Full and Final Settlement (FnF): The Definitive Guide in 2020

1. Unpaid Salary 💸

Unpaid salary refers to the total number of days for which an employee has worked, after submitting the resignation. It is usually the time duration between an employee’s resignation date and the last working day. In some cases, unpaid salary may include payments from the past several months (for example, if your employee salaries are paid quarterly). Unpaid salary also includes any other arrears and LTA (i.e Leave Travel Allowance)

Unpaid Salary is Calculated As:

Example: (The number of days an employee has worked* gross monthly salary)/ 26 (or the number of paid days in a month)

2. Non-Availed Leaves & Bonus 😞

Your employee’s non-availed paid leaves are also subject to encashment. Any bonuses or special credits offered are also encashed and added to the full and final settlement sum. Regulation has mandated that when an employee resigns, all dues from an employee’s unpaid leaves must be paid on or before the 7th and 10th of the following months. Section 15 (3) of the Karnataka shops & Commercial establishment act also states that ‘All encashment dues must be cleared on or before the 10th of the following month.

The Amount Due For Non-Availed Leaves is Calculated as:

Example: (The number of days of unavailing leaves * monthly salary)/ 26 (or the number of paid days in a month). Non-availed leaves will include those which have been offered as a privilege (usually mentioned in your employee’s contract) and ones that have been earned.

3. Gratuity 💰

Gratuity is a cash benefit that employers provide to their employees, for service to their organization. If an employee has completed a minimum of 4 years or 240 days with your organization, then the gratuity amount has to be paid within 30 days of the employee’s separation from your company. The regulation states that your organization will have to pay gratuity with interest, if not paid within the first 30 days.

Gratuity is Calculated As:

Example: (15 days of last drawn salary for each working year*tenure of working)/26 (or the number of paid days in a month).

Originally published at https://www.startuphrtoolkit.com on September 19, 2020.