Template Description

The Full and Final Settlement Letter template serves as a formal record of the financial reconciliation conducted between an employer and an outgoing employee upon cessation of employment. This template is used to document earnings, deductions, and the net amount payable, ensuring transparency, compliance, and closure for both parties. Structured as a professional and legally aligned communication, this 3 page Word document can be used for all types of separations including resignation, termination, retirement, or contract completion. The letter provides a breakdown of the final dues, statutory deductions, confirmation of asset return, employee declaration, and transfer timelines.

This template is most suitable for HR, finance, and compliance teams in organizations of all sizes and ensures consistency in offboarding practices.

Understanding the Full and Final Settlement Letter

Key Features of the Template

1. Subject & Purpose: Communicates the intent to settle all dues and formally close the employment engagement, along with reference to the last working day.
2. Purpose Clause: Highlights the need for a systematic process for dues clearance, ensuring adherence to labor laws and internal policy frameworks.
3. Scope Section: Defines the categories of employees covered under the settlement process, including permanent, temporary, probationary, and contractual staff.
4. Employment Details: Captures the employee’s tenure, department, position, and reason for separation for record-keeping and statutory reporting.
5. Earnings and Payables: Lists all entitled components such as salary, leave encashment, bonuses, gratuity, and reimbursements with item-wise amounts.
6. Deductions Section: Outlines statutory and policy-based deductions such as TDS, PF, notice period recovery, loan repayments, and asset non-return penalties.
7. Net Settlement Summary: Shows the net payable amount (in numbers and words), along with bank details for payment and expected settlement timeline.
8. Asset & Clearance Confirmation: Ensures that all company assets have been returned and clearance is obtained from relevant departments before release of funds.
9. Timeline for Processing: States the target duration for settlement completion (typically 15–30 days), subject to exit formalities.
10. Confidentiality Clause: Emphasizes that the contents and process are confidential and to be handled by authorized personnel only.
11. Record Maintenance: Mentions retention duration for all settlement-related documents, typically 4 years, for audit and legal purposes.
12. Governing Law: Lists relevant Indian labor laws governing the settlement process, including Payment of Wages Act and Gratuity Act.
13. Employee Declaration: Includes a formal statement from the employee confirming receipt, asset return, and no further dues or claims.

Conclusion

The Full and Final Settlement Letter is a critical component of the employee offboarding process. This standardized template provides clarity, legal protection, and formal closure for both the employee and the organization. It fosters goodwill and reduces the likelihood of future claims or misunderstandings while fulfilling compliance obligations.