• Source:JND
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The new Labour Code, which came into effect on November 21 has introduced several employee-friendly reforms for both fixed-term and permanent employees. One of the most significant changes is the faster Full and Final (FnF) settlement process.

Under the old system, many companies typically took 30 to 45 days to process FnF payments, leaving employees struggling financially while changing jobs. The new Labour Code aims to address the issue by establishing a strict timeline that all employers must adhere to.

Full and final will have to be done in 2 days

The Code on Wages, 2019, one of the four consolidated labor codes, mandates a much faster settlement cycle. According to the new rule, employers must clear the full and final wages within two working days of an employee's departure, whether due to resignation, termination, retrenchment, or closure.

Previously, some companies issued the FnF on the last working day, while others made the payment within the legal timeframe of approximately 30 days. This is because when an employee leaves a job, multiple settlements, such as gratuity and leave encashment, each have their own deadlines. Therefore, companies often settle everything at once to ensure they are compliant with the law.

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What did experts say?

According to Arjun Paleri, partner at BTG Advaya, the new wage code brings uniformity to all job positions. Under Section 17(2) of the Wage Code, 2019, all employees must receive their final salary,the full and final settlement (FnF) of their salary (excluding certain statutory payments such as gratuity), within two working days of the last working day.

Ashish Philip, executive partner at Lakshmikumaran & Sridharan Attorneys, agrees with Paleri and said that under the Code on Wages, employers will now have to pay full and final salary within two working days of an employee's resignation, termination, dismissal or retrenchment, as the case may be, which is significantly shorter than the earlier 30-day timeline.

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Employees will benefit

For employees, this significant reduction in processing time provides financial security. It also promotes accountability and prevents unnecessary delays that previously affected millions of workers.

Section 17 of the Code on Wages, 2019, provides clear guidelines regarding the timeframe for paying wages to employees. This section specifies how employers should pay employees based on their pay cycles, which can range from daily to monthly payments. It also gives the government the flexibility to adjust payment timelines in certain circumstances, while also taking into account other existing laws that may have different requirements.

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