Full and final settlement
Before you start
- The employee's Leaving date is set. See Mark an employee as left.
- Defaults are set in Payroll configuration → Full and Final:
| Setting | What it does |
|---|---|
| Default notice period (days) | Notice the employee should serve. |
| Days divisor | Days used for the daily rate, usually 30 or 26. |
| Notice pay basis | Components the daily rate is worked out from. Empty uses all earnings. |
| Notice pay component / Notice recovery component | Components for paying or recovering a notice shortfall. |
| Gratuity component, Leave encashment component | Components used in the settlement. |
Gratuity rules are in Gratuity Master (eligibility, payable salary days such as 15, calculation days such as 26, non-taxable limit). Leave encashment rules are in Leave Encashment.
Create the settlement
- Go to Full and Final Settlements and choose the employee.
- HCM Cafe proposes notice, leave encashment and gratuity from the policy settings. Review each:
- Notice served (days) and what to do with a shortfall: Recover the shortfall from the employee, Pay the shortfall to the employee, or Waive the shortfall.
- Leave encashment days and any exempt amount.
- Gratuity.
- Save, then pay it in a Full and final payroll run.
Example
Daily rate basis: Basic + DA = 26,000 a month, divisor 26, so 1,000 a day. Notice 60 days, served 40.
| Item | Amount |
|---|---|
| Notice shortfall, recovered | 20 × 1,000 = 20,000 deducted |
| Leave encashment, 10 days | 10 × 1,000 = 10,000 paid |
Gratuity, for an eligible employee with 6 years' service, 15 payable days and 26 calculation days: 26,000 × 15 ÷ 26 × 6 = 90,000.