When an employee leaves, the last thing either side wants is a settlement that drags on for weeks. Full and final settlement, often shortened to F&F, is the process of closing every financial and administrative account between the employer and the departing employee. Done well, it protects the employer's reputation and leaves the former employee with a good final impression. Done badly, it creates disputes, complaints and sometimes legal claims.
This checklist breaks the process into stages so nothing is missed.
Stage 1: Confirm the exit details
- Record the type of exit: resignation, retirement, termination, end of a fixed-term contract or death.
- Confirm the last working day and whether the notice period was served, bought out or waived.
- Check the employment contract and company policy for any specific exit terms.
Stage 2: Collect clearances
- Return of laptops, ID cards, access cards, phones and other assets.
- Handover of documents, passwords and ongoing work.
- Clearance from finance for outstanding advances, loans or expense claims.
- Clearance from IT for system access removal.
Use a single clearance form so each department signs off in one place.
Stage 3: Calculate what is payable
The settlement usually brings together several components:
- Salary for days worked in the final month.
- Encashment of unused leave, according to policy and applicable law.
- Gratuity, if the employee is eligible.
- Pending reimbursements, incentives or bonuses that have been earned.
- Statutory bonus, where applicable.
Stage 4: Calculate what is recoverable
- Notice period shortfall, if the policy provides for recovery.
- Unrecovered advances or loans.
- Value of unreturned assets, where agreed in writing.
Be careful with deductions. They should be supported by policy, documented and communicated clearly.
Stage 5: Handle tax and statutory items
- Compute income tax on the final payment, taking exemptions into account.
- Update provident fund and ESI records with the exit date.
- Guide the employee on transferring or withdrawing their provident fund.
- Issue the year's tax documents when due.
Stage 6: Pay and document
The new labour codes have put a spotlight on timely payment of wages to departing employees, so treat the settlement deadline seriously and check the current requirement that applies to you. Once payment is made, share a clear settlement statement that shows every earning and deduction.
Stage 7: Issue exit documents
Provide the relieving letter, experience letter and any service certificate promptly. Many disputes start simply because these documents are delayed. The TankhaPay article on the relieving letter explains what such a letter typically contains.
Keeping it consistent
Most F&F problems come from inconsistency: different people calculating settlements differently, or components being forgotten. A written checklist, a standard template and a single owner for each exit make a big difference. Organisations that prefer not to run this in-house sometimes use payroll outsourcing services so that settlements follow the same process every time.
A clean exit is part of the employee experience. A checklist keeps it fair, fast and well documented.
Written by the TankhaPay team. General information, not legal advice.