Full and final settlement letter

Salary for the days worked in the final month, encashment of earned leave still due, gratuity after five years of service, and any bonus, incentive or reimbursement owed. Against that are recoveries: notice pay not served if the contract allows it, advances, unreturned assets and tax deducted at source.

Under the Code on Wages, wages due to an employee who resigns or is removed must be paid within two working days. Gratuity has to be paid within 30 days of becoming payable. Many employers still take longer, which leaves them exposed to claims and interest.

As days of earned leave due multiplied by a day's pay, under your leave policy. A day's pay is commonly basic pay and DA divided by 30, though some policies use gross salary or a 26 day month. Choose the base that matches your policy, or edit the line.

Salary and bonus are taxable as usual. Gratuity is tax free up to ₹20 lakh for most employees, and leave encashment on leaving is tax free up to ₹25 lakh over a working life, with anything above taxed as salary. Enter the tax deducted on the settlement as its own line.

If the employment contract allows it and the employee did not serve the full notice period, the unserved days are usually recovered at a day's gross pay. The recovery should be shown as its own line, as this letter does.

The letter shows a net amount recoverable instead of payable, and asks the employee to pay the balance. Recover it with care: a demand that is not supported by the contract can be disputed.

So there is a record that they received the statement and accepted the amount. It does not stop them raising a genuine error later, which is why the letter invites them to report any mismatch within seven days.