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How fast must full and final settlement be paid in India?

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Full and final settlement in India falls under section 17 of the Code on Wages: wages payable to an employee who resigns, is dismissed or is retrenched must be paid within two working days. Gratuity must be paid within 30 days of becoming payable. Company policy may describe a longer "F&F cycle", but it cannot lower the Code's minimums.

At a glance

  • Wages due on exit: within two working days of the exit event (Code on Wages, section 17(2)).
  • Leave encashment: wages in lieu of leave before the end of the second working day after quitting (OSH Code, section 32).
  • Gratuity: within 30 days of becoming payable (Code on Social Security).
  • Deductions: only those the Code authorises, up to 50% of wages in a wage period.

What goes into full and final settlement (F&F) in India?

ComponentBasisTiming
Salary up to last working dayCode on WagesTwo working days
Encashment of accrued leaveOSH Code section 32Second working day for quitting
Gratuity, if eligibleCode on Social Security30 days from becoming payable
Bonus dueCode on Wages section 26As per the bonus rules
Retrenchment compensationIndustrial Relations CodeOn retrenchment
Less: authorised deductionsCode on Wages section 18With the payment

"Two working days" in practice

The Code uses "within two working days of his removal, dismissal, retrenchment or, as the case may be, his resignation". Employers sometimes read the final working day, the date of acceptance or the date notice ends as the trigger. The Code text refers to resignation, and a government can set a different time limit for specific cases under section 17(3). Check any state rule that applies to your establishment.

Notice period, buyouts and recoveries

Recoveries from final pay must fit the Code's list of authorised deductions. If you are unsure whether a recovery, such as a notice shortfall, is allowed, ask for the clause in your contract and the payslip breakup. Read notice period in India.

If payment is late

Keep your resignation acceptance, relieving date and payslips. Raise it in writing with HR. The Code provides for Inspector-cum-Facilitators and enforcement through the labour authorities of the appropriate government. Seek legal advice if the amount is disputed.

Documents

A relieving letter and experience letter are not part of payment timelines. See relieving letter. For the term itself, see F&F settlement.

Sources

This is general information, not legal, tax or immigration advice. Rules change and your situation may differ. Consult a licensed attorney or qualified adviser.