Full and final settlement: what you get when you leave a job
Updated 11 October 2026
Full and final settlement (F&F) is the last payment your employer makes when you leave: unpaid salary, leave encashment, bonus, gratuity and reimbursements, minus recoveries and tax. Under the Code on Wages, 2019, in force since 21 November 2025, wages must be paid within two working days of your resignation, removal, dismissal or retrenchment. Gratuity has its own deadline of 30 days.
How fast you must be paid
Section 17(2) of the Code on Wages says that when an employee has been removed, dismissed or retrenched, has resigned, or is out of work because the establishment closed, the wages due must be paid within two working days. The old Payment of Wages Act did not cover resignations, so this is a real change. The central rules under the Code were notified in May 2026, but the two-day limit is in the Code itself.
Two points are still being argued over. First, "wages" in the Code means basic pay, DA and retaining allowance, plus some allowances under the 50% rule; it leaves out gratuity, retrenchment compensation and commission, and lawyers differ on whether leave encashment counts. Second, many employers still run 30 to 45 day settlement cycles. If you are not paid, raise it in writing with HR first. You can then file a claim with the authority under the Code, generally within three years.
What goes into your F&F
| Item | How it is usually worked out |
|---|---|
| Salary for days worked | Monthly gross × days worked ÷ days in the month, or as per policy |
| Leave encashment | As per company policy, often basic ÷ 30 × leave days |
| Bonus and variable pay | Statutory bonus if eligible; variable pay as per the plan's rules |
| Gratuity | 15/26 × last basic plus DA × completed years, after 5 years (1 year for fixed-term staff), up to ₹20 lakh |
| Reimbursements | Pending claims with bills |
| Deductions | Employee PF, professional tax, TDS, unpaid advances or loans, and any notice shortfall |
For gratuity, a part year of more than six months counts as a full year. Under the Labour Codes, if allowances other than basic and DA are more than half your total pay, the excess is added back to wages, which can raise gratuity for people with a low basic. See gratuity rules and Labour Codes and your salary.
Deductions and the notice pay question
Under the central rules, total deductions in a wage period cannot exceed 50% of wages. Deductions for unreturned company property are allowed within the Code's conditions, but the Code does not make the payment of wages depend on a no-dues clearance. Recovering pay for an unserved notice period is common, yet it is not in the Code's list of permitted deductions, and some lawyers argue it must be claimed separately. The point has not been settled. See notice period buyout.
PF, pension and your tax certificate
- PF: transferring your account to the next employer through your UAN keeps your service and interest running. If you are unemployed, up to 75% of the balance can be withdrawn at once and the rest after 12 months, under rules EPFO announced in October 2025.
- EPS: the pension part can be withdrawn only after 36 months, so transferring is usually better. See EPS pension and EPF explained.
- Tax certificate: your old employer issues Form 130 (Form 16 until 2025-26) by 15 June after the tax year. Give your new employer the salary and TDS figures from your old job so that this year's TDS is right; see Form 16 and Form 130.
How F&F is taxed
Salary, bonus and notice pay you receive are fully taxable, and the employer deducts TDS on the settlement. Leave encashment is also salary, apart from an exemption of up to ₹25 lakh on retirement for non-government employees, and gratuity is tax-free up to ₹20 lakh. See tax on gratuity and leave encashment and TDS on salary.
Checklist for your last day
- Get your resignation acceptance and last working day in writing.
- Confirm your leave balance and any notice adjustment.
- Return company assets and keep the acknowledgement.
- Ask for the F&F statement, relieving letter and experience letter.
- Note your UAN and ESIC number, and check your health cover after you leave.
Estimate gratuity with the gratuity calculator. The Labour Codes are on the Ministry of Labour and Employment website.