The new Labour Code, which came into effect on November 21, has introduced one of the most significant employee-friendly reforms in recent years, a mandatory two-day Full and Final settlement (FnF) timeline. This change marks a major shift in India’s labour law, offering huge relief to employees transitioning between jobs.
Faster Full and Final settlement under new Labour Code
Under the old system, employees often waited 30 to 45 days for their Full and Final settlement, creating financial stress during job changes. The new Labour Code tackles this problem directly by enforcing a strict payment deadline.
The Code on Wages 2019, one of the four consolidated labour laws, states that employers must complete the Full and Final settlement within two working days of an employee’s last working day—whether the exit is due to resignation, termination, retrenchment, or company closure.
What Section 17 of the code on Wages 2019 says
According to Section 17(2) of the Wage Code 2019, every employee must receive:
Their final salary, and the Full and Final settlement (FnF) amount (excluding statutory payments like gratuity), within two working days of leaving the organisation.
This is a dramatic reduction from the earlier practice where companies took up to a month to clear all dues.
Different components, such as gratuity, leave encashment, and reimbursements, had their own timelines under various labour rules. Companies often combine all payouts to stay compliant with multiple overlapping regulations.
With the new Labour Code, employers must now ensure the final salary and FnF amount is cleared immediately, improving employee rights and offering greater financial stability for workers between jobs.
Source – https://english.mathrubhumi.com/amp/news/money/labour-code-full-final-settlement-yhkihfsd