Historically, companies in India settle Full and Final (FnF) accounts within 30-45 days of an employee’s exit. Section 17(2) of the Code on Wages, 2019 makes this practice illegal.

1. The Statutory Mandate

The Code states: “Where an employee has been removed, dismissed, retrenched, or has resigned, the wages payable to him shall be paid within two working days of his removal, dismissal, retrenchment or, as the case may be, his resignation.”

2. Operational Challenges

Meeting a T+2 deadline requires a complete overhaul of the exit workflow:

• Asset Handover: IT teams cannot wait weeks to check laptops. Clearance must happen on the last day.
• No-Dues Certificates: Department heads must sign off digitally and instantly.
• Payroll Cycle: FnF cannot wait for the next “Payroll Run.” It must be processed on-demand.

3. Strategic Implementation

To comply without chaos, ComplianceAge recommends:

A. “Hold Back” Policy Review

If your contracts state “FnF after 45 days,” they are void against the law. Update contracts to reflect the statutory timeline while strengthening asset recovery clauses.

B. Automated Clearance

Implement an HRMS workflow where asset clearance triggers automatic FnF computation. Manual processing will almost certainly lead to missed deadlines.

C. Recovery of Dues

If an employee damages assets, you can only deduct amounts authorized under the Code (fines/damages). You cannot hold back the entire salary indefinitely pending investigation.