What is Meant by Full and Final Settlement in Payroll?


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Payroll is a system where a company records its list of employees, and the amount due to each is calculated after deducting tax and adding bonuses, etc. Payroll is usually managed by the accounting or HR Department.

In the case of a small business, it’s managed by the owner. While some may misread salary with payroll, salary means remuneration, given to the employees monthly or annual. In contrast, payroll is a system where records of payments made to the employees are recorded. A majority of us want a single tool that can keep track of salary information, taxes paid, and overtime pay. Pay Stub helps in all this and tops them with generating, printing and using after cashing out payroll checks done. But one has to be aware of fake Pay Stubs in the world of the internet!

What is Full and Final Settlement in Payroll?

When an employee resigns from an organization, the employer has some obligation towards the employee. One such responsibility is called the full and final settlement, commonly known as FnF Process.

In this process, an employee’s payment for the last working month is calculated plus any additional bonus and deductions. This process is carried out when an employee resigns and is called final settlement and is based on the appointment contract at the time of joining the employment. After full and final settlement, a salary slip is issued to the employees with a detailed description of the bonus paid, deductions, etc.

When does the Settlement Happen?

The full and final Settlement should happen on the employee’s last working day as per the rules. But clearance policy says that the entire process takes 30-45 days of the employee’s last working day.

Pointers to Keep in Employee’s Mind

  • To complete the FnF process, make sure that all the required documents are submitted.
  • Settle any advances taken or make sure that all the advances get adjusted in the final settlement process.

These pointers will help both employees to get the full and final settlement in time and employers to finish the FnF process without any delay.

How to Claim Assets?

When an employee joins the company, they are provided with all the needed assets such as a laptop and phone to work effectively and efficiently and contribute to the company’s growth.

Employers have to keep track of the assets provided to employees. For that purpose, professional HR or payroll software will help to reclaim all those assets when an employee resigns. Asset reclaims, and exit Interview is a critical aspect of the full and final settlement.


Adhering to all the rules FnF process helps an organization to avoid unnecessary dues and achieve maximum growth. The FnF process is organized and systematic. In the new era, companies use easily accessible software, which will help the companies reduce the errors in the calculation and help speed up the FnF process. 


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