Cheque Payments for Employee Settlements: What Are the Pros and Cons?

Advantages and Disadvantages of Cheque Payment for Employee Settlements

Can anyone help me with the advantages and disadvantages of using cheque payment for an employee's full and final settlement?

Regards

As raised by Raj, please share how you process the F&F in your organization. You need to keep valid legal proof of the amount paid to the employee. A demand draft is not possible, and bank transfers are not considered. A cheque issued with a number and a signed copy along with a declaration makes it legal proof of the employee receiving it. This information is stored in the employee file, thereby preventing future conflicts.

Regards,
Cite Contribution

Salary Transfers for Full and Final Settlement

Salary transfers are possible for full and final settlement. However, it will be impossible for you to create a record to attach it along with the full and final settlement worksheet. This is the reason why cheques are issued. In the full and final worksheet, the cheque number, date, amount, and bank details are mentioned. This facilitates us in presenting the matter before internal and external auditors.

Full and final settlements are generally not small sums of money to be paid in cash. Even in cases where you are unable to settle the amount on the date of the employee's exit, it is suggested to obtain the address for communication and forward the full and final worksheet and an advanced stamped receipt for the dues to the employee's address, clearly indicating that the cheque mentioned in the full and final worksheet will be forwarded upon receipt of the advanced stamped receipt.

As promised, upon receiving the advanced stamped receipt, forward the cheque by registered post with acknowledgment due and file this in the employee's personal file.

This procedure will also be relevant to bonuses payable to the employee after his exit. Generally, bonuses are declared a few months after the employee leaves.

Trust the matter is clarified.

Regards,
M.V. Kannan

Dear kannanmv, Excellent reply! One of the best, logical, and correct answers that I have seen recently. Such answers are the hallmark of an adept and experienced HR professional. I am quoting the most relevant points of your post. In addition to the ones given by you, I would also like to add a few other points:

It is not always possible or prudent to pay the full and final payments as normal salary since generally the data is pulled out from the Current Employee Salary Sheet/Database. This is important to prevent automatic payment of salary by mistake in subsequent months. Also, the name is struck off from the Employees Rolls. Moreover, such procedures are helpful since there would be no other opportunity (like next month's salary in case of Current Employees) to adjust any last moment leave/absences undertaken.

Dear Best HR, Because in the full and final worksheet, the cheque number and date are mentioned along with the amount and bank details. This facilitates us to present the matter before internal and external auditors. Full and final settlements are generally not small sums of money to be paid in the form of cash. This procedure will also be relevant to the bonus payable to the employee after his exit. Generally, the bonus is declared a few months after the employee leaves. Trust the matter is clarified.

M.V.KANNAN

Advantages of Cheque Payment for Full and Final Settlement

In this regard, the mode of settling the full and final settlement amount through a cheque also has another advantage. When a cheque is issued to a resigned employee for the full and final settlement, and he deposits the cheque into his bank account, he cannot later dispute the amount of the full and final settlement. The reason is that he himself accepted the cheque from the employer and deposited it into his bank account.

On the contrary, if the company were to transfer the full and final settlement amount to the bank account of the resigned employee, he can always argue that he had disputed the amount of the full and final settlement, yet the company transferred the same to his bank account.

Regards, MK