Full and final settlement, usually shortened to F&F, is the closing account between an employer and an employee who is leaving. It totals everything still owed to the employee, subtracts everything the employee still owes, and pays the balance. Once F&F is done and the dues are cleared, the employment relationship is financially closed.

What goes into it

Payable to the employee

• Salary for the days worked in the final month
• Leave encashment for the unused balance
• Gratuity, if five years of service are complete
• Pending reimbursements, incentives and any variable pay already earned
• Pro-rata statutory bonus where applicable

Recovered from the employee

• Notice pay for any shortfall in the notice period
• Outstanding salary advances or loans
• Unreturned assets, training bonds, or excess leave taken
• TDS on the taxable portion of the settlement

Timeline

Practice has been to complete F&F in 30 to 45 days after the last working day, largely because PF and leave reconciliation take time. The Code on Wages, once in force, requires wages to be paid within two working days of the last day, which will compress this considerably.

Frequently asked questions

Is gratuity part of F&F?

Yes, if you have completed five years. It is one of the larger components and, unlike most, has its own 30-day statutory payment window.

Can an employer withhold F&F until I return company assets?

Employers commonly make asset clearance a condition and recover the value of anything unreturned. Withholding the entire settlement indefinitely is on weaker legal ground.

Is the notice-period recovery taxable in my hands?

The common view is that recovery reduces your taxable salary for the year. There has been litigation, so keep the settlement statement showing the deduction.

Estimate your settlement with the Full and Final Settlement Calculator, and the notice component with the Notice Period Buyout Calculator. Our guide to notice periods covers the exit process in more depth.