What Should Be Included in a Full and Final Settlement for a Resigning Worker?

Full and Final Settlement for Resigning Worker

If a worker completes six years and resigns, their full and final settlement should include:

1. Gratuity on basic salary
2. Notice Salary
3. Bonus
4. Unpaid Salary
5. Balance Leave
6. Can we pay retrenchment compensation also?

Kindly let me know if any payments have been inadvertently omitted.

Regards,
Raju Shriname

If gratuity is being paid as per the Gratuity Act, it shall be paid on basic + DA. Since it is a case of resignation, the payment of retrenchment compensation does not arise. Please check if any claims for reimbursement for travel or any incentives are due to be settled also.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

Criteria for Retrenchment Payment

What is the criteria for the retrenchment payment? Can it be applicable to a single worker if we can't give him any work due to any reason?

Regards,
Raju Shriname

Where is the question of retrenchment here? You have clearly said that "If an employee resigns." This means the cessation of employment is voluntary, and the company has not terminated him. Therefore, prima facie, you don't even need to think of "retrenchment compensation."

You have mentioned "Notice Pay." The way you included it in your settlement looks like you are contemplating paying the notice period also. Then you have asked him to go, right? In that case, it is a forceful resignation and not voluntary, right? If this is the case, then you need to pay retrenchment compensation. Otherwise, if you had intended the recovery of the notice period (employee has to serve), then there is no "payment" we need to assume, but it is "recovery," let's understand.

So be clear about the complete background of the exit of this or any other employee for that matter so that there would not be any ambiguity in dealing with such settlements.

Regards,
V. Balaji

I also totally agree with Mr. Balaji. In the case of resignation by the employee, the question of paying notice pay or retrenchment benefit does not arise.

Regards,
Aroop

Thank you for your valuable suggestion. That means retrenchment is given only when we terminate a worker, regardless of the reason. But how do we calculate this amount—on the basic salary or the gross salary, as we calculate gratuity based on the basic salary?

Regards,
Raju Shriname

Understanding Retrenchment and Compensation

Retrenchment means termination for any reason like a surplus of staff except for the following reasons:

1. Termination by way of punishment like dismissal.
2. Termination by way of retirement, resignation, or VRS.
3. Termination by way of continued ill health.
4. Termination on the expiry of the period of a contract in cases where a workman has been appointed for a fixed tenure.

Retrenchment compensation is calculated based on basic salary + DA + other allowances but not on bonus. Gratuity shall also not be considered since it is not a wage.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai