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

You start an F&F settlement when an employee is leaving. When you create the Final Pay run, you choose one of three termination types:

• Resignation (employee-initiated)
• Termination by Employer
• Mutual Agreement

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.

info

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

warning

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. 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

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

TDS is deducted on the taxable portion of F&F and reflected in the final payslip.

For Employers: Running Final Pay

The settlement is processed through a Final Pay payroll run:

1. Open Payments > Payouts to reach the Payroll dashboard.
2. Click Create Payroll > Final Pay.
3. Select the employee who is leaving and click Continue.
4. Enter the Last Working Date, choose the Termination Type (Resignation, Termination by Employer, or Mutual Agreement), and set the Notice Period Served (defaults to 30 days).
5. Optionally add Advance Recovery, Equipment Recovery, or other deductions.
6. Click Preview Settlement to see the full earnings and deductions breakdown.
7. Review the Net Settlement Amount, then click Create Final Pay Run.

This creates a payroll run that you then approve and pay like any other run. See Running Payroll and The Payroll Run Detail Page.

What the settlement preview shows

The preview lists the earnings that apply -- Pro-rata Salary (final month), Leave Encashment, Gratuity (or "Not eligible (< 5 years)"), Notice Period Pay, and Statutory Bonus (the last two appear only when they are greater than zero) -- followed by the deductions and the Net Settlement Amount.

info

The amounts come from Omnivoo's settlement calculation. If that calculation is temporarily unavailable, the preview falls back to a rough local estimate: gratuity as (monthly salary / 26) x 15 x whole years of service (only when the employee has five or more years), pro-rata salary by the day of the month, and leave encashment, notice period pay, and bonus all shown as zero. Always confirm the final figures on the run before paying.

Reviewing and Approving a Settlement

Alongside the Final Pay run, an offboarded employee's settlement can be reviewed and approved on a dedicated Full & Final Settlement page, reached from the EOR area with the employee's engagement selected. If you open it without choosing an employee, it shows a No settlements empty state ("Full & Final settlements will appear here when employees are offboarded"), and a Back to EOR Dashboard link returns you to the EOR dashboard.

For a selected employee, the page shows:

• Summary cards -- a status badge, the Net Settlement amount in INR, and the Termination Date.
• Employee Details -- Name, Email, Last Working Day, and Reason.
• Earnings -- Pro-rata Salary, Leave Encashment, Gratuity (with an Eligible or Not Eligible badge), Notice Period Pay, Bonus Payable, Reimbursements, and Total Earnings.
• Deductions -- Advance Recovery, Notice Period Shortfall, Other Deductions, and Total Deductions.
• Net Settlement Amount -- the final figure, with the employee's tenure.

If the settlement has not been generated yet, the page shows No settlement found for this employee.

Approving

When the settlement status is pending, an Approve Settlement button appears on the Net Settlement card. Clicking it opens a Confirm Approval dialog that states the net amount and the employee's name and warns that "This action cannot be undone". Choose Cancel to go back or Confirm Approval to approve.

warning

Approving a settlement is irreversible. Review every earning and deduction before you confirm.

For Employees: What to Expect

1. The settlement covers your pro-rata salary, leave encashment, gratuity (if eligible), notice period adjustment, and any agreed deductions.
2. If you have questions about the amounts, raise them with Omnivoo support before the run is paid.
3. After the run is paid, the net settlement is credited to your registered bank account, and a payslip is generated for it.