Full and Final Settlement Letter: Word Format & Mail Templates

Full and Final Settlement Letter: Word Format & Mail Template

An employee must go through the Full and Final Settlement Letter, or FnF settlement, process when they quit or leave their job. Typically, this FnF settlement falls under the purview of the organization's HR division. The full and final settlement calculation formula is a reasonable and unambiguous process that is implemented in accordance with labor law and income tax rules specified in the employee's offer letter.

HR professionals understand the significance of a full and final settlement letter. To make sure that the format of the final and final settlement letter is appropriate, the HR department can typically handle this matter on its own.

This blog article will provide you with the information and resources you need to construct a thorough and efficient complete and full and final settlement letter, will share some examples, mail templates, & word format. Whether you are an employer or a human resources specialist in charge of doing so. Through the identification and provision of workable solutions, we hope to enable you to effectively manage the settlement process and uphold amicable connections with departing employees.

What is a Full and Final Settlement Letter?

When an employee leaves the company, they receive a full and final settlement letter confirming that all outstanding payments have been settled and that they are no longer owed. It includes all the information about the amounts owed to the employee and notes that the employee receives a check in the same amount. In the event that former employees dispute the salary, a full and final settlement letter may be employed.

A formal document outlining the terms and conditions of a negotiated settlement between HR and the employee is called a full and final settlement letter. This full and final settlement letter, which is usually utilized in employment situations, is a formal document that attests to the fulfilment of all monetary and legal commitments. It contains information about the precise sums to be given or received, the settlement's nature, and any other relevant terms like non-disparagement or confidentiality clauses that were agreed upon.

The full and final settlement letter serves as a legally enforceable document that safeguards the interests of all parties concerned while offering clarity and closure.

Importance of Full and Final Settlement Letters

In handling employment-related issues like termination or settling dues, meticulous attention and clear communication between employers and employees are paramount.

A Full and Final Settlement Letter plays a pivotal role in such instances. It delineates the settlement terms, bringing closure to the employment tie.

Drafting a meticulously written Full and Final Settlement Letter is crucial to ensure:

  • Clarity and comprehension on both ends,
  • Consensus on settlement terms, and
  • Mitigation of potential future disputes or misunderstandings.

What things should be included in the Full and Final Settlement Letter?

As HR professionals or employers, it's imperative to ensure the comprehensive inclusion of the following details in a Full and Final Settlement Letter:

  • Settlement Amount: Clearly state the finalized amount to be settled.
  • Settlement Cheque: Provide details regarding the issuance of the settlement cheque.
  • Resignation/Termination Date: Specify the date on which the employee resigned or was terminated.
  • Cheque Issuance Date: Clearly mention the date for which the settlement cheque is issued.
  • Statement of Account: Include a detailed statement of the account, outlining the breakdown of the settlement amount.

How is the Full and Final Settlement calculated?

The term "full and final settlement" refers to the total of all previous calculations. It includes calculating your employee's residual salary, deducting taxes, and clearing out paid leave, arrears, and Provident Fund accounts. Businesses rarely make these computations manually.

They use powerful and reliable software to calculate the return amount neatly and orderly. An FnF settlement letter is used to outline the entire procedure at the end.

How many days does it take to complete the full and final settlement process?

According to the Payment of revenue Act of 1936, earnings due to a dismissed employee must be paid within two working days of the termination. According to the requirements, the final settlement must be completed on the employee's last day of service with the organization. However, clearances and paperwork take time, so this isn't always true in practice. Although the Act does not specify a specific date for full and final settlement, experts generally believe that 30-45 days is an appropriate time frame. The company must clear the gratuity within 30 days. Any additional bonuses must be recorded during the same fiscal year.

Full and Final Settlement Letter Word Format & Mail Template 

#Format 1

Date: ______________

Subject: Final Payment Advice

Dear Mr./Ms. ________________,

We would like to inform you that your final payment has been processed in accordance with your appointment letter and company policies. Your last working day with us was on 'Relieving date', and your salary has been paid up to that date.

Please find enclosed a cheque bearing no. 'cheque no' dated 'date' for Rs. 'amount' drawn on ‘bank’ towards your final payment. Also attached is the statement of account.

We'd want to take this opportunity to express our gratitude for your efforts and services during your time with us, and we wish you all the best in your future pursuits.


'Name of the Company'

'Name of the employee'


#Format 2

Date: ______________ 

Subject: Full and Final Settlement Letter 

Respected Mr./Ms. ________________,

In continuation of your resignation letter dated ‘date’ and subsequent relieving from your duties on ‘Relieving date’, your full & final settlement has been prepared in line with the terms & conditions of your appointment letter.

Please find enclosed a cheque bearing no. ‘cheque no’ dated ‘date’ for Rs. ‘amount’ drawn on ‘date’ Bank towards your full & final settlement. Also attached is the statement of settlement of account.

With this, your account is settled with our firm, and nothing is owed from the company to you.


'Name of the Company' 

'Name of the employee' 



The Full and Final Settlement Letter stands as a critical document in the employee departure process, ensuring clarity, compliance, and closure. The entire Full and Final Settlement procedure is thorough and well-organized. When done successfully, it enables a company to systematically let go of employees. The FnF settlement requires both HR expertise and precise mathematics.

A complete and final settlement procedure in which the HR department facilitates transactions between all parties and resolves all outstanding issues prior to an employee's last day of work is preferable.

By meticulously outlining the settlement terms, it fosters mutual understanding and minimizes the risk of future disputes. As HR professionals, it's imperative to uphold transparency and communication throughout this process, safeguarding the interests of both parties involved. Through the utilization of comprehensive templates and clear communication, we aim to streamline the settlement process and maintain positive relationships with departing employees, fostering a culture of professionalism and respect within the organization.

Full and Final Settlement Letter FAQs

Full and Final Settlement Letter FAQs

A: A formal document confirming settlement of all dues upon an employee's departure, detailing amounts owed and cheque issuance

A: Key details such as settlement amount, cheque details, resignation/termination date, and a statement of account breakdown

A: It encompasses residual salary, tax deductions, paid leave, arrears, and Provident Fund, usually computed using specialized software

A: The law typically mandates payment within two working days post-termination, but practical completion may take 30-45 days

A: It ensures clarity, consensus on terms, and mitigates future disputes between employer and employee.

A: Templates include formats for final payment advice and full & final settlement letters, facilitating clear communication.

A: HR plays a crucial role in managing settlements, ensuring procedural compliance, and fostering positive employee relations

A: If you do not pay the recovery amount, the company may take legal action against you, including withholding papers such as your NOC or experience letter, until they collect the money from you.

A: Yes, a Full and Final Settlement Letter can be employed in the event of a dispute over salary as it outlines all the amounts owed to the employee and confirms the issuance of a settlement cheque