How Long Should Full & Final Settlement Take After Notice Period? Seeking Advice!

Dear All, Please suggest to me how much time a company should take for the Full & Final Settlement after an employee has served their notice period and a proper handover has been completed. Is there any act or process for it?

Thanks,

Regards,
J.N. Modi

If your company's HR policies are made properly, then there is no reason to delay. If the person submits their resignation and serves the complete notice period, then you have to issue the clearance within 3 days and make all the payment dues on the last working day. You can confirm from other branches, and if required, the entire company about any dues against the staff concerned. Regarding the disciplinary/administrative action, you can get confirmation from the Admin Department before relieving the person.

In case of retirement, you can stop their PF deduction 3 months before retirement/superannuation, and you can submit Form 10C and Form 19 on their last working day to the PF Office. Within one or two months, their pension will also be affected.

In case of termination or resignation without the full notice period, you can take an undertaking from the terminated/resigned staff that "As the resignee/terminated staff is leaving the service before completing all the clearance formalities/procedures, the settlement may take longer than the normal case. In case of a delay in settlement for more than 6 months, the concerned should not approach any court of law to get their dues settled."

Hope I have cleared your doubt. In case of any further queries, please revert back.

Regards

Thank you for the immediate reply. My last company has repeatedly informed me that my settlement has been under process for the last 20 days. This includes one month's salary, bonus, and leave encashment. Kindly advise me on what legal action I should take.

Thanks,
Regards,
J.N. Modi

I suggest that you take a few necessary precautionary measures in the future to avoid such panicking situations. It's always better for anybody to document the final settlement communication through email or written communication, rather than oral communication. This way, you can legally claim your rights if the issue is not sorted out within the given timeline.

I too have the same doubt. Kindly clarify for me, if we do not receive our F&F, should we file a lawsuit against the company or not? Does the law specify any timeline for this? I am looking forward to your kind suggestions.

Thank you.

Regards

The employer is bound to settle an employee's account upon cessation of their employment with the organization. This is a statutory obligation on the employer. Settlement shall be for the following and their respective Acts:

- Earned leave: Factories Act / Shops and Establishment Act.
- Unpaid salaries: Payment of Wages Act.
- Gratuity: Payment of Gratuity Act.
- Bonus: Payment of Bonus Act.
- Notice Pay: As per the terms and conditions / policy of the company.

The time limit varies from organization to organization, but it shall be within a reasonable time. The attached is the format for final settlement. This can be used in case you need it.

Regards,
YAGNIAH K
Manager - HR

I have a query regarding F&F payment. Is there any standard rule set for this payment? For example, from the last day of working, how much time is set to make the payment?

Another query is: Is it technically right if the salary is being paid first and then the others, like leave encashment and gratuity (if applicable), afterwards?

Regards,
Gargi Mitra

The Full and Final Settlement Payment should be made within a reasonable time. The meaning of the term "reasonable time" varies from time to time, company to company, and place to place.

Yes, the company can make the regular payment initially during the regular payday (for which they can obtain a pre-receipted certificate). Furthermore, they can calculate the Notice Pay, Gratuity, Leave Encashment, Retrenchment compensation, or Superannuation Fund, etc., within a reasonable time period. Additionally, before November 30th of the next financial year, they can settle the Bonus payment.

I hope I have clarified your doubt. In case you have any other doubts, you can seek assistance from our learned members. All the best.

Regards