Overview of a Full and Final Settlement Letter

What is a full and final settlement letter?

A full and final settlement letter is used to pay an employee their remaining due or settlement while resigning from the organization.

It is also known as an FNF settlement. The process results in an employee getting paid for the last working month net of tax deductions.

A full and final settlement letter is handled by the human resource department in an organization and might take around a month for full settlement.

What is included in the full and final settlement letter?

A FNF settlement is used to settle an employee’s final remuneration while resigning from an organization. These are the important things included in a full and final settlement letter.

Unpaid salary: This includes the total number of days an employee has worked in an organization after submitting the resignation. Normally an employee has to serve the organization for 1 to 3 months after submitting the resignation letter. All the payments incurred in those times should be paid while leaving the organization.

Unpaid bonus: When an organization makes a certain level of profit or achieves their financial target then the employee will get rewarded as a form of bonus. These bonus payments should be settled while an employee leaves the organization.

Payment for remaining leaves: In any organization, the leaves are divided into several categories like sick leave, casual leave and privilege leave, etc. if an employee has not used their privilege leave in a year, he/she will get paid for those leaves while leaving the organization.

Pension: Pension is the retirement benefit an employee will get after serving an organization for a longer period of time. All the information regarding pension deductions is clearly stated in a full and final settlement letter.

Deductions: While leaving any organization, the full and final settlement letter contains all the information regarding the tax deductions and provident fund income before paying the employees.

What is the period of settlement?

When an employee wants to leave an organization, they have to go through a lot of processes normally handled by the human resource department. They have to sign the exit formalities, return any belongings taken from the organization like laptops and mobile and get the signature from their immediate supervisor. After completing all the paperwork, it might take around 30-40 days for full and final settlement depending upon the organization’s policies and applicable government laws.

Conclusion

A full and final settlement letter is used by the human resource department when an employee wants to leave the organization. The main purpose of using this letter is to compensate the employees for their efforts during the job period.

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