An audit senior at a 40-person CA firm in Pune hands in her resignation. She joined on 15 Jun 2020, her appointment letter asks for 60 days' notice, and she agrees with the partners to leave after 40, on 18 Sep 2026. She has 18 days of earned leave left. Her Basic plus DA is ₹38,400 a month and her gross is ₹64,000.
Below is everything the firm owes her, worked out line by line, and the two dates it has to pay by. The figures come from the same payroll engine that runs our free calculator, so you can check each one yourself.
Full and final settlement calculation, line by line
A settlement has six lines. Most exits use four of them.
- Salary for the last month. The gross, divided by the days in the month, times the days worked. Skip it if the monthly payroll already paid that month.
- Leave encashment. Unused earned leave, at Basic plus DA divided by 26 for each day.
- Gratuity. Only after five years of continuous service: the last Basic plus DA, times 15, divided by 26, times the years. There's more on this in how gratuity is worked out.
- Notice. Days of notice not served, priced at a day's pay. The employee pays it back if they left early; the employer pays it if it let them go without notice.
- Other dues. Bonus, incentives and reimbursements still owed.
- Recoveries. Salary advances, loans and anything not returned, such as a laptop.
The worked example, in rupees
| Line | How it is worked out | Amount |
|---|
| Last month | ₹64,000 ÷ 30 × 18 days | ₹38,400 |
|---|
| Leave | ₹38,400 ÷ 26 × 18 days | ₹26,585 |
|---|
| Gratuity | 6 years 97 days, counted as 6 | ₹1,32,923 |
|---|
| Notice recovered | 20 days at ₹1,280 a day | −₹25,600 |
|---|
₹1,72,308net payable to her
21 Sep 2026last day to pay her wages
18 Oct 2026last day for the rest
The line people get wrong: notice recovery. The firm takes back ₹25,600, which is 20 days at ₹38,400 ÷ 30. That's her Basic plus DA, never her CTC and not her gross. A recovery priced on CTC is the one most likely to be challenged, and it usually loses.
Her gratuity is there because she crossed six years. Her six years and 97 days count as 6: a final part-year only rounds up at six months or more. Put her last day a year earlier and she'd still have five years in, so gratuity would still be due. Put it two years earlier and the line disappears.
The full and final settlement timeline in India
Since 21 November 2025, the Code on Wages has set the clock. Wages have to be paid within two working days of the last working day, whether the person resigned, was dismissed or was retrenched. For her, that's 21 Sep 2026. Gratuity has its own deadline of thirty days, which is 18 Oct 2026, and most employers settle leave encashment and notice on the same date.
A lot of companies still quote 30 to 45 days for the whole settlement. That's a habit carried over from before the codes. The practical fix is to split the settlement: pay the wages on time from the monthly run, and pay the rest once the handover is done.
Leave encashment in full and final
Only earned leave is encashed, unless your leave policy says casual or sick leave carries a cash value too. The day rate is Basic plus DA divided by 26, the same working month gratuity uses, so her 18 days come to ₹26,585.
It's taxable as salary. Part of it can be exempt when somebody retires or resigns, within a lifetime limit of ₹25 lakh for private-sector employees, and the payroll works out that part when it deducts TDS on the settlement.
Notice period recovery from salary
You can recover notice only if the appointment letter sets a notice period. Recover it on Basic plus DA for the days not served, as above. You can also waive it, and plenty of small firms do when the handover is done early. Put the waiver in writing, so the settlement and the relieving letter agree with each other.
It works the other way round too. If the employer ends the job and doesn't give the notice the letter promises, it pays the employee for the missing days, and that payment is priced on gross.
The F&F statement format
The statement is what the employee signs once they're paid. It should list:
- the employee, the date of joining and the last working day;
- every line payable, and every line recovered, each with how it was worked out;
- the net amount in figures and in words;
- the two due dates; and
- an acknowledgement for the employee to sign.
The full and final settlement calculator prints exactly that as a PDF. The relieving letter and the experience letter usually go out with it.
