Earn More · 7 min read
Full and final settlement in India: what you are owed, and when
Under the Code on Wages, final wages are due within two working days of leaving. What else goes into your F&F, what can be deducted, and what to do if it is late.
Krish Dalal
Founder and editor, PaisaExpert. Master's in Business Management, SP Jain School of Global Management, London. · Last updated 2026-09-26
For years, a four to eight week wait for the full and final settlement was treated as normal. The law has now caught up with the complaint. Section 17(2) of the Code on Wages says that when an employee resigns, is removed, dismissed or retrenched, or loses the job because the establishment closes, the wages payable must be paid within two working days. Many employers are still adjusting their exit processes, which makes it worth knowing exactly what you are owed.
What goes into a full and final settlement
| Item | What it is | When |
|---|---|---|
| Unpaid salary | Wages for the days you worked in your final month | Within two working days of leaving |
| Leave encashment | Payment for unused earned leave, as per company policy and state law | Usually with the settlement |
| Bonus or variable pay | Any bonus already earned, as per policy or statutory bonus rules | As per policy |
| Reimbursements | Approved expenses not yet paid | With the settlement |
| Gratuity | If you completed the qualifying service | Within 30 days of becoming payable |
| Provident fund | Your EPF balance | You withdraw or transfer it through EPFO |
What can be deducted
- Notice period shortfall. If you left without serving your full notice and did not buy it out, your contract may allow recovery of pay for the unserved days.
- Company property you have not returned, such as a laptop, phone or access card.
- Advances and loans still outstanding.
- Leave taken beyond your entitlement, if the policy makes it recoverable.
Every deduction should trace back to your contract, a policy you accepted, or something you signed. Ask for an itemised statement before you accept the final figure.
Tax on your settlement
- Salary, bonus and notice pay are taxed as salary in the year you receive them.
- Leave encashment on resignation is exempt for private sector employees only up to a limit, capped at ₹25 lakh across your career and restricted by your average salary and leave balance. The rest is taxable.
- Gratuity is tax-free up to ₹20 lakh across your career. Gratuity calculation shows how much yours is.
- Your employer issues a Form 16 for the months you worked. You will need it, with the one from your next employer, to file your return. Form 16 explained.
Documents to collect before you go
- Relieving letter.
- Experience or service certificate.
- Final payslip and the full and final statement.
- Form 16 for the part of the year you worked.
- Confirmation, in your EPFO passbook, that your last PF contribution landed.
What to do if your settlement is late
- Email HR with your last working day and ask for a payment date. Mention that the Code on Wages requires final wages within two working days.
- Escalate in writing to the head of HR or the finance team.
- If nothing moves, file a complaint with the labour department in your state. Under the labour codes, inspectors are now called inspector-cum-facilitators, and helping employees recover dues is part of the role.
- For gratuity specifically, the labour department's gratuity authority can order payment with interest.
What to do next
- Ask HR for a written list of your dues and deductions before your last day.
- Transfer your PF to your new employer using the same UAN.
- If you are close to five years of service, check your gratuity eligibility before you fix your last day.