FnF

Full and Final Settlement (FnF)

Full and Final Settlement commonly known as FnF process is done when an employee is leaving the organization. At this time, he/she has to get paid for the last working month + any additional earnings or deductions. The procedure has to be carried out by the employer after the employee resigns from their services.

The procedure of paying and recovering during the resignation process is called the Final Settlement of the employee.

You can relieve the employee first and then do the FnF OR do the final settlement first then relieve the employee. It depends on your company policy.

The major components of FnF are:

Unpaid Salary

Unpaid salary includes annual benefits such as LTA (leave travel allowance) and arrears or any salary held due to certain reasons.

Leave Encashment

Unpaid leave dues should be paid by or before 7th and 10th of the following month of resignation.

Payment for non-availed leaves (earned or privilege leave) has to be calculated based on company policy. So, the different options for leave encashment are:

Per day Basic (Or Basic + DA OR other components)
Fixed amount defined by company

Calculation of per day basic:

(number of days of non-availed leaves * basic salary) / 26 days ( Avg paid days in a month).

For e.g., If an employee has 25 earned leaves which is not availed and basic salary = 5000, then encashed amount will be

(25*5000)/26 = Rs. 4807

Gratuity

As per Section 7 (3) of the Payment of Gratuity Act 1972, Gratuity should be offered within 30 days of the resignation. If you fail to do so you need to pay with interest.

Deductions

Deductions include PF, ESI, PT (if applicable), Income Tax and Compensation for Notice Period not served. Gratuity and encashed earned leave are exempt from tax deducted at source (TDS) as per Income Tax Act. All other payments attract TDS under Section 192 of the Income Tax Act.

Role

Finance Admin

Path

Salary » Full and Final Settlement

Inputs Needed

Employee should be relieved from the Head Admin.

Functionality

Full and Final Settlement comprises of several direct and indirect components which the company or at times the employee is liable to pay.
This section helps the Finance Admin to understand the net amount due for payment to a particular employee. The dues are usually bifurcated as per below criteria:
1. Salary due during the notice period.
2. Gratuity Amount.
3. Leave Encashment
4. Medical Reimbursement (if any)
5. Provident Fund
The system automatically calculates the amounts due for these criteria based on the earn card of the employee.
This report can be downloaded in non editable (pdf) format through the system.
Further more since this report can be fetched month wise, it also clearly provides information about how many employees have been relieved for a particular month.