When is gratuity payable in an FnF?

When the employee has completed five years of continuous service (with limited exceptions such as death or disablement). The FnF should perform this check explicitly.

Is leave encashment part of FnF?

Yes — unused earned leave is typically encashed in the final settlement, valued per company policy (commonly on basic salary).

Is TDS deducted on the FnF payout?

On its taxable components, yes — final salary and taxable portions of encashment are subject to TDS like regular pay.

Full and Final settlement, decomposed

A Full and Final (FnF) settlement closes an exiting employee's account: pending salary for days worked, encashment of unused earned leave, gratuity if the employee has completed five years of continuous service, minus notice-period shortfall recovery and standard statutory deductions on the final payout.

The five components of a clean FnF

(1) Final prorated salary to the last working day; (2) leave encashment, typically on earned-leave balance at a basic-salary rate; (3) gratuity when the five-year continuous-service threshold is met; (4) recoveries — notice buyout, advances, assets; (5) statutory deductions (PF, PT, TDS) applied to the taxable parts of the payout.

Where FnF goes wrong

The classic failures are missing the gratuity eligibility check, encashing the wrong leave balance, and forgetting that parts of the settlement are taxable. Each error becomes a dispute precisely when the relationship is ending — the worst time.

In Flocci Work Suite

FnF settlement screens — gratuity eligibility check, leave encashment and notice recovery — are live in the product today with backend persistence in rollout; the underlying payroll, leave-balance and attendance data they consume is the same audited, locked data the rest of the suite runs on.

Frequently asked questions

When is gratuity payable in an FnF?: When the employee has completed five years of continuous service (with limited exceptions such as death or disablement). The FnF should perform this check explicitly.
Is leave encashment part of FnF?: Yes — unused earned leave is typically encashed in the final settlement, valued per company policy (commonly on basic salary).
Is TDS deducted on the FnF payout?: On its taxable components, yes — final salary and taxable portions of encashment are subject to TDS like regular pay.

Keep reading

Statutory rules summarized as of 2026-07-29. Rates and thresholds change — always confirm against the current EPFO, ESIC and Income Tax department notifications before filing.