Khanal Group

Full and final settlement calculator

Everything owed to a departing employee and everything recovered, line by line, with the net payable and the dates by which wages and gratuity must be paid under the labour codes.

Last checked 25 October 2026
Total remuneration
Paid on calendar days of that month
Bonus on ₹7,000 or this, whichever is higher
Reimbursements, arrears, incentives
From your payroll tax working

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How it is calculated

A full and final settlement adds up what the employer owes the departing employee and takes off what the employee owes back. Each line follows its own rule.

Final salary = monthly gross × days payable ÷ calendar days in the final month
Notice shortfall = (notice required − notice served) × monthly pay ÷ 30: paid to the employee if the employer ended the employment, recovered if the employee resigned (unless waived)
Leave encashment = leave days × basic + DA ÷ 30 (or 26)
Gratuity = 15 ÷ 26 × last wages × completed years (part year over 6 months counts as a year), at most ₹20,00,000
Bonus = wages for bonus (up to ₹7,000 or the minimum wage fixed by the Central Government) × months worked in the accounting year × rate
Net payable = all the above + other dues − advances and recoveries − TDS

Where each rule comes from

  • Payment deadline: s.17(2) of the Code on Wages 2019, in force from 21 November 2025, requires the wages of an employee who has been removed, dismissed or retrenched, or who has resigned, or who is unemployed because the establishment closed, to be paid within two working days. Unlike the Payment of Wages Act 1936 it covers resignation. Section 17(2) counts the two working days from the removal, dismissal, retrenchment or resignation; this calculator takes that date to be the last working day.
  • Gratuity: Code on Social Security 2020, s.53, as on the gratuity calculator: 5 years of continuous service, 1 year for a fixed-term employee, no minimum on death or disablement; wages with the 50% rule (here, gross salary is taken as total remuneration). Payable within 30 days of becoming due. The ceiling is ₹20 lakh, as the Ministry of Labour and Employment's Labour Codes FAQ (January 2026) states.
  • Bonus: Code on Wages 2019 s.26 and the notifications of 25 August 2026: eligible up to ₹21,000 a month, worked out on ₹7,000 or the minimum wage fixed by the Central Government, whichever is higher, at 8.33% to 20%, pro rata; see the bonus calculator.
  • Leave encashment: amount as the leave policy says; tax treatment on the leave encashment calculator.
  • Notice pay: set by the appointment letter, the certified standing orders or, for retrenchment, the Industrial Relations Code 2020. A recovery from a resigning employee needs a basis in the contract.
  • TDS: the settlement is salary for TDS; the figure here is an input, not a calculation.

Worked example

Round illustrative numbers. An employee of ABC Infra Private Limited joined on 1 April 2019 and resigned, with 31 October 2026 as the last working day. Gross salary ₹40,000, basic + DA ₹18,000. The notice period is 60 days; 45 were served.

  • October salary: ₹40,000 × 31/31 = ₹40,000.
  • Notice shortfall: 15 days × ₹40,000 ÷ 30 = ₹20,000, recovered.
  • Leave encashment: 24 days × ₹18,000 ÷ 30 = ₹14,400.
  • Gratuity: service 7 years 7 months, counted as 8. Labour-code wages are the higher of ₹18,000 and half of ₹40,000, so ₹20,000. 15/26 × ₹20,000 × 8 = ₹92,308.
  • Bonus: ₹20,000 is within ₹21,000; bonus on ₹7,000 × 7 months × 8.33% = ₹4,082.
  • Other dues ₹5,000; advance recovered ₹10,000.
  • Net: ₹40,000 + ₹14,400 + ₹92,308 + ₹4,082 + ₹5,000 − ₹20,000 − ₹10,000 = ₹1,25,790 with each line rounded; the calculator shows ₹1,25,789 because it rounds only the total. Wages are due by 3 November 2026 (two working days, skipping Sunday 1 November); gratuity by 30 November 2026.

Points to confirm

PF and ESIC on the final month's wages, PF withdrawal or transfer, Form 16, and the experience and relieving letters are outside this calculation. K-HR handles the exit with notice period and clearance, and the month's attendance goes to K-Finance payroll.

Common questions

Within how many days must full and final settlement be paid?

Under s.17(2) of the Code on Wages 2019, in force from 21 November 2025, wages due to an employee who is removed, dismissed, retrenched or resigns must be paid within two working days. Gratuity has its own 30-day limit under the Code on Social Security 2020.

Can the employer recover notice pay from an employee who resigns?

Only if the appointment letter, policy or standing orders provide for it. The amount is usually the shortfall in days at the monthly pay divided by 30. Many employers waive part or all of it.

Is gratuity part of full and final settlement?

Yes, if the employee is eligible: 5 years of continuous service for a permanent employee, 1 year for a fixed-term employee under the Code on Social Security 2020, and no minimum on death or disablement.

Is bonus paid on resignation?

Statutory bonus is payable pro rata for the part of the accounting year worked, if wages are within ₹21,000 a month and at least 30 days were worked, unless the employee was dismissed for the reasons the law sets out.

Is TDS deducted on full and final settlement?

The settlement is salary, so the employer deducts tax on it as part of the year's salary TDS, after the exemptions for gratuity and leave encashment where they apply.

Sources