Full & Final Settlement

What this document contains

7 clauses every full & final settlement carries, plus 1 you can add.

1. 01

   Who the letter is from and to

   The head of the letter: the place and date it bears, the employer it issues from, and the person it is addressed to. Both are parties who sign, so both come from the party picker rather than being typed into the letter.

2. 02

   Subject

   The one line the letter is filed and found by. Written by the employer rather than composed from the particulars — those live on other clauses, and a clause cannot read another clause's data.

3. 03

   The employment

   Who the employee was and when the employment ended. Establishes what the settlement is a settlement of.

4. 04

   The settlement

   What is payable and what is deducted, itemised, with the net the employer states. Nothing here adds up the rows or works out the net — those are the employer's figures, and a person signing a receipt should be checking arithmetic somebody stands behind rather than arithmetic a document performed.

5. 05

   How and when it is paid

   The route and the timing of the payment. Stated rather than computed — a date the employer commits to, not one derived from the last working day.

6. 06

   Acknowledgement

   How the statement closes and what the employee's signature means. It acknowledges receipt of the stated sum and agreement with the statement — not a waiver of anything the law confers, which the release clause says explicitly.

7. 07

   Acceptance

   The other side's own words, accepting what the letter offers. Its own clause in an unnumbered section, because it is not a term of the letter and reading as one — indented under the employer's numbered request — is where it was.

Optional clauses

• Release of claims covered by this settlement

  An optional paragraph in which both sides record that the claims this settlement covers are closed. Scoped deliberately: it releases the claims settled here and nothing else. It does not, and cannot, release statutory entitlements — gratuity and provident fund accumulations survive any receipt, and a clause purporting to extinguish them would be unenforceable as to those and would mislead the person signing it.

  Worth adding when: the employer wants both sides to record that the settled claims are closed

What the law requires

Statutory entitlements survive any receipt

Gratuity and provident fund accumulations arise under legislation and are recoverable through the machinery that legislation provides. An employee cannot contract out of them, and a full and final settlement purporting to extinguish them is ineffective as to those entitlements. This is why the release in this statement is confined to the claims the statement settles.

Code on Social Security 2020 (gratuity; provident fund)

Wages have a payment deadline on separation

The wage legislation fixes the period within which wages must be paid where an employee resigns or is removed. A settlement issued late does not become timely because the employee signs it.

Code on Wages 2019 (time limit for payment of wages)

Only permitted deductions may be made

The Code on Wages lists the deductions that may lawfully be made from wages and caps the total proportion that may be deducted in any wage period. A deduction outside that list, or beyond that cap, is not made lawful by appearing on a settlement statement.

Code on Wages 2019 (authorised deductions and limits)

A release signed under pressure is vulnerable

Where a release is obtained by withholding wages already earned, it may be attacked as given under coercion or undue influence. A settlement that pays what is owed and asks for acknowledgement of receipt stands on firmer ground than one that makes payment conditional on a wide waiver.

Indian Contract Act 1872, ss. 15 and 16