Full and Final Settlement (FnF)
FnF is the closing payout when an employee leaves. It includes pending salary, leave encashment, gratuity, and bonus, less notice recovery and dues. Paid within 30 to 45 days.
What is Full and Final Settlement (FnF)?
Full and Final Settlement is the last cheque an employee receives after exit. HR consolidates everything owed: pending salary up to last working day, leave encashment for unused earned leave, gratuity if eligible, statutory bonus if applicable, and any pending reimbursement. From this, HR deducts notice pay shortfall, advance recovery, joining bonus clawback if within lock-in, asset recovery for unreturned laptops, and any tax due. The Code on Wages and most state laws say FnF should be paid within 2 working days of last day, but in practice 30 to 45 days is the norm because clearance from IT, finance, and admin takes time. The relieving letter and experience letter usually go out with FnF.
Formula: FnF = Pending salary + Leave encashment + Gratuity + Bonus + Reimbursements - Notice recovery - Advance - Asset recovery - TDS
Example
Employee leaves March 15. Pending salary ₹30K (15 days), leave encashment ₹40K (20 days x ₹2K), gratuity ₹2.5L. Notice shortfall 10 days at ₹2K = ₹20K. FnF = 30K + 40K + 2.5L + 0 (no bonus) - 20K - TDS.
How Full and Final Settlement (FnF) is used
Run FnF as a separate payroll cycle in the month after exit. Generate a single FnF statement that lists all earnings and deductions. Trigger relieving and experience letters once FnF is approved.
Full and Final Settlement (FnF) FAQs
How long does FnF take?
Usually 30 to 45 days from last working day, even though law says 2 working days. Asset and clearance hold-ups are the usual reason.
Is FnF taxable?
Yes, the salary and leave encashment portions are taxable. Gratuity has separate exemption rules.
Can the employer hold FnF?
No, except for genuine recoveries that are documented. Holding FnF without reason can be challenged at the labour office.