Full & Final Settlement

2026-02-17 · 2 min

Overview

Full & Final (FnF) Settlement is the financial closure process when an employee exits the organisation. It computes all pending earnings and recoveries to arrive at the net payable or recoverable amount.

Settlement Components

FnF calculation includes:

• Earnings: unpaid salary (pro-rata for the last month), earned leave encashment, bonus (pro-rata), gratuity (if eligible -- 5+ years), notice period recovery (if served).
• Deductions: outstanding loan balance, salary advance recovery, notice period shortfall (if not served), asset recovery (laptop, phone, ID card), canteen/other dues.
• Net amount: total earnings minus total deductions.
• Tax computation: TDS on FnF payment based on annual income.

Process Flow

Navigate to Payroll > Full & Final:

1. HR initiates FnF for the exiting employee with last working date.
2. System auto-computes all components based on employee records.
3. HR reviews and adjusts any manual items.
4. Submit for approval: HR > Finance > Management.
5. On approval, generate the FnF statement for employee signature.
6. Process the payment.
7. Generate final payslip and Form 16 (if applicable).
8. GL entries auto-posted for the settlement.

Notes

Related topics