Process a full and final settlement
Calculate final salary, leave encashment, gratuity, notice pay and recoveries for a leaving employee, then approve and pay it.
On this page
A full & final (FnF) settlement pays everything owed to a leaving employee and recovers anything they owe, in one statement.
What is included
| Earnings | Deductions |
|---|---|
| Final salary, pro-rated to the last working day (with PF, ESI, PT and LWF) | Outstanding loans and salary advances |
| Leave encashment on the encashable leave balance | Notice shortfall recovery (if they left early) |
| Gratuity, when eligible | Asset recovery |
| Notice pay in lieu (if you asked them to leave early) | Other deductions |
| Approved expense claims not yet paid, and any bonus | TDS on the settlement |
Gratuity is 15/26 × last drawn Basic + DA × completed years. It applies from 5 years of service (or 4 years plus 240 days in the fifth year) and is capped at ₹20,00,000. The divisor for leave encashment (26 or 30) and the basis for notice pay (gross or Basic) are set in Payroll → Statutory Settings (see Statutory settings).
Before you start
- You need payroll.view to see settlements and payroll.manage to create or change them.
Start a settlement
- Go to Payroll → FnF Settlement ( open FnF Settlement). You can also click Start FnF settlement on an exit.
- Click Start settlement.
- Choose the Employee. Dates and notice period are filled in from their resignation if there is one.
- Check the Resignation / notice date, Last working day, Notice period (days) and Notice served (days). Leave notice served empty to work it out from the dates.
- Under Notice shortfall, choose Recover from employee (left early), Pay in lieu (company asked to leave early) or Waive.
- Add a Reason and click Calculate draft.
A still-working employee is put on notice, and they are removed from any draft payroll run for the months the settlement pays.
Adjust and approve
- On the settlement page, review the Earnings and Deductions & recoveries.
- Under Adjust & recalculate, change dates or enter Encashable leave days, Bonus / incentive (₹), Asset recovery (₹), Other deductions (₹) with remarks, and TDS on settlement (₹).
- Click Recalculate.
- When the figures are right, click Approve and confirm. The figures are locked.
Click Reopen to unlock an approved settlement that hasn't been paid yet.
Pay and close
- Click Mark paid.
- Enter the Payment date and a Reference such as the bank transaction number.
- Check the Employee exit status (it defaults to the exit type from the resignation record).
- Click Mark paid.
Paying closes outstanding loans, marks claims paid, marks the included adjustments processed, sets the employee's exit status and notifies the employee.
Print the statement
Click Settlement letter to open the Full & Final Settlement Statement with a signature block. Print it or save it as PDF.
The PF balance is not part of this settlement. EPFO settles it directly on the employee's claim. Cancelling a settlement lets the employee be included in payroll again.
Related
- Manage exits and resignations
- Running payroll and statutory settings: Payroll