What your company actually owes you when you leave — pending salary, leave encashment and gratuity, minus the recoveries nobody warns you about.
Your full and final settlement(F&F) is the single payment that closes out your employment: everything you've earned but not been paid, minus everything the company can legitimately claw back. Most people only find out what's in it 30–45 days after their last working day, when the number lands and it's smaller than expected. Work it out now:
Your salary
₹
₹
What you're owed
unpaid days up to your last working day
encashable balance, per your policy
total 5y 2m
₹
What gets deducted
recovered at your per-day salary
₹
Estimated settlement, before TDS
₹2,09,231
₹2,09,231 owed to you no recoveries
Pending salary12 days × ₹3,333/day (gross ÷ 30)₹40,000
Leave encashment15 days × ₹1,667/day (basic ÷ 30)₹25,000
Gratuity5 completed yrs × 15 days ÷ 26, on basic + DA₹1,44,231
Likely tax-free
₹1,69,231
Taxable as salary
₹40,000
Directional estimate — your company's policy and employment contract govern the actual numbers. Gratuity is tax-free up to ₹20L and leave encashment up to ₹25L (lifetime caps for private-sector employees, and both still apply under the new tax regime); the taxable part has TDS deducted at your slab rate, which this doesn't compute.
The four things you're owed
01
Pending salary for your final month
Your last month is almost never a full month. You're paid per day for the days you actually worked — gross salary divided by 26 or 30, whichever your contract specifies. That divisor is worth checking: ÷26 makes each day about 15% more valuable than ÷30.
02
Leave encashment on your unused balance
Your accumulated paid leave gets converted to cash, almost always on basic + DA rather than gross — which is why the number comes in far lower than people estimate. Policies cap what carries forward and what's encashable at all, so check your leave policy before counting on a large balance.
03
Gratuity, if you crossed five years
The statutory formula is (last drawn basic + DA) ÷ 26 × 15 × completed years of service. A part-year over six months rounds up to a full year — so 5 years 7 months is paid as 6. Below five years it isn't payable at all, which makes the 4-year-something exit expensive in a way most people never price in.
04
Pending reimbursements, bonus and arrears
Approved expense claims, a declared but unpaid bonus, and any arrears from a mid-year revision all belong in the F&F. These are the items most often quietly dropped — if you don't list them in writing before your last day, they tend not to appear.
The four-years-eight-months trap
Gratuity needs five years of continuous service. But the Madras High Court held in Mettur Beardsellthat completing 240 days in your fifth year counts as having completed the full five — so roughly 4 years and 8 months can qualify. Labour tribunals widely follow it and many employers honour it. It is not, however, binding on every High Court, and plenty of companies simply refuse and let you take it to a controlling authority. If you're anywhere near that line, the honest read is that your gratuity is a claim you may have to press, not money you should assume is coming. Serving out the extra few weeks is usually cheaper than the fight.
P
PATHWISE
Your settlement is the small number. What the move costs you is the big one.
The recoveries are where settlements collapse. Unserved notice is deducted at your per-day salary — if you skipped 30 days on a ₹1L monthly salary, that's roughly ₹33,000 gone (our notice period buyout calculator goes deeper on that formula). Then come unreturned assets — laptop, phone, ID card — charged at book value or worse. Then any joining or retention bonus still inside its clawback window, which is recovered in full and can wipe out the entire settlement on its own. Salary advances and excess leave taken beyond your accrual round it out.
If the recoveries exceed what you're owed, the balance flips: you get an invoice instead of a payment, and your relieving letter can be held until it clears. That letter matters more than the money at your next background check.
What's taxable and what isn't
Pending salary, bonus and arrears are ordinary salary income, taxed at your slab with TDS deducted. Gratuity is exempt up to ₹20 lakh and leave encashment on resignation up to ₹25 lakh — both lifetime cumulative caps for private-sector employees, and both still available under the new tax regime, which is a common misconception. The catch nobody expects: a notice-period recovery generally does not reduce your taxable salary, so you can end up paying tax on money you handed back. Treatment is contested and varies by employer — worth a conversation with a CA if the amount is large.
How long it should take
Most Indian companies settle within 30–45 days of your last working day, and many state shops and establishments rules require payment within roughly two days to a week of termination — rules honoured mostly in the breach. Gratuity has its own statutory clock: it's payable within 30 days of becoming due, with interest after that. If your F&F is stuck, a written request to HR followed by an application to the controlling authority under the Payment of Gratuity Act is the usual escalation path for the gratuity portion.
These are directional estimates, not legal, tax or financial advice. Eligibility, formulas, encashment policy, clawback terms and tax treatment are all set by your specific contract, company policy and current law — read your employment agreement, and get professional advice for anything contested or large.
Common questions
How long does full and final settlement take in India?
Most Indian companies settle within 30 to 45 days of your last working day. Many state shops and establishments rules require payment far sooner — roughly two days to a week — but those are honoured mostly in the breach. Gratuity has its own statutory clock: it is payable within 30 days of becoming due, with interest after that.
Do I get gratuity if I leave before five years?
Usually not — the Payment of Gratuity Act requires five years of continuous service. The Madras High Court held in Mettur Beardsell that completing 240 days in your fifth year counts as the full five, so roughly 4 years and 8 months can qualify. It is not binding on every High Court and many employers simply refuse, so treat it as a claim you may have to press rather than money you should assume is coming.
Is full and final settlement taxable?
Partly. Pending salary, bonus and arrears are ordinary salary income taxed at your slab with TDS deducted. Gratuity is exempt up to ₹20 lakh and leave encashment on resignation up to ₹25 lakh — both lifetime cumulative caps for private-sector employees, and both still available under the new tax regime, which is a common misconception.
Is leave encashment calculated on basic or gross salary?
Almost always on basic plus DA, not gross. That is the single biggest reason settlements come in below what people estimate — if your basic is half your gross, your leave encashment is roughly half what you assumed it would be.
Can my employer deduct unserved notice from my settlement?
Yes. Unserved notice is recovered at your per-day salary and netted off the settlement, alongside unreturned assets and any joining or retention bonus still inside its clawback window. If the recoveries exceed what you are owed, the balance flips — you get an invoice instead of a payment, and your relieving letter can be held until it clears.
Figures on this page are directional estimates based on published market data and Pathwise's own model — not financial, legal, or career advice. Individual outcomes vary.