Resigned Or Terminated? Your Full And Final Settlement Money Will Now Arrive In Just 2 Days Under New Labour Law
The new labour code in India has introduced several standardisations across employment practices, and one of the most significant changes affects full and final (FnF) settlements. Previously, employees often had to wait weeks or even months to receive their dues after resignation , termination, or retrenchment. With the new regulations, this process has been drastically accelerated.
Under the updated Code on Wages, 2019, all employers are now mandated to disburse an employee’s full and final salary within two working days of their last working day. This represents a major shift from the earlier statutory period, which could extend up to 30 days. The change ensures that employees have faster access to their earned wages, aiding financial planning during career transitions.
Arjun Paleri, Partner at BTG Advaya, highlights that this amendment brings uniformity to all employment situations. Section 17(2) of the Code on Wages requires full and final settlement of salary components classified as ‘wages’ under the law, excluding statutory payments like gratuity , within two working days. It applies to all employees, regardless of salary level or employment type, and covers voluntary resignations, dismissals, and retrenchments.
Asish Philip of Lakshmikumaran and Sridharan Attorneys adds that the new framework significantly reduces waiting periods, benefiting employees who previously had to wait several weeks or even months to access substantial amounts. Sonakshi Das from JSA clarifies that components outside the definition of ‘wages’, such as gratuity, may follow separate prescribed timelines. However, all standard wage components must now be paid promptly within the new two-day window.
This reform aims to protect employees’ financial security, particularly during sudden job loss. “The government intends to ensure immediate access to wages, preventing prolonged delays and reducing financial stress on employees,” explains Philip. Das also notes that previously, companies often added conditionalities such as returning company assets or completing exit formalities before releasing settlements. The new code eliminates unfair delays and holds employers accountable.
While practical challenges remain for employers such as reconciling payroll cycles and verifying asset returns the overall benefit for employees is clear. Prompt settlements reduce uncertainty and provide financial stability at a critical transition point. Experts emphasise that internal payroll processes may need restructuring to comply with the Wage Code fully.
This update marks a significant step towards greater employee protection and financial transparency. Whether resigning or being terminated, employees can now rely on receiving their full and final settlement quickly, reflecting the government’s push to modernise labour laws and support workforce stability across India.
Under the updated Code on Wages, 2019, all employers are now mandated to disburse an employee’s full and final salary within two working days of their last working day. This represents a major shift from the earlier statutory period, which could extend up to 30 days. The change ensures that employees have faster access to their earned wages, aiding financial planning during career transitions.
Arjun Paleri, Partner at BTG Advaya, highlights that this amendment brings uniformity to all employment situations. Section 17(2) of the Code on Wages requires full and final settlement of salary components classified as ‘wages’ under the law, excluding statutory payments like gratuity , within two working days. It applies to all employees, regardless of salary level or employment type, and covers voluntary resignations, dismissals, and retrenchments.
Asish Philip of Lakshmikumaran and Sridharan Attorneys adds that the new framework significantly reduces waiting periods, benefiting employees who previously had to wait several weeks or even months to access substantial amounts. Sonakshi Das from JSA clarifies that components outside the definition of ‘wages’, such as gratuity, may follow separate prescribed timelines. However, all standard wage components must now be paid promptly within the new two-day window.
This reform aims to protect employees’ financial security, particularly during sudden job loss. “The government intends to ensure immediate access to wages, preventing prolonged delays and reducing financial stress on employees,” explains Philip. Das also notes that previously, companies often added conditionalities such as returning company assets or completing exit formalities before releasing settlements. The new code eliminates unfair delays and holds employers accountable.
While practical challenges remain for employers such as reconciling payroll cycles and verifying asset returns the overall benefit for employees is clear. Prompt settlements reduce uncertainty and provide financial stability at a critical transition point. Experts emphasise that internal payroll processes may need restructuring to comply with the Wage Code fully.
This update marks a significant step towards greater employee protection and financial transparency. Whether resigning or being terminated, employees can now rely on receiving their full and final settlement quickly, reflecting the government’s push to modernise labour laws and support workforce stability across India.
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