Full and Final Settlement
Full and Final Settlement in payroll popularly known as FnF Settlement is the process that happens when an employee decides to take an exit from an organization or is terminated by the employer. In this case, the employer has to make a full and final settlement of the due salary including any bonuses or incentives.
The significance of this settlement policy is to pay all the balance payments to the employees including retirement benefits, bonus, gratuity, incentives, etc. The full and final settlement process needs to happen on an employee’s last working day. However, clearance takes time. Generally, clearance happens within 30 – 45 days after the employee’s last working day.
The Process of FnF settlement
The first step in the settlement is the “Resignation Letter”, which should be in writing. After sending that Resignation Letter to the employer, management will issue an acceptance letter to the employee for his resignation. Along with the Acceptance letter, the employer asks an employee to sign a no dues certificate from the department and give it to HR. FnF statement will be prepared by HR and then will be sent to the Accounts department for further process. Then the Accounts department prepares a cheque for the payable amount and a service certificate handed over to the employee and HR.
Major components of FnF
- Unpaid Salary
- Leave Encashment
- Per day basic salary