Resigned or fired? Employees will now get full and final settlement money in just 2 days under new labour law
Nov 26, 2025
Synopsis
Employees will now receive their full and final settlement within two working days. This new labor code standardizes the process for all separations. Previously, settlements could take up to 30 days or longer. The change aims to provide employees with faster access to their dues. Employers may face operational challenges in meeting the new, shorter timeline.
With the new labour code in place, several small details that were either informal or handled differently by various companies have now been officially standardised. One notable change involves the full and final settlement (FnF).
According to the new labour code, companies are required to pay your full and final settlement money within two working days. In the past, some companies would issue the FnF on the last working day while some paid within the statutory timeframe of about 30 days. This is due to the fact that when an employee leaves, there are many settlements to consider like gratuity and leave encashment, each with its own deadline. So, companies would often settle everything at once to ensure that they were following the law.
What has changed with full and final settlement payment under new labour code
According to Arjun Paleri, Partner, BTG Advaya, the new wage code introduces uniformity across all employment situations. Under Section 17(2) of the Code on Wages, 2019, all employees must receive their final wages—the complete full and final settlement (FnF) of salary (excluding certain statutory payments such as gratuity)—within two working days after the last working day. This provision now:
a. Covers all forms of separation from employment, including voluntary resignation
b. Applies uniformly to all employees, irrespective of salary level or employment category
c. Eliminates the previous salary-based limitation entirely.
Asish Philip, Executive Partner at Lakshmikumaran and Sridharan Attorneys agrees with Paleri and adds that under the Code on Wages, full and final wages must now be disbursed by employers within two working days of an employee’s resignation, removal, dismissal or retrenchment as the case may be, which is a significant reduction from the earlier 30-day timeline for the full and final settlement.
Paleri says that currently, final wage settlements typically take several weeks after an employee's last working day, sometimes extending to months.
This means employees must wait for extended periods to receive their full and final settlement, which can be a substantial amount, particularly for long-term employees.
Paleri says: “Such prolonged settlement periods significantly impact employees' financial planning during career transitions. The new rule requires employers to settle final wages within two working days after the last working day—much faster than current practices. This eliminates prolonged waiting periods and is highly beneficial for employees.”
Why was this amendment in the timeline for payment of full and final settlement needed?
According to Philip, the objective of this amendment is to facilitate early and faster access to wages and ensure financial security of the employees.
Philip says: “While the reduction in time limit prevents prolonged withholding of dues, it may create operational challenges for employers to undertake full and final settlements within merely two days. This includes settlement in cases where company assets and other confidential data is not returned by the employees, particularly in remote working set ups.”
Philips says that the timelines for settlement should be different in case of resignation by the employee and retrenchment or dismissal by the employer. He says: “While subsistence allowance may be paid within two working days, the employers should be permitted to undertake full and final settlement upon completion of the exit formalities within the earlier timeline of 30 days.”
[The Economic Times]
