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Calculate your Full and Final Settlement in a click!
F&F Settlement entails the clearance of all dues between an employer and an exiting employee. Full & Final Settlement includes all the amounts that the company needs to pay the employee pending salary, leave encashment, gratuity, bonus, and reimbursements, from which all dues owed by the employee, such as notice period, loan repayment, or return of company property, should be deducted.
The procedure is followed in any mode of exit, whether it is resignation, termination, retrenchment, retirement, or closure of the organization. Our FnF Calculator takes care of each element under the present statutes.
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Under Section 17(2) of the Code on Wages, 2019 – in force since the Labour Codes took effect on 21 November 2025, employers must pay all wage dues within two working days of the employee’s last working day. This applies to resignation, termination, retrenchment, and closure alike.
Two components follow separate statutory clocks:
If your final settlement is delayed beyond these windows without written justification, the employee can file a claim with the Labour Commissioner.
Component | How it’s calculated |
Pending salary | (Gross monthly salary ÷ paydays) × days worked in the final month, plus any unpaid arrears |
Leave encashment | (Basic + DA ÷ paydays) × unused earned leave days. Casual and sick leave are generally not encashable |
Gratuity | (Basic + DA) × 15 × completed years of service ÷ 26 — payable after 5 years of continuous service (courts have upheld eligibility at 4 years + 240 days) |
Bonus and incentives | Any declared but unpaid bonus, pro-rata variable pay per policy |
Reimbursements | Pending expense claims, unclaimed LTA (if policy permits encashment) |
Notice pay (employer side) | If the employer terminates without serving full notice, they pay salary for the shortfall |
Deduction | How it’s calculated |
Notice period recovery | Daily gross salary × unserved notice days. Example: 30-day notice, 15 served – 15 days’ salary is recovered |
Outstanding loans/advances | Full pending balance from salary advances or company loans |
Asset recovery | Repair or replacement cost of damaged/unreturned company assets (laptop, ID, SIM) |
Statutory deductions | TDS on taxable components, professional tax, EPF/ESI for the final payroll period |
FnF Amount = (Pending Salary + Leave Encashment + Gratuity + Bonus + Reimbursements) − (Notice Recovery + Loans + Asset Recovery + TDS and Statutory Deductions)
Priya resigns from a Gurugram-based company. Gross salary ₹80,000/month, basic ₹32,000, 6 years of service, 20 days of earned leave, 25 of 26 paydays worked in her last month, full notice served, ₹10,000 incentive due.
Component | Calculation | Amount |
Pending salary | (80,000 ÷ 26) × 25 | ₹76,923 |
Leave encashment | (32,000 ÷ 26) × 20 | ₹24,615 |
Gratuity | (32,000 ÷ 26) × 15 × 6 | ₹1,10,769 |
Incentive | As declared | ₹10,000 |
Gross FnF | Sum of payables | ₹2,22,307 |
Less: TDS and statutory deductions | Per applicable slab on taxable components | As computed |
Note: Gratuity and leave encashment enjoy tax exemptions (see tax section below), so the taxable portion is far smaller than the gross FnF.
Component | Tax treatment |
Pending salary & bonus | Fully taxable as salary income; TDS under Section 192 |
Leave encashment | Exempt up to ₹25 lakh (lifetime aggregate) under Section 10(10AA) for non-government employees at retirement/resignation |
Gratuity | Exempt up to ₹20 lakh (lifetime aggregate) under Section 10(10) for non-government employees |
Notice pay recovery | Deducted from gross; tax treatment depends on employer policy and applicable rulings |
Reimbursements | Non-taxable if supported by bills; unclaimed FBP/LTA paid out is taxable |
The employer must compute TDS on the full year’s income, including the FnF month, before releasing the final settlement, not at year-end. Exact liability depends on the employee’s total income and chosen tax regime; consult your Form 16 or a CA for precise figures.
Send a written demand to HR citing the 2-working-day requirement under the Code on Wages. If unresolved, file a claim with the Labour Commissioner or pursue recovery under the Code. Delayed gratuity separately attracts interest under the Payment of Gratuity Act. Most disputes settle at the written-demand stage; keep every communication documented.
What is meant by F&F settlement is the clearance of all dues between the employer and the employee prior to the employee’s leaving – payables such as pending salary, encashment of leaves, and gratuity, less any recoveries, such as notice period and loan recovery.
Two working days from the last working day as per Section 17(2) of The Code on Wages, 2019 (from 21st November 2025). A separate deadline of 30 days is there for gratuity payment.
Yes, if the employee has completed 5 years of continuous service (courts have upheld 4 years + 240 days). Formula: (Basic + DA) × 15 × completed years ÷ 26. Exempt up to ₹20 lakh lifetime.
Yes. Taxable components – pending salary, bonus, leave encashment beyond the exempt limit, gratuity beyond ₹20 lakh, attract TDS under Section 192 before payment is released.
Earned/privilege leave is encashable. Casual and sick leave generally lapse. Encashment at exit is exempt up to ₹25 lakh lifetime under Section 10(10AA).
Raise a written demand citing the 2-day rule, then escalate to the Labour Commissioner if unpaid. Keep your resignation acceptance, settlement sheet, and all emails as evidence.
