Full & Final (F&F) Settlement
Full and Final (F&F) settlement refers to the process of calculating and paying all dues owed to an employee upon separation from a company, whether through resignation, termination, or retirement. It ensures both the employer and employee close out all financial obligations before the employee formally exits.
An F&F settlement typically includes unpaid salary up to the last working day, encashment of unused earned leave, pending bonus or incentives, gratuity (if eligible), reimbursements, and deductions for notice period shortfall or unrecovered loans/advances. The Ministry of Labour recommends settlement within 2 working days of the last working day, though many companies process it within 30-45 days.
Key points
- ✓ Includes last drawn salary, leave encashment, bonus, gratuity, and reimbursements
- ✓ Deductions cover notice period shortfall, loan recovery, and asset non-return
- ✓ Labour codes recommend settlement within 2 working days of the last working day
- ✓ Form 16 for the part-year worked must still be issued after F&F processing
- ✓ Delayed F&F settlements can attract complaints under labour welfare provisions
Example
An employee resigning with 15 unused earned leave days and a last-drawn salary of ₹50,000/month would have their F&F settlement include the pro-rata salary for days worked in the final month, plus leave encashment of roughly ₹25,000 (15 days × per-day salary), minus any notice period shortfall deduction.
Frequently asked questions
How long does an F&F settlement take in India?
Is F&F settlement taxable?
What can be deducted during F&F settlement?
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