An employee’s final settlement with an organisation happens on their last working day there. The clearance can take some time, usually a month after the last working day. It is strange, however, that most companies don’t know much about this process, even when it is required to be followed as per regulations. Choosing the right Payroll software can make all the difference for your HR department and your organisation as a whole.
Components of Final Settlement
Find out what are the key components of an employee’s final settlement.
- Unused Leaves: It is required by law to pay against all the unpaid leaves. The right payroll system will take the unused leaves into account when computing the final settlement.
- Unpaid Salary: This part is simple and refers to the salary to be paid to the employee from the date they submitted their resignation letter to their last working day. This should also include the annual benefits like the arrears and allowances.
- Gratuity: It is also required to pay the employee’s gratuity within a month of them leaving your organisation. If the employee has completed a specific number of years in the organisation, it will be required to pay interest on the gratuity if it is delayed beyond 30 days. The right payroll program will include and compute this component efficiently.
- Deductions: There are several points that can be included in deductions. This can include professional tax, income tax, PF, and compensation if notice period is not served.
- Recoverable: Very few Payroll software will include the recoveries point when settling an employee’s account. This can include loan advances, petty cash, and assets that may be taken by the employee.
When you choose the right payroll application, it makes the final settlement process simpler and efficient. It can help eliminate any room for human error and ensure that your organisation complies with the rules and regulations without any omissions.