Full And Final Settlement
Meaning & Definition
Full and Final Settlement is the process where all outstanding dues of an employee are settled after terminating or resigning. It comprises payment of unpaid salary, leave encashment, bonus, reimbursements and statutory payments. The purpose of the full and final settlement is to finalise the financial obligations of both the employer and employee before closing the employer-employee relationship.
Why Full and Final Settlement Matters?
- Ensure that all employment agreements are fulfilled and all outstanding obligations have been paid.
- Providing a high level of financial transparency between employers and employees.
- Assist in providing correct payroll and addressing issues relating to exit management.
- Facilitate the offboarding of employees from their employers successfully while ensuring compliance with any regulations relating to their offboarding.
- Help avoid any disputes in the future regarding unpaid payables.
Legal & Regulatory Considerations
The timelines and components of your full and final settlement will depend on your employment contract, policies within the company regarding terminations and the Labour Laws applicable to your work. You need to ensure that you receive your final wage, any leave encashment and payment of any statutory dues such as PF or gratuity as required by law within the required timeframes.
