Full & Final Settlement
When an employee's employment ends -- whether through resignation, termination, or mutual agreement -- Omnivoo processes a Full & Final (F&F) Settlement. This ensures all dues are calculated and paid correctly.
What Triggers F&F
F&F settlement is initiated when:
- An employee resigns
- The employer terminates employment
- The employment contract ends (fixed-term)
- Mutual separation is agreed upon
F&F Components
The settlement includes the following:
1. Pro-Rata Salary
Salary for the days worked in the final month. If the employee's last working day is the 15th of a 30-day month, they receive 15/30 of their monthly salary.
2. Leave Encashment
Unused Paid Leave (Earned Leave) is encashed at the time of exit:
- Calculation: (Basic Salary / 30) x Number of unused PL days
- Only Paid Leave is encashable. Sick Leave and Casual Leave typically lapse on exit.
- Maximum encashable days depend on company policy and state-specific rules.
Leave encashment is taxable. However, under Section 10(10AA) of the Income Tax Act 1961, there is a partial exemption for non-government employees (up to ₹25,00,000 as per the latest amendment).
3. Gratuity
Payable if the employee has completed 5 years of continuous service (or in case of death/disability, regardless of tenure):
Formula: (Last drawn Basic Salary / 26) x 15 x Number of years of service
- Calculated under the Payment of Gratuity Act 1972.
- Maximum gratuity payable: ₹20,00,000.
- Service of more than 6 months in the final year is rounded up to a full year.
Example: Employee with Basic Salary of ₹50,000 and 6 years of service: (50,000 / 26) x 15 x 6 = ₹1,73,077
Gratuity is a statutory right after 5 years. It cannot be denied or reduced by the employer. If you have completed 5 years, Omnivoo will calculate and include gratuity in your F&F automatically.
4. Notice Period Pay
Depends on who initiates the separation:
- Employee resigns without serving notice: Notice period salary is deducted from F&F (notice period buyout).
- Employer terminates without notice: Notice period salary is paid to the employee.
- Notice period served in full: No adjustment needed.
Standard notice period is as specified in the employment agreement (typically 30-90 days).
5. Retrenchment Compensation
If the employer terminates employment (not for misconduct) and the employee has completed 1+ year of continuous service:
Formula: 15 days' average pay for every completed year of service
This is in addition to notice period pay, as required under the Industrial Disputes Act 1947.
6. Other Adjustments
| Item | Credit/Debit |
|---|---|
| Pending reimbursements | Credit |
| Salary advances (if any) | Debit |
| Recovery for damage to company property | Debit |
| Pending bonus (if applicable) | Credit |
F&F Timeline
| Step | Timeline |
|---|---|
| Employment end date confirmed | Day 0 |
| Omnivoo calculates F&F | Within 5 business days |
| Employer reviews and approves F&F | 2-3 business days |
| F&F disbursed to employee | Within 2 business days of approval |
| Form 16 (Part B) generated | End of financial year |
The total F&F process typically completes within 10-15 business days of the last working day. Omnivoo sends status updates via email at each stage.
Tax on F&F
F&F components are taxed differently:
| Component | Tax Treatment |
|---|---|
| Pro-rata salary | Fully taxable (regular salary) |
| Leave encashment | Partially exempt under Section 10(10AA) |
| Gratuity | Exempt up to ₹20,00,000 under Section 10(10) |
| Notice period pay (received) | Fully taxable |
| Retrenchment compensation | Exempt up to ₹5,00,000 under Section 10(10B) |
TDS is deducted on the taxable portion of F&F and reflected in the final payslip.
For Employers: Initiating Termination
- Navigate to Employees > select the employee.
- Click Initiate Exit.
- Select the reason (resignation, termination, mutual, end of contract).
- Enter the last working day.
- Omnivoo calculates F&F and presents it for your review.
- Approve the F&F to trigger disbursement.
For Employees: What to Expect
- You will receive an email with the F&F calculation breakdown.
- Review all components: pro-rata salary, leave encashment, gratuity, notice period adjustment.
- If you have questions, raise them with Omnivoo support before the employer approves.
- After approval, payment is credited to your registered bank account.
- You will receive your experience letter and relieving letter via the Omnivoo portal.