Navigating Resignation: Can Companies Withhold Relieving Certificates and Use PF for Loan Settlements?

Question 1: When an employee resigns, he is entitled to receive a relieving certificate as well as his full and final settlement letter. Usually, the settlement takes some time to process. However, the same does not hold true for a relieving certificate. Most companies, as a practice, give the relieving certificate along with the full and final settlement. I wish to know if the practice of withholding the relieving certificate until the full and final settlement is done is subject to the company's internal policies or if there is a law that regulates this requirement and specifically states if a company is allowed or not allowed to withhold the relieving letter until such time that the settlement takes place.

Question 2: It is generally understood that the company is not allowed to touch an employee's provident fund in lieu of settlement of loans provided to him by the company. Can the employee, at the time of rendering his resignation, authorize the company to utilize his PF balances to settle the outstanding loan amount? Is it possible for an employee to do this? If yes, then what is the procedure to be followed?

Hi,

The resignation needs to be accepted first, and then a proper relieving letter must be issued to obtain clearance from all parties involved. The full and final settlement is the last step, which should be completed within 48 hours.

Regarding the claim under the PF Act, it cannot be forfeited, attached, or authorized by the member to be claimed by the employer.

Sincerely,
[Your Name]

I am still unclear as to whether it is legally permissible for a company to hold the relieving letter until the full and final settlement is processed.

Is there a law around it, or is it a company's internal policy that determines its exit procedures?

The company can withhold the relieving letter because after receiving the relieving letter, the employee may refuse to sign the full and final settlement letter. We issue the relieving letter only after the signing of the full and final settlement. 😊

There is no fixed regulation that requires an organization to hold an employee's relieving letter until the full and final settlement is done. Though some, in fact, most companies issue the letter once the full and final settlement is done, sometimes just to be on the safer side and sometimes as part of the process.

In case of urgent requirements, you can request the organization to issue the same based on mutual understanding.

Provident Fund Regulations

The second question regarding the PF: companies cannot forfeit your PF account as the money going towards the PF goes to the PF department, which is a public entity and is not related to the company. At most, the PF amount can go to the beneficiary you have added to it at the time of filling the PF form. If not redeemed by the concerned parties, all this amount goes to the government. 

Hope this helps. 