Growing rate of urbanization and rise in metro cities has opened numerous employment avenues. A person who is employed in an organization may decide to leave for reasons such as better prospects, self-employment or some other personal reasons. In such case when one exists the company the dues of their last working month are paid with arrears, bonuses if any which is termed as a full and final settlement. Let us dive further to discuss everything you need to know about the full and final settlement.
Meaning of full and final settlement from employment
In simple terms, the full and final settlement means clearance of all dues and payment of the last working days from the employer. This process of recovering the final dues from the employer is termed as a full and final settlement. The settlement may happen either on the last working day or the time stipulated by the organization which ranges from 30 to 45 days as a general norm.
Elements of full and final settlement
The elements which form the full and final settlement at the end of an employment contract can be listed and briefly explained as follows:
- Unpaid Salary- This includes salary dues for the last working month or salary for the period from last date paid till the last working day. This also includes the leave travel allowance.
- Unpaid Bonuses- The bonuses declared or which were a part of salary and were uncleared are a part of the full and final settlement.
- Unused Leaves- All the accrued and unused leaves are also a part of the full and final settlement
- Gratuity- If an employee has worked for more than four years and 240 days gratuity is payable to such employees as a full and final settlement.
- Pension- If an employee has completed ten years of pensionable service and a minimum of 6 months with the current employer, the pension is also payable as a part of the full and final settlement.
- Provident Fund- The form for withdrawal or transfer of the provident fund can be filled out at while initiating full and final settlement.
Period of settlement
As a rule of thumb following stipulations are generally followed by a period of full and final settlement.
- Salary Dues- Ideally the salary dues including leave travel allowance and unused leaves are to be paid out on the last working day but the settlement period for this component ranges anywhere between 30 to 45 working days.
- Gratuity- The gratuity is to be strictly paid out within 30 days of the employee leaving the company.
- Unpaid Bonus- Unpaid bonus if any should be paid out to the employee within that accounting year only.
- Provident Fund- Since the provident fund is deposited with the PF office, a form can be filled and approved which the employee can submit and therefore withdraw or transfer the PF.
Basic steps to follow for settlement
While your employment contract is terminated there are some basic steps that you need to follow for settlement.
- One must take clearance from all the departments as specified in the company policy in writing.
- Clear any dues or advances that you may have taken.
- Write to the human resource department asking for a settlement.
- Escalate to the relevant authorities in case of delay in settlement highlighting the issue.
Laws under which an employee can seek relief
In cases where there is an undue delay in settlement or the compensation received is inadequate or the termination was illegal, an employee can seek relief under some laws namely,
- Industrial Employment (Standing Order) Act, 1946 which extends to the whole of India and applies to the industries where more than 50 workmen are employed.
- SE Act which applies to states
- Payment of wages act, 1936 which extends to the whole of India
- Industrial Dispute Act, 1947 which extends to the whole of India and regulates the labor law
- The Employees Provident Funds Scheme, 1952
We hope that this article proves of help to anyone looking for details related to the full and final settlement. For more of such updates sign up to EasyAdvocacy today.
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