Full & Final Settlement (F&F) Calculator
Build a complete exit settlement — pending salary, leave encashment, gratuity, bonus, notice recovery and TDS — and see the net amount payable or recoverable.
Gratuity exempt to ₹20 lakh · leave encashment exempt to ₹25 lakh
10 or more employees — gratuity uses a 26-day month.
Days not served, recovered at gross rate.
Reimbursements, arrears and similar.
Loans, advances, unreturned assets.
Net settlement
₹2,12,769
payable to the employee
Earnings
Deductions
No deductions.
What a settlement is made of
A full and final settlement closes out the financial relationship between employer and employee. It brings together everything still owed in either direction and nets it to a single figure. The individual components are not complicated, but they draw on different records — attendance for pending salary, the leave ledger for encashment, the joining date for gratuity, and finance for advances.
Gratuity and the five-year rule
Gratuity is the largest component for long-serving employees and absent entirely for short ones. Five years of continuous service is the threshold, and under the Act a part year of six months or more rounds up. An employee leaving at four years and eleven months receives nothing; one leaving at five years and six months is credited with six years.
Notice pay works in both directions
Where an employee does not serve their full notice, the employer normally recovers the shortfall at the salary rate. Where the employer terminates without notice, the same logic runs the other way and pay in lieu is owed to the employee. Whether the calculation uses gross or basic is set by the employment contract, not by statute, so the contract is worth reading before the argument starts.
Tax on the settlement
The settlement is not taxed as a single lump. Pending salary and bonus are ordinary salary income. Gratuity carries its own ₹20 lakh lifetime exemption. Leave encashment carries a separate ₹25 lakh exemption with its own four-way limit test. Applying a flat rate to the whole settlement will almost always be wrong.
Settle it promptly
Beyond the legal timelines, delayed settlements are the single most common source of employment disputes and negative employer reviews. Gratuity in particular carries interest if not paid within 30 days of becoming due. Having the underlying records straight is what makes a prompt settlement possible.
Frequently asked questions
- What is included in a full and final settlement?
- On the earnings side: unpaid salary for days worked, encashment of unused earned leave, gratuity if five years are complete, and any pending bonus, incentive or reimbursement. On the deductions side: notice period shortfall, recovery of loans or advances, the value of unreturned company assets, and TDS. The net of the two is what is paid out.
- How long does an employer have to settle?
- Wage legislation requires payment within two working days where employment is terminated, and most state rules expect settlement within 30 to 45 days of the last working day. Many employers take longer in practice, but the obligation is not discretionary.
- Is gratuity part of the settlement?
- Yes, where the employee has completed five years of continuous service. Below that it is not payable at all, except on death or disablement. Gratuity itself must be paid within 30 days of becoming due, or the employer owes interest on it.
- Can the employer recover notice pay?
- Yes, if the employee does not serve the full notice period stated in their contract. The recovery is normally calculated at the gross salary rate for the days not served, and set off against whatever else is payable. Whether it is charged on gross or basic depends on the employment contract.
- Can a settlement end up negative?
- Yes. If an employee leaves with little notice, has no leave balance and has outstanding advances, the recoveries can exceed what is owed. In that case the employee owes the company, and the settlement statement shows a recoverable amount rather than a payment.
- Is the settlement taxable?
- Each component is treated on its own terms. Unpaid salary and bonus are fully taxable. Gratuity is exempt up to ₹20 lakh. Leave encashment is exempt up to ₹25 lakh subject to the Section 10(10AA) limits. Notice pay recovery reduces taxable salary in most readings, though practice varies.
Related free tools
- Gratuity Calculator
Calculate gratuity from your last drawn salary and years of service, including the tax-free limit.
- Leave Encashment Calculator
Calculate the payout for unused earned leave at exit, and the portion exempt from tax.
- Experience Letter Generator
Generate an experience certificate or relieving letter for a departing employee as a PDF.
Settling exits from memory and email threads?
An F&F is assembled from joining date, salary history, leave balance and outstanding advances. If those live in four different places, every exit becomes an investigation. Smart Dhandha keeps them against the employee record so the settlement is a report rather than a reconstruction.
- Joining date, salary history and leave balance per employee
- Gratuity and encashment computed from real records
- Exit paperwork and payslips in one system
This tool is provided free for general guidance and uses the rates noted above. Statutory rates change, and individual circumstances differ — please confirm with your accountant or a qualified professional before relying on these figures for filing or payroll.