Employment · Template
The full and final settlement is where an exit either closes cleanly or turns into a claim. It is an arithmetic document, and there are statutory floors under the arithmetic: gratuity has its own formula and its own deadline, leave encashment follows the leave actually accrued, and the clock on paying the whole thing starts on the last working day whether or not anyone is watching it.
Quick Statutory Answer
How long do I have to pay a full and final settlement? Two working days for the wages. Section 17(2) of the Code on Wages, 2019 requires the wages of a departing employee to be paid within two working days of leaving, and it names resignation alongside dismissal, retrenchment and closure. Gratuity carries its own deadline: under section 56 of the Code on Social Security, 2020 the employer must arrange payment within thirty days of it becoming payable, with interest running on delay. Plan on days, not months.
The full text of this document as VidhiSar drafts it, with every blank shown in square brackets. Copy it or download it as a Word file and fill it in yourself — or answer a few questions and VidhiSar fills it in and prints a formatted PDF. Clauses that apply only in some cases are left out here; the drafting flow adds them when your answers call for them.
STATEMENT DETAILS
Date: [Statement Date]
Employee: [Employee's Full Name] Employee Code: [Employee Code / ID] Designation: [Designation at Separation] Date of Joining: [Date of Joining] Last Working Date: [Last Working Date] Issued by: [Company Legal Name]
Subject: Statement of Full and Final Settlement of Account
EARNINGS
1. Unpaid Salary. Salary for [Unpaid Days Worked in Final Month] day(s) worked in the final month and not yet disbursed: Rs. [Unpaid Salary].
2. Leave Encashment. Encashment of [Leave Days Being Encashed] day(s) of accumulated leave standing to the employee's credit as at the last working date: Rs. [Leave Encashment].
3. Gratuity. Gratuity payable under section 53 of the Code on Social Security, 2020, computed at fifteen days' wages on last drawn wages for each completed year of continuous service and part thereof in excess of six months: Rs. [Gratuity Payable]. Where the employee has not completed the qualifying period of continuous service, this amount is recorded as Nil.
4. Bonus, Incentive and Reimbursements. Statutory bonus, performance incentive and approved expense reimbursements outstanding as at the last working date: Rs. [Bonus / Incentive / Reimbursements].
DEDUCTIONS
5. Notice Period Recovery. Recovery in respect of the unserved portion of the notice period, as provided in the employee's contract of employment: Rs. [Notice Period Recovery].
6. Other Recoveries. Advances, loans, asset non-return charges and other amounts lawfully recoverable: Rs. [Other Recoveries].
7. Tax Deducted at Source. Tax deducted at source under the Income-tax Act, 2025 on the taxable component of this settlement: Rs. [Tax Deducted at Source].
NET SETTLEMENT
8. Net Amount Payable. The net amount payable to the employee on full and final settlement is Rs. [Net Amount Payable], to be remitted by [Payment Mode] on or before [Payment Date]. The wages included in it fall due within two working days of the last working date under section 17(2) of the Code on Wages, 2019, and gratuity within thirty days of it becoming payable under section 56 of the Code on Social Security, 2020.
9. Statutory Fund Balances. Balances standing to the employee's credit in the provident fund and any other statutory fund are held by the respective statutory authority and are not part of this settlement. They are to be withdrawn or transferred by the employee directly with that authority, and the Company shall complete its part of the formalities on request.
10. Certificate of Tax Deducted. A certificate of tax deducted at source in the prescribed form shall be issued to the employee for the relevant tax year within the timeline prescribed under the Income-tax Act, 2025 and the rules made under it.
11. Basis of Statement. This statement has been prepared on the records available to the Company as at the date of issue. Any arithmetical error or omission notified by the employee in writing within thirty (30) days shall be examined and, if established, corrected and settled.
ACKNOWLEDGEMENT
For [Company Legal Name]
[Authorised Signatory Name] Authorised Signatory
Received the sum stated at Clause 8 in full and final settlement of all my claims arising out of my employment with the Company, subject to Clause 11 above.
What the law behind this document actually requires.
| Essential Clause | Legal Purpose & Protection | Governing Law / Benchmark |
|---|---|---|
| Every earning on its own line | Unpaid salary days, leave encashment, gratuity, bonus, reimbursements. A single net figure is impossible for the employee to verify, and an unverifiable number is what turns a routine exit into a dispute. | Code on Social Security, 2020 — ss. 53 and 56 |
| Leave encashment computed on the leave actually standing to credit | State the number of days being encashed, not just the amount. The balance is a fact the employee can check against their own record, and disagreements surface faster when both are shown. | Code on Wages, 2019 — s. 17(2) |
| Gratuity shown separately, with the service period it rests on | Gratuity is a statutory entitlement with its own computation, not a discretionary component of a package. Burying it inside a lump sum makes it look like a favour and makes the calculation impossible to audit. | Income-tax Act, 2025 |
| Deductions itemised, each pointing at its contractual basis | A notice-period recovery has to be traceable to the clause that permits it and to the salary base that clause names. A deduction with no stated basis is the line that gets challenged first. | Code on Social Security, 2020 — ss. 53 and 56 |
| Tax deducted at source shown, and the certificate promised | The components of an exit payment are not taxed alike. Showing the deduction and committing to issue the certificate for the relevant year prevents the query that otherwise arrives at return-filing time. | Code on Wages, 2019 — s. 17(2) |
| A statement that statutory fund balances are not part of this settlement | Provident fund and similar balances sit with the authority, and the employee withdraws or transfers them directly. Saying so stops the employee assuming those amounts were meant to be inside your figure. | Income-tax Act, 2025 |
| The payment date and mode, and a window to flag an arithmetic error | A stated date makes the obligation checkable. A short correction window costs you nothing and converts most disagreements into a recalculation instead of a claim. | Code on Social Security, 2020 — ss. 53 and 56 |
Two working days for the wages. Section 17(2) of the Code on Wages, 2019 requires the wages of a departing employee to be paid within two working days of leaving, and it names resignation alongside dismissal, retrenchment and closure. Gratuity carries its own deadline: under section 56 of the Code on Social Security, 2020 the employer must arrange payment within thirty days of it becoming payable, with interest running on delay. Plan on days, not months.
Where the contract provides for recovery and states the basis of calculation, yes — it is a contractual adjustment. What you cannot do is treat every payable as fungible: a statutory entitlement such as gratuity stands on its own footing and is not simply netted off against a contractual claim.
The qualifying period is five years of continuous service, and that condition does not apply where the employment ends on death or disablement. Some High Courts have taken a view on what counts as a completed year in the final year of service, so a borderline case is worth checking rather than deciding from the bare figure.
An acknowledgement of receipt is evidence, not an absolute bar. Statutory entitlements cannot be contracted away, and a discharge obtained under pressure can be challenged. The protection comes from the arithmetic being right and visible, not from the signature at the bottom.
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