Section 17(2) of the Code on Wages 2019, in force since 21 November 2025, requires final wages within two working days of an employee's last day. Offrd's F&F module works out each component from payroll data, with 19 deduction heads and 13 exit payouts, and produces the settlement letter for e signature. It is built for Indian companies with up to 250 employees. Each settlement uses 10 credits, and credit packs start at ₹99 for 10.
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Before November 2025, most Indian companies settled full and final dues in 30 to 45 days, sometimes longer. There was no hard deadline for wage settlement specifically, and the practice drifted. Employees who resigned or were terminated often waited weeks for their last salary, leave encashment, and related payments.
Section 17(2) of the Code on Wages 2019 changes that. Final wages must now be paid within two working days of the employee's last working day. The rule covers all separations: resignation, termination, retrenchment, and retirement. There is no carve-out for seniority or salary level.
The important nuance is that wages and full F&F are not identical. The 2-day rule covers earned wages and final salary. Gratuity retains its 30-day timeline under the Code on Social Security 2020. Bonus follows the accounting year. Your settlement letter should state each component with its own deadline, not one aggregate date. Treating everything as a single 2-day obligation is an overstatement; ignoring wages in that window is non-compliant.
| Component | Before Nov 2025 | From Nov 2025 |
|---|---|---|
| Final wages | 30 to 45 days informal norm | 2 working days |
| Gratuity | 30 days (Payment of Gratuity Act) | 30 days (Code on Social Security) |
| Bonus | Within accounting year | Within accounting year (unchanged) |
| PF settlement | Employee-initiated via EPFO | Employee-initiated via EPFO (unchanged) |
| TDS certificate | By 15 June after the financial year | By 15 June after the financial year (unchanged) |
What needs to be calculated and paid as part of a complete F&F settlement.
Calculated based on days actually worked in the final month. Salary advances or outstanding loans are deducted from this figure after disclosure in the settlement letter.
Unused earned leave is encashable under the Shops and Establishments Act of the relevant state. The amount depends on the leave balance and daily wage rate. Casual and sick leave are generally not encashable.
Payable under the Code on Social Security 2020 to employees with five or more years of continuous service, or one year for fixed term staff. The formula: last drawn basic plus dearness allowance, divided by 26, multiplied by 15, multiplied by completed years.
Payable where applicable under the Code on Wages 2019, within the accounting year. Eligibility depends on salary threshold and tenure. Stated separately in the settlement letter with its own payment timeline.
Travel, mobile, internet, or other reimbursements submitted before the last day should be cleared as part of the settlement. Leaving these unresolved after exit creates difficulty on both sides.
If the employer waives the notice period, the equivalent salary is paid out. If the employee leaves without serving notice, the equivalent is recovered. The direction and basis should be documented in the settlement letter.
A complete F&F settlement is not just a payment. It involves a set of documents that the employer issues and, in some cases, both parties sign. Missing any of these creates gaps that show up during background verification, PF withdrawal, or tax filing.
The no-dues process runs in parallel. IT, admin, and accounts each need to confirm that company property has been returned, access revoked, and outstanding liabilities cleared before the settlement is finalised. Getting all three departments to respond promptly is where most of the time goes in practice.
An itemised letter stating every payment component, the deadline for each, deductions taken, and the net amount payable. The primary document of record for the settlement.
Confirms the last working day and that the employee has been formally released from duties. Without it, the employee cannot join a new employer who requires background verification.
Certifies the period of employment, designation held, and generally a comment on conduct. Issued alongside the relieving letter.
Required for the employee's income tax return. Should cover the period of employment in the relevant year and reflect actual TDS deducted and deposited.
Form 13 for transfer to a new employer's account, or Forms 19 and 10C for withdrawal. The employee initiates this through EPFO, but the employer must ensure UAN seeding was completed during employment.
Signed confirmation from IT, admin, and finance that all company assets have been returned, access deactivated, and no financial obligations remain on either side.
The settlement letter is both a compliance document and a record of mutual acknowledgment. These are the elements it needs to cover.
Full name, designation, department, employee ID, date of joining, and last working day. These must match the employee's records exactly to avoid discrepancies during background verification.
Every component listed separately: pro-rated salary, leave encashment, gratuity, bonus, reimbursements, notice pay. Each with the amount due and the date by which it will be paid.
Salary advances, outstanding loans, notice pay recovery, TDS, and professional tax each listed with the basis and amount. No deduction should appear without prior disclosure in this letter.
The final amount after all deductions, and how it will be paid. Bank account details should be confirmed before the last day to avoid complications after access is revoked.
Wages within 2 working days, gratuity within 30 days, bonus within the accounting year. Stating each timeline separately protects the employer from a gratuity delay being treated as a wage default.
An authorised HR or finance signatory on behalf of the company, and the employee's acknowledgment. Disputes over any component should be resolved before the letter is signed, not after.
Not everything in the F&F payout reaches the employee in full. Several deductions are permissible under law, and some are mandatory. The rule is that every deduction must be disclosed and itemised. A settlement letter that shows only a net figure without explaining the deductions is incomplete and difficult to defend in a dispute.
One area handled badly in many companies is bonds and non-competes. If the employee signed a bond, a non-solicitation agreement, or a confidentiality clause, the settlement letter should explicitly state whether those obligations survive the separation. Silence on this becomes a problem when the employee joins a competitor or contacts former clients.
Offrd's Full & Final Settlement module sits under Employees, with two tabs: Exit Letters and Full & Final Settlement. Both pull from the same employee record so the figures you see match what the offer, payslip, and onboarding modules already hold.
Generate Resignation Acceptance, Relieving Letter, or Experience Letter per employee. Pick the letter type from a single dialog. Name, designation, joining date, and CTC slot in from the employee record without manual rework.
Each settlement gets a unique reference in the format OFFR/FNF/YYYY/NNNN and a status badge that moves from Draft to Approved. Payable amounts shown in green, deductions in red, last working day, and created date all on one row.
Standard heads load from the employee's salary structure: Basic, HRA, Special Allowance, DA, Sodexo, Broadband Allowance. Custom components configured at the org level flow through. Edit Actual and Earned values per row, totals recalculate.
Professional Tax, Income Tax (TDS), Labour Welfare Fund, Notice Period Recovery, Asset Recovery, Loan Recovery, Advance Salary Recovery, Insurance Premium, Bonus Recovery, Leave Encashment Deduction, Gratuity Recovery, Employee EPF, Employee ESI, and more. Every line itemised, nothing buried in a net figure.
Add Gratuity, Leave Encashment, Ex Gratia, Retention Bonus, Travel Reimbursement, Fuel Reimbursement, Mobile Reimbursement, Food Coupon Refund, Expense Claims, Relocation Allowance, Loyalty Bonus, Final Incentive, or Special Payout. Thirteen common exit heads available without configuration.
Capture Signatory Name and Designation at the bottom of the editor. Approve moves the settlement out of Draft and locks the figures. Download produces the signed settlement letter PDF, ready to send. Approved records are read-only on subsequent visits.
Exit letters, F&F calculations, and the signed settlement letter, all from one employee record.