Pay Hike Dilemma: Should We Use the Old or New Rate for Final Settlement?

Hi friends,

We announced a pay hike for an employee on 1st March. He resigned on 16th March, but we asked him to continue until 7th of April. Now, in the F&F salary calculation for the seven days in April, is it okay if we calculate at the earlier rate or do we have to do it at the revised rate?

I would be grateful if anyone could answer my query.

Thanks,
Neel

It depends on the type of pay hike. Whether the same was for all the employees or only for that particular employee as a part of retention.

If it is for all, then F&F settlement should be calculated considering his new salary; else, the old salary has to be considered for his F&F settlement.

Hi Neel,

In your description for the pay hike, you have mentioned that you announced it on 1st March. Did you specify when the revised salary would be effective? I mean, did you mention this with effect from 1st March? If you did, then the Full and Final Settlement (F&F) will be based on the new salary; otherwise, the old salary would be applicable.

I assume you have completed the F&F process for the concerned employee by now, in line with your request date. Please let me know how you conducted the F&F for the employee.

Thanks,
Geetika

Neel,

If you are paying the March salary as per the new structure, the Full and Final (F&F) settlement will also follow the new structure. If the salary hike has not been confirmed in writing, then you have the option to process the F&F at the old rate as well.

Anand

His F&F settlement will be according to the new salary, as you already received the salary for March with the revised rate according to the salary revision effective March 1st.

Thanks

Hi Neel, :P

I think you must calculate the physical working days of the employees during the increment date to the resignation date. If it is =>2/3rd of the total days, then you should give him his full and final settlement according to the new rate; otherwise, you can calculate his F&F only giving arrears for the current month, and the rest of the compensation will be according to the old wages.

Regards,
Sachin Pathak
Manager-HR
RR Honda, Delhi
Email: sachi_bh12@rediffmail.com, Sachin@rrhonda.com