company and unfortunately, have never been in HR. I am now told to work on the FFS for an employee who left us a couple of weeks back. In the month of June, she worked only for 15 days. She had no sick/casual leave to her credit except for 21 PL. As per her appointment letter, she is supposed to serve a notice of 1 month which she hasn't. Can you please guide me on how to go about her FFS? It's a little urgent.

Regards,
Jancy