From April 1, 2026, companies will have to complete full and final (F&F) settlements within two working days of an employee’s last working day. This change comes under India’s updated labour law framework through the Code on Wages.
The rule applies to all kinds of exits, including resignation, termination and layoffs. It covers payments such as pending salaries, leave encashment, bonuses and other dues.
So far, there has been no fixed timeline that employers were required to follow. In many cases, employees had to wait for weeks or even months to receive their final payments.
“Currently, final wage settlements typically take several weeks after an employee’s last working day, sometimes extending to months," News18 quoted Paleri as saying.
Why it matters for employees
Delays in receiving final dues often create financial strain, especially for those switching jobs or managing expenses between roles.
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“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," Paleri added.
“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. This is a significant reduction from the earlier 30-day timeline for full and final settlement," News 18 cited Asish Philip, Executive Partner at Lakshmikumaran and Sridharan Attorneys, as saying.
Pressure points for companies
While the move benefits employees, it could be difficult for companies to execute smoothly. F&F settlements require several checks, including attendance records, leave calculations, tax deductions and departmental clearances.
Compressing these steps into a two-day window may require companies to upgrade systems, improve coordination and rely more on automation.
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What about bonuses and disputes
Certain components, like incentives or performance-linked pay, may not always be immediately calculated. Experts indicate that while fixed payments will likely be cleared within the timeline, variable components may follow separate processes, depending on company policies and future clarity.
Wider impact
Industries with frequent employee movement, such as IT, startups, retail and gig work, are expected to feel the change more strongly. Faster settlements could improve exit experiences and reduce friction.
However, smaller firms and MSMEs may need time to adjust, especially where processes are still manual.
