Employee Exits Guide
Comprehensive guide to managing employee separations - resignation, termination, retrenchment, F&F settlement, and compliance requirements.
Resignation
Key Points
- Written resignation required
- Acceptance by employer recommended
- Notice period can be waived/bought out
- Clearance process to be completed
Termination (Non-Workmen)
Key Points
- Follow contractual terms strictly
- Termination letter with reasons
- Consider notice pay in lieu
- Document performance issues if applicable
Retrenchment (Workmen)
Key Points
- Retrenchment compensation: 15 days × years of service
- Government approval needed for 300+ employees
- Re-skilling fund contribution required
- Full and final settlement within 2 working days
Disciplinary Termination
Key Points
- Valid domestic enquiry mandatory
- Principles of natural justice observed
- Proportionate punishment
- May affect gratuity eligibility
Retirement
Key Points
- As per company policy/service rules
- Gratuity payable
- Pension/PF settlement
- Retirement benefits as applicable
Contract Expiry
Key Points
- Gratuity payable after completing one year of service (or on death/disability)
- Contract completion certificate
- Non-renewal is not termination
- Same benefits as permanent employees during tenure
Submit Resignation
Written resignation submitted to reporting manager/HR
HR Acceptance
HR processes and accepts resignation
Notice Period
Serve notice period or negotiate buyout
Exit Clearances
Complete departmental clearances
F&F Settlement
Process full and final settlement
Relieving Letter
Issue relieving letter to employee
Experience Certificate
Issue experience/service certificate
Select a start date above to calculate all compliance deadlines
Retrenchment Decision
Management decision to retrench
Government Approval
Seek approval from appropriate government
Notice to Employee
Written notice of retrenchment
Pay Compensation
Pay retrenchment compensation and F&F settlement
F&F Settlement
Complete full and final settlement
Select a start date above to calculate all compliance deadlines
Full & Final Settlement Components
| Component | Description | Mandatory |
|---|---|---|
| Salary for days workedSec. 5, Payment of Wages Act 1936 | Basic + DA + other allowances for working days in final month | Yes |
| Notice paySec. 25F, Industrial Disputes Act 1947 | Pay in lieu of notice period (if not served) | Conditional |
| Leave encashmentSec. 79(11), Factories Act 1948 | Earned leave balance × daily wage | Yes |
| GratuitySec. 4, Payment of Gratuity Act 1972 | 15 days × years of service ÷ 26 (if eligible) | If eligible |
| BonusSec. 8, Payment of Bonus Act 1965 | Pro-rata bonus if earned during accounting year | If applicable |
| PF settlementSec. 6, EPF & MP Act 1952 | Employee + employer contribution with interest | Yes |
| Retrenchment compensationSec. 25F(b), Industrial Disputes Act 1947 | 15 days × years of service (for retrenchment) | If applicable |
| Ex-gratiaContractual / company policy | Any additional payment as per company policy | No |
Gratuity Formula
(15 × Last Drawn Wages × Years of Service) ÷ 26
Eligible after 5 years of continuous service (except death/disability). Fixed-term employees get pro-rata gratuity under new codes.
Retrenchment Compensation
15 Days Average Pay × Years of Service
Payable for employees with 1+ year of continuous service who are retrenched.
Common Pitfalls to Avoid
Delayed F&F Settlement
Risk: Legal claims, interest liability
Prevention: Process F&F within 2 working days
Missing Documentation
Risk: Disputes over terms, legal exposure
Prevention: Maintain signed acceptance of resignation/termination
Incorrect Gratuity Calculation
Risk: Underpayment claims, penalties
Prevention: Use correct formula: 15 × last drawn wages × years ÷ 26
Skipping Domestic Enquiry
Risk: Wrongful termination claims, reinstatement orders
Prevention: Always conduct fair enquiry before disciplinary termination
Non-compliance with Notice
Risk: Breach of contract claims
Prevention: Follow contractual notice requirements or pay in lieu