How Long Should We Wait to Settle Unclaimed Full and Final Settlement Amounts?

Full and Final Settlement Time Period

I want to know what the actual time period is for settling the full and final settlement account. If a worker or employee leaves the job and does not come to receive their full and final amount, how long should we wait before mentioning their FNF amount in the account?

Handling Unclaimed FNF Amounts

If we have taken all necessary actions to give the FNF amount but the employee does not come to receive it, what should we do in this situation? How many months should we keep this amount as unpaid in the account?

Thank you.

Dear Nayan,

Consequent upon the termination of service of an employee for whatsoever reason, the responsibility of the employer ends after he tenders to the ex-employee the latter's dues. Once it is done, the employer has no further liability if the ex-employee does not turn up to collect his dues. But remember that the process of tendering payment should be carried out in a non-controversial manner.

I am sure this will help. In case of any further issues, please come back.

Regards,
S.K. Johri

This can be treated as unclaimed wages/salary for up to 2 years. After two years, the same can be booked as income until the employee claims it.

This is a wrong stance and can get you into trouble.

Understanding the Payment of Wages Act

The Payment of Wages Act, as well as the various Labor Welfare Act regulations, are very clear. You cannot misappropriate an amount due to an employee.

Steps to Follow for Full and Final Settlement

1. Send a notice to the employee that their full and final amount is ready. You need to send it to their official (permanent as well as current) residence as per the records in your files. The notice must be sent by registered AD, and the proof of delivery must be kept for reference.

2. If you have the account number (salary account), you must deposit the same in the account if you do not get a response. It is preferable that you specify in the notice that you will deposit it if they do not respond.

3. If the above is not possible, and they do not come to take it, you must put the amount in the "Unpaid Wages Register."

4. After a period of 3 years from when the original amount was due, the same must be deposited with the Labor Welfare Fund. You cannot under any circumstance claim it as your money/profit.

Please note that this also applies to the Statutory Bonus that is due to an employee and is not paid to them when they leave the organization.