Full and Final Settlement in India

What full and final settlement actually means

Full and final settlement, written most often as FnF or F and F, is the last money conversation between an employer and a departing employee. It closes the account on both sides.

Every working relationship leaves loose ends at exit. A part month of salary that has not run through payroll yet. A pile of earned leave the person never took. Gratuity, if the tenure crossed the threshold. A bonus that was declared but not paid. Travel and phone bills filed in the last week. On the other side sit the things the employee owes back, a salary advance, an equipment loan, notice not served, tax to be cut. The settlement is where all of that meets, gets totalled, and resolves into a single net figure.

So FnF is not one payment. It is a reconciliation. You assemble what is payable, you assemble what is recoverable, you net them, and you record the working so neither side has to argue about it months later. Done well, it takes a messy exit and makes it clean. Done badly, it becomes the thing a former employee complains about on review sites and, increasingly, the thing a labour inspector asks about.

It applies to every kind of separation. A resignation, a termination, a retrenchment when a role is cut, a retirement, the end of a fixed term contract, even an absconding case where the person simply stopped showing up. The components shift from one case to the next, and so does the arithmetic, but the duty to settle does not vanish because the parting was sour.

The two day wage rule, and what the Code on Wages changed

For years, Indian companies settled exits whenever the next payroll cycle came around. Thirty days was common. Forty five was not unusual. Some firms let it drift past sixty, especially when the parting was tense or the no dues form was stuck on someone's desk. There was no single statute that put a sharp deadline on the final wage, so the practice sagged.

That changed on 21 November 2025, the date the four Labour Codes were brought into force across the country. The Press Information Bureau confirmed the rollout, which folds twenty nine older labour laws into four consolidated codes. One of them, the Code on Wages, 2019, carries the provision that matters most for exits.

Section 17 of the Code on Wages sets the time limits for paying wages. Sub section (1) handles the routine cases, daily wages at the end of the shift, monthly wages before the expiry of the seventh day of the following month, and so on. Sub section (2) is the new teeth. It reads:

Read it slowly, because the breadth is the point. It does not say terminations only. It does not say involuntary exits only. Resignation sits in the same clause as dismissal. So an employee who quits of their own accord is owed final wages on the same two working day clock as one who was let go. There is no threshold of salary, no exemption for senior management, no separate treatment for someone on a fixed term contract. The deadline is flat across the workforce.

There is one release valve. Section 17(3) lets the appropriate Government set a different time limit where it considers that reasonable, and the section does not override any other law that already fixes a payment window. The central rules under the Codes were still being finalised through early 2026, so the prudent reading for any employer is to treat two working days as the live wage deadline and build the exit process to hit it.

The practical effect is uncomfortable for a lot of HR teams. A process built around a leisurely monthly cycle now has to produce a correct wage figure, run it past finance, and pay it, inside two working days of the last day. That is not a documentation tweak. It is an operational reset, and the firms that feel it most are the smaller ones that were drafting settlements by hand in a spreadsheet.

Wages, gratuity, bonus: three clocks, not one

The single most common error in the wake of the new rule is to assume the whole settlement is now due in two days. It is not, and overstating the deadline causes its own problems, because a team that thinks it has failed a legal duty starts cutting corners. The accurate picture is that different components run on different statutory clocks.

The two day rule is a wage rule. Gratuity is not wages. Bonus is not wages in this sense either. Provident fund is a separate withdrawal the employee drives. Each has its own governing law and its own deadline.

Why does this separation matter so much in practice? Because if you treat gratuity as if it were caught by the two day rule, you will either delay the wage payment while you compute gratuity, which breaches the wage deadline, or you will rush the gratuity figure and get it wrong. The clean approach is to split them on purpose. Pay the wage portion fast, inside two working days, and let gratuity and bonus settle on their own longer windows, each stated separately in the letter.

This is also why a settlement letter that shows component level deadlines protects you. If the letter says wages paid on the second working day, gratuity payable within thirty days, and bonus within its accounting year window, then a gratuity that lands on day twenty is plainly compliant, not a late wage. Collapse everything into one date and you invite the opposite reading.

Every component of a full and final payout

A complete settlement is a stack of line items, some owed to the employee, some owed back to the company. Before you can hit any deadline, you need to know what belongs in the stack. Here is the full set, with the reasoning behind each.

Pro rated salary for the last month

Almost nobody leaves on the last day of a pay period, so the final month is partial. You pay for the days actually worked, computed against the monthly salary and the working day count. If the person worked eleven days of a twenty two day month, you pay eleven twenty seconds of the monthly figure, adjusted for any unpaid absence. This pro rated salary is wages, so it falls squarely inside the two working day rule.

Earned leave encashment

Most employees leave with an unused balance of earned leave, also called privilege leave. That balance is convertible to cash at exit, valued at the daily wage. It is one of the larger swing items in a settlement, especially for long tenured staff who banked leave for years. Casual leave and sick leave usually lapse rather than encash. The full mechanics, including the state by state variation, get their own section below.

Gratuity

Gratuity rewards sustained service. It is payable under the Payment of Gratuity Act once an employee crosses the qualifying tenure. For permanent staff that tenure is five years of continuous service. For fixed term employees it is one year, on a pro rata basis. Because it can be a sizeable sum, it deserves careful calculation, and it carries its own thirty day deadline rather than the two day wage window.

Bonus, where it applies

Where the employee is covered by statutory bonus, any declared but unpaid bonus forms part of the settlement. It is stated separately because its timeline is different, within eight months of the close of the accounting year under Section 39 of the Code on Wages. Discretionary or contractual bonuses follow whatever the employment terms say, so read the offer letter and any policy before you commit a figure.

Pending reimbursements

Travel, mobile, internet, fuel, and similar claims submitted before the last day should be cleared as part of the settlement rather than left hanging. Reimbursements are a reimbursement of the employee's own spend, not income, so they are not generally taxed, but they do need supporting bills. Leaving them unpaid after the person loses system access turns a small sum into a sore point that lingers.

Notice pay, in either direction

Notice pay cuts both ways. If the employer waives the notice period and releases the person early, the equivalent salary for the waived days is paid out. If the employee leaves without serving the agreed notice, the equivalent is recovered. Which way it runs, and on what base salary it is calculated, has to be written down, because this is one of the most disputed lines in any exit.

Ex gratia and retention payouts

Some exits carry extra payments that no statute compels, a severance amount, an ex gratia goodwill sum, a retention or loyalty bonus that vested on a date, a final performance incentive. These are creatures of contract and company policy. If they were promised, they belong in the settlement, and they should be named for what they are so the tax treatment is clear.

Gratuity, in full

Gratuity is where a lot of settlements go wrong, because the rules feel simple and then turn out to have edges. Get the eligibility, the formula, and the tax treatment straight and the rest follows.

Who qualifies

Under the Payment of Gratuity Act, 1972, a permanent employee becomes eligible for gratuity after five years of continuous service with the same employer. The five year bar is waived where service ends because of death or disablement, in which case gratuity is paid regardless of tenure. Fixed term employees are treated more generously by the newer framework: they accrue gratuity on a pro rata basis and qualify after one year, not five, so a fixed term contract is not a way to sidestep the benefit.

The formula

For establishments covered by the Act, gratuity is calculated as last drawn wages, multiplied by fifteen, multiplied by the number of completed years of service, divided by twenty six. Wages here mean basic pay plus dearness allowance. The twenty six is the assumed number of working days in a month, and the fifteen represents fifteen days of wages for each completed year.

One subtlety trips people up. The redefinition of wages under the Code on Wages pushes basic pay up for many employees, because excluded allowances are now capped at half of total remuneration. A higher basic feeds the gratuity formula, so settlements computed under the new wage definition can run higher than the old spreadsheets predicted. Budget for that.

The thirty day clock and the interest tail

Section 7 of the Payment of Gratuity Act requires the employer to arrange payment of gratuity within thirty days from the date it becomes payable. Miss that window and the Act provides for simple interest from the due date to the date of payment, at the rate the Central Government notifies, unless the delay was the employee's own fault and the controlling authority cleared it in writing. So gratuity has a soft tail of cost if you sit on it. Pay it inside thirty days and the tail never appears.

Tax on gratuity

Gratuity is exempt from income tax up to twenty lakh rupees for covered employees, under Section 10 of the Income Tax Act. Anything above the exemption is taxable as salary, and tax is deducted at source on the excess, then reflected in the Form 16 for that year. For the large majority of small company exits the whole gratuity falls under the ceiling and no tax arises, but a long tenured senior leaver can cross it, so check rather than assume.

If you want the maths done for you, the gratuity calculator takes tenure and last drawn wages and returns the figure. For the underlying statutory background, the what is gratuity explainer walks through eligibility and the exceptions.

What continuous service means

The five year bar hinges on a phrase that carries more weight than it looks: continuous service. The Payment of Gratuity Act defines it, and the definition is wider than uninterrupted attendance. Service is not broken by authorised absence, sickness, accident, leave, a lawful strike or lockout, or a stoppage of work that was not the employee's fault. An employee who renders a set number of days in a year, commonly two hundred and forty, is treated as having been in continuous service for that year even if not physically present every working day.

This is where the edge appears. Some High Courts have read two hundred and forty days of work in the fifth year as enough to satisfy the five year requirement, which would make an employee with four years and a part year eligible. The reasoning has been followed in some jurisdictions and not settled uniformly across the country. So an employee close to the five year mark is a case to check against the position in your state rather than to dismiss out of hand. Treating tenure as a simple count of calendar years can understate who actually qualifies.

Leave encashment, and why the state matters

Leave encashment is the cash value of leave an employee earned but never used. It sounds mechanical, and the calculation is, but the right to encash and the caps on it come from state law, so the answer is not uniform across India.

The general principle holds everywhere. Earned leave, the leave that accrues with service and carries forward, is encashable at exit. The amount is the unused earned leave balance multiplied by the daily wage, where the daily wage is derived from the monthly salary. Casual leave and sick leave are different in character, meant to be used in the year rather than banked, and are usually not encashable.

What varies is the detail. Each state's Shops and Establishments Act, together with the Factories Act for manufacturing, sets how much earned leave accrues, how much can carry forward, and whether there is a ceiling on the accumulated balance. A company in Karnataka and a company in Maharashtra can land on different encashment numbers for the same tenure, because the carry forward rules differ. So the honest instruction is to check the rule for the state where the employee is engaged, not to apply a single national figure.

Tax on leave encashment

Leave encashment paid at the time of leaving is taxed as salary income for non government employees, but it carries its own exemption ceiling under the Income Tax Act, with the balance taxable. Government employees are treated more favourably. Because the exemption limit and its conditions sit in tax law rather than labour law, the cleanest practice is to run the leave encashment through the final payroll, deduct tax on the taxable portion, and let the Form 16 carry the record.

Notice period and notice pay

The notice period is the bridge between deciding to leave and actually leaving. It exists so the employer can plan a handover and the employee can wind down cleanly. In the settlement, it shows up as money, and the direction of that money depends on what happened during the notice.

There is no single national statute that fixes a notice length for all private employees, so the figure comes from the employment contract. One to three months is the usual range for permanent roles, shorter during probation. Make the clause reciprocal, the same notice on both sides, because a one sided clause reads badly and holds up poorly if it is ever tested.

Three situations cover almost every case. First, the employee serves the full notice, and there is nothing to adjust. Second, the employer waives part of the notice and releases the person early, in which case the salary for the waived days is paid out as notice pay. Third, the employee leaves without serving the full notice, and the contract allows the shortfall to be recovered, so a notice recovery appears as a deduction. Many contracts also let the employee buy out the notice, paying the equivalent rather than serving it, which is the same recovery by another name.

Whichever way it runs, write down the base it is calculated on. Notice pay computed on basic alone gives a very different number from notice pay on gross salary, and an unstated base is the seed of a dispute. The notice period guide goes deeper on buyouts, garden leave, and how to word the clause, and the statutory notice period page covers what the law requires where standing orders apply.

What you can deduct, and what you cannot

Not every rupee in the gross settlement reaches the employee. Several deductions are lawful, and some are required. The governing rule is simple to state and easy to forget under deadline pressure: every deduction must be disclosed and itemised. A settlement that shows only a net figure, with the subtractions hidden, is incomplete and hard to defend if it is ever challenged.

Deductions that are generally permissible

• Recovery of salary advances and loans. If the company advanced salary or extended a loan, the outstanding balance can be set against the payout. The original sanction document is the basis, so keep it on file.
• Notice pay recovery. Where the contract provides for it and the employee did not serve full notice, the shortfall is recoverable, as covered above.
• Tax deducted at source. Final salary, bonus, and the taxable slice of leave encashment and gratuity attract tax, which is cut at source in the final payroll and deposited with the government.
• Professional tax. Where the state levies it, professional tax is deducted on the final salary at the applicable slab.
• Provident fund and state insurance. The employee's share of provident fund and, where the wage ceiling applies, state insurance, is deducted on the final salary the same way it is every month.
• Asset recovery, with a documented basis. Where a company asset was not returned and there is a clear valuation and a signed acknowledgement, its value can be recovered. The basis has to exist before the deduction, not after.

The line you must not cross

You cannot hold back wages because an asset has not come back. This is the rule employers break most often, usually with good intentions, by parking the whole settlement until the laptop is returned. The law does not allow it. Wages are due inside the two working day window regardless of the asset position. Pay the wages, then chase the asset through a separate, documented route, an indemnity clause, a recovery line agreed in advance, or a structured handover schedule. Withholding wages to force a return swaps a small operational problem for a statutory one.

Bonds, non solicits, and surviving obligations

One area handled poorly in many companies is what survives the exit. If the employee signed a training bond, a non solicitation clause, or a confidentiality undertaking, the settlement letter should state plainly whether those obligations continue after separation. Silence becomes a problem the day the person joins a competitor or contacts a former client. A training bond, it is worth knowing, is enforceable in India only in narrow form, where the employer incurred a real, quantifiable training cost and the recovery is a reasonable estimate of it. A bond that merely locks a person in place tends to fail under the restraint of trade rule in the Indian Contract Act.

If the settlement runs late

Deadlines are only as real as the consequence of missing them, so it helps to know what follows a delay. The picture is not symmetrical across components, because each sits under its own law.

Gratuity carries the clearest penalty. Where the employer does not pay within the thirty day window, the Payment of Gratuity Act provides for simple interest from the date the gratuity became payable to the date it is finally paid, at the rate the Central Government notifies. The only escape is where the delay was the employee's own fault and the controlling authority cleared it in writing. An employee who is not paid can apply to the controlling authority appointed under the Act, which can determine and direct payment. So sitting on gratuity is not a free option. It accrues a cost and exposes the employer to an order.

Unpaid wages have their own route. The Code on Wages provides a mechanism for an employee to raise a claim for wages that were due and not paid, heard by an authority appointed under the Code, and it puts inspectors, styled inspectors cum facilitators, in place to oversee compliance. Because the two working day rule is now the live standard, a final wage left unpaid past that window is the kind of claim the system is built to hear. The defensible position for an employer is boring and effective: pay on time, document what you paid, and keep the signed settlement letter on file.

None of this is reason to panic over a settlement that lands a day late through a genuine banking holdup. It is reason to design the process so lateness is rare, and to write the component deadlines into the letter so a payment made on its proper clock is never mistaken for a default.

What the settlement letter must state

The full and final settlement letter is the document of record. It is part compliance instrument, part mutual acknowledgement, and it is the thing both sides reach for if memory diverges later. A thorough letter prevents most disputes simply by leaving nothing unsaid. These are the elements it should carry.

• Employee identification. Full name, designation, department, employee identifier, date of joining, and last working day. These must match the personnel record exactly, because a mismatch surfaces during background verification at the next job and casts doubt on the whole document.
• Itemised earnings. Every payable listed on its own line: pro rated salary, leave encashment, gratuity, bonus, reimbursements, notice payout, and any ex gratia or retention sum. Each with its amount and the date it will be paid.
• Itemised deductions. Salary advances, loans, notice recovery, tax, professional tax, provident fund, and any agreed asset recovery, each with the amount and the reason. Nothing buried.
• Net payable and method. The final figure after all deductions, and how it will be paid. Confirm the bank account before the last day, because once system access is revoked, fixing a wrong account number is slow.
• Component level timelines. Wages within two working days, gratuity within thirty days, bonus within its accounting year window. Stating each separately is what stops a lawful gratuity delay from being read as a wage default.
• Surviving obligations. A clear line on whether any bond, confidentiality, or non solicit clause continues after exit.
• Signatures. An authorised signatory for the company, with name and designation, and the employee's acknowledgement. Resolve any disagreement on a component before the letter is signed, not after.

A settlement letter that does all of this is not a formality. It is the cheapest insurance an employer can buy against an exit turning into a claim.

The documents an exit requires

A settlement is more than a payment. It comes with a small bundle of documents, some issued by the employer, some signed by both sides. A gap in the bundle does not show up immediately. It shows up months later, during the employee's background check, provident fund withdrawal, or tax filing, and by then it is awkward to fix.

• Full and final settlement letter. The itemised letter described above. The primary record of the settlement.
• Relieving letter. Confirms the last working day and that the person has been formally released from duties. Without it, a new employer that runs verification may not let the person join. The separation and relieving letter tool generates this from the employee record.
• Experience letter. Certifies the period of employment, the designation held, and usually a line on conduct. Issued alongside the relieving letter, and often the document the employee values most. Offrd's experience letter generator handles the wording.
• Form 16 tax certificate. The annual certificate of tax deducted from salary, needed for the employee's income tax return. It is due by 15 June following the financial year, and it should reflect the actual tax cut and deposited. Offrd now generates Form 16 from the payroll record.
• Provident fund transfer or withdrawal. Form 13 for transfer to a new employer, or Form 19 and Form 10C for withdrawal. The employee drives this through the EPFO portal, but the employer must have seeded the Universal Account Number and marked the exit date for the online claim to clear.
• No dues certificate. Signed confirmation from IT, admin, and finance that assets are returned, access is deactivated, and no money is outstanding either way.

Provident fund at exit

Provident fund confuses both sides at exit because people expect it to come through the settlement. It does not. The fund balance already sits in the employee's account with the Employees' Provident Fund Organisation, built from the monthly employee and employer contributions over the tenure. The employer does not pay it out. The employee claims it.

There are two routes. If the person is joining another covered employer, the cleaner route is transfer, moving the accumulated balance to the new account using Form 13, which keeps the service continuous for pension purposes. If they want the money, withdrawal uses Form 19 for the provident fund corpus and Form 10C for the pension, the Employees' Pension Scheme portion. Both run online through the EPFO member portal, provided the groundwork is in place.

That groundwork is the employer's real job here. The Universal Account Number must have been seeded and activated, the bank and identity details linked, and the date of exit marked in the EPFO system after the last working day. Skip the exit marking and the employee's online claim stalls, which generates a support ticket weeks after they have gone. A few minutes of housekeeping at exit saves a frustrating back and forth later.

The no dues process, where the time actually goes

On paper, the settlement is arithmetic. In practice, the slowest part is rarely the maths. It is the no dues clearance, the round of sign offs that confirm the employee owes nothing and has returned everything. This runs in parallel with the calculation, and it is where exits stall.

Three functions usually have to clear. IT confirms that the laptop, access cards, and any other hardware are back, and that system and email access has been revoked. Admin confirms desk keys, lockers, and physical property. Finance confirms that advances, loans, travel claims, and corporate card balances are reconciled. Each owns a piece, and the settlement cannot be finalised until all three respond.

The friction is coordination, not difficulty. Any one of the three can sit on the request for days, and because the two working day wage clock is now running from the last day, that delay is no longer harmless. The fix is to start the clearance before the last day, not after. Trigger the no dues round during the notice period, so by the time the person actually leaves, the only thing left is to total the figures and pay. Firms that wait until the last day to begin clearance are the ones that miss the wage deadline.

Note the asymmetry the law now imposes. The no dues process cannot be used as a reason to delay wages. If clearance is incomplete on day two, the wages are still due. So the clearance protects the company on assets and advances, but it does not buy time on the wage payment. Plan the process so the two never collide.

Resignation, termination, retrenchment, retirement, absconding

The two working day wage rule covers every separation type, so the deadline does not move from one case to the next. What moves is the content of the settlement, the extra components, and the documentation each scenario needs. Here is how the common cases differ.

Resignation

The most common exit. The employee gives notice, serves it or buys it out, and the settlement is largely the standard stack: pro rated salary, leave encashment, gratuity if eligible, less any notice recovery. The resignation acceptance, the relieving letter, and the experience letter complete it. Clean, as long as the notice question is settled in writing.

Termination and dismissal

When the employer ends the relationship, the wage deadline is identical, but the settlement may add severance where the contract or policy provides it, and the documentation needs more care because a contested termination can become a dispute. Keep the reason, the process followed, and any payment in lieu of notice on record. The wage clock still starts from the last working day.

Retrenchment

Where a role is cut for business reasons, retrenchment compensation can apply under industrial law for covered workers, on top of the standard settlement. The threshold and the formula depend on the establishment and the worker's status, so this is the scenario most worth confirming against the specific facts before committing a figure.

Retirement

Retirement is a planned exit, which makes it the easiest to settle on time. Gratuity is almost always in play given the tenure, leave encashment tends to be large, and there is usually enough notice to start the no dues process well ahead. The same component clocks apply.

Absconding

The hard case. An employee who simply stops coming in leaves the last working day itself in doubt, which makes the wage clock ambiguous. The right approach is process, not assumption. Send written warnings to the last known address, give a reasonable window to respond, and document each step before you treat the employment as ended and the dues as settled. Rushing to close an absconding case without that trail is what turns it into a claim later. The guide to absconding employees sets out the warning sequence.

The exit timeline, step by step

Pulling it together, here is a sequence that hits the deadlines instead of chasing them. The trick is that most of the work happens before the last day, not after, so that the two working day window is spent paying, not calculating.

1. On receipt of resignation or decision to exit. Acknowledge in writing. Fix the last working day. Note whether notice will be served, waived, or bought out.
2. During the notice period. Start the no dues clearance with IT, admin, and finance. Pull the salary structure, leave balance, advances, and loans. Confirm the bank account on file.
3. A week before the last day. Draft the settlement: earnings, deductions, net. Compute gratuity and leave encashment. Flag any component that needs a sign off.
4. On the last working day. Collect assets, revoke access, close the no dues round. Finalise the figures. Capture the signatory details.
5. Within two working days. Pay the wage portion of the settlement. Issue the relieving and experience letters. Mark the date of exit in the EPFO portal.
6. Within thirty days. Pay gratuity. Settle bonus within its accounting year window. Issue Form 16 by the statutory date for the year.

A worked example

Figures make the structure concrete, so here is one settlement, start to finish. The numbers below are illustrative, chosen to show the mechanics rather than to state any rule. Substitute your own and the method holds.

Take an employee resigning after six completed years. Monthly gross is fifty thousand rupees, of which basic and dearness allowance are twenty five thousand. The final month runs twenty four working days and the person worked twelve of them. Fifteen days of earned leave are unused. Four thousand rupees of travel claims are pending. A salary advance of ten thousand rupees is outstanding. Full notice was served, so there is no notice recovery.

Notice how the deadlines split inside one settlement. The wage portion, the pro rated salary, the leave encashment, and the reimbursements net of salary deductions, is due within two working days. The gratuity of eighty six thousand odd is not wages, so it rides its thirty day window. Gratuity here is well under the twenty lakh ceiling, so none of it is taxed. The letter states both timelines, and the net figure is one number the employee can check line by line.

How Offrd handles full and final settlement

Offrd is HR document software for Indian companies, built so the basics get done right without a payroll specialist on staff. The full and final settlement module sits under Employees, with two tabs, Exit Letters and Full and Final Settlement. Both pull from the same employee record as the offer letter, the payslip, and the onboarding file, so the figures you settle on match the figures the rest of the platform already holds. No re keying, no version drift.

Exit letters from the employee list

Generate the resignation acceptance, the relieving letter, or the experience letter for any employee from a single dialog. Name, designation, joining date, and salary slot in from the record, so the letter is ready in the time it takes to pick the type.

A settlement list with reference IDs

Each settlement gets a unique reference in the format OFFR/FNF/YYYY/NNNN and a status that moves from Draft to Approved. Payable amounts show in green, deductions in red, with the last working day and the created date on the same row, so a glance tells you where each exit stands.

Earnings that load from the salary structure

Standard heads come straight from the employee's salary structure, Basic, HRA, Special Allowance, dearness allowance, and any custom components configured at the organisation level. Each row carries an Actual and an Earned column, so the pro rated month is explicit, and totals recalculate as you edit.

Nineteen deduction heads and fourteen exit earnings

The deduction side gives you nineteen standard heads, among them professional tax, income tax, labour welfare fund, notice period recovery, asset recovery, loan recovery, advance salary recovery, bonus recovery, leave encashment deduction, gratuity recovery, and the employee shares of provident fund and state insurance. Beyond regular salary, you can add fourteen exit specific earnings such as gratuity, leave encashment, ex gratia, retention bonus, several reimbursement heads, relocation allowance, loyalty bonus, and a final incentive. Every line is itemised, which is exactly what a defensible settlement letter needs.

A signed settlement letter on approval

Capture the signatory name and designation at the foot of the editor. Approve, and the settlement leaves Draft, the figures lock, and download produces the signed settlement letter as a PDF, ready to send. Approved records are read only on later visits, so the record cannot drift after the fact.

For the rest of the lifecycle, the same record feeds the offer letter generator at the start, the payslip generator each month, and the increment letters along the way. The companion offer letters guide covers the joining end of the same journey.

Frequently asked questions

Primary sources

The legal points in this guide trace to the statute and the government record, not to secondary commentary. The exit deadline, the gratuity timeline, and the bonus window are quoted from these:

• Code on Wages, 2019, Section 17 (time limit for payment of wages) and Section 39 (time limit for payment of bonus). Official text, India Code, Ministry of Labour and Employment: indiacode.nic.in.
• Implementation of the four Labour Codes with effect from 21 November 2025. Press Information Bureau: pib.gov.in.
• Payment of Gratuity Act, 1972, Section 7 (determination and time limit for payment of gratuity). India Code: indiacode.nic.in.

This page is for general information. Full and final obligations depend on the applicable state laws, the employment contract, and the facts of each exit. For a specific case, consult a labour law practitioner.