# Full and final settlement in 2 working days | Peoplo.ai

URL: https://peoplo.ai/in/en/blog/full-and-final-settlement-two-working-days/

> The Code on Wages requires final wages within two working days of an exit. What full and final settlement includes, what to prepare and how gratuity fits.

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# Full and final settlement in two working days: a checklist for HR

Peoplo.ai team · 5 min read

The Code on Wages requires final wages within two working days of an exit. What full and final settlement includes, what to prepare and how gratuity fits.

Full and final settlements used to take 30 to 45 days in many companies. Under the **Code on Wages** , in force since 21 November 2025, wages due to an employee who resigns, is removed, dismissed or retrenched must be paid **within two working days** of their last day.

Two working days is not much time. The only way to meet it reliably is to do most of the work before the employee leaves.

## What goes into a full and final settlement

A typical settlement adds up:

- Salary for the days worked in the last month

- Leave encashment for unused earned leave, if your policy or state law provides for it ( [leave encashment calculator](https://peoplo.ai/in/en/tools/leave-encashment-calculator/) )

- Bonus or incentives that are due

- Pending reimbursements and expense claims

- Notice pay, if the company asked the employee to leave before the notice period ended

And takes away:

- Notice pay recovery, if the employee left without serving notice

- Outstanding loans, advances and salary paid in advance

- Value of company assets not returned, where your policy allows it

- Income tax for the year, recalculated on final earnings

## Gratuity runs on its own clock

Gratuity is part of most settlements, but it follows the Code on Social Security, not the two-day rule. It must be paid within **30 days** of becoming due. Employees qualify after five years of continuous service, or after one year for fixed-term employees, who are paid pro rata. The [gratuity calculator](https://peoplo.ai/in/en/tools/gratuity-calculator/) shows the amount.

## A checklist that works backwards from the last day

**When notice is given**

- Confirm the last working day in writing, and whether any notice will be bought out or waived.

- Start the asset return list: laptop, ID card, access cards, and anything else issued.

- Ask the employee to submit all pending claims and tax proofs.

**A week before the last day**

- Freeze the leave balance and work out [leave encashment](https://peoplo.ai/in/en/tools/leave-encashment-calculator/) .

- Calculate the gratuity provision and check eligibility.

- Collect sign-offs from finance, IT and the manager on any recoveries.

**On the last day**

- Record returned assets and revoke system access.

- Finalise attendance for the month.

- Prepare the settlement statement for approval.

**Within two working days**

- Pay the settlement, with a clear statement of every line.

- Issue the relieving and experience letters.

- Update PF exit details so the employee can withdraw or transfer.

## Where software helps

The two-day deadline is mostly a coordination problem: leave, attendance, claims, assets and tax all sit with different people. In Peoplo.ai, the exit coordinator agent prepares the settlement, checks it against leave, claims and assets, and sends it for approval. A person approves it before anything is paid.

For what is included, a worked example and the full checklist, see the [full and final settlement guide](https://peoplo.ai/in/en/compliance/full-and-final-settlement/) .

Sources

- [The Code on Wages, 2019, section 17(2): Gazette of India, 8 August 2019 (checked 3 November 2026)](https://egazette.gov.in/WriteReadData/2019/210356.pdf)
- [LiveLaw: two working days under the Code on Wages](https://www.livelaw.in/articles/two-working-days-code-wages-employee-final-settlement-552780)
- [India Code: Code on Social Security, 2020 (gratuity, section 53)](https://www.indiacode.nic.in/bitstream/123456789/16823/1/aA2020-36.pdf)

General information, not legal or tax advice. Rules change, so check the source before you act.

Payroll that keeps up with the rules

Peoplo.ai agents prepare each payroll run and flag anything unusual. A person approves before anyone is paid.

[Request a demo](https://peoplo.ai/contact/)

## Keep reading

[Payroll Gratuity calculation formula in India: 15/26 explained with examples Read](https://peoplo.ai/in/en/blog/gratuity-calculation-formula/) [Payroll EPF wage ceiling is now ₹25,000: what employers need to change Read](https://peoplo.ai/in/en/blog/epf-wage-ceiling-25000/)