India’s revamped labor laws are ushering in a new era of workplace efficiency, particularly when it comes to managing employee exits. A key change is the mandate requiring employers to complete the full and final (F&F) settlement within two working days of an employee’s departure. This significant shift aims to eliminate the often lengthy delays employees face in receiving their dues after leaving a company, streamlining the entire process of how to post employee’s resignation and handle their final payments.
The End of Lengthy Waiting Periods After an Employee’s Resignation
Historically, employees in India often waited weeks, sometimes even months, to receive their final settlements. The new regulation, outlined in Section 17(2) of the Code on Wages, 2019, mandates that all outstanding payments, including salary dues and leave encashment, must be cleared within two working days following resignation, termination, retrenchment, or closure of the establishment. This is a major step forward in ensuring timely financial settlements for employees and creates a standardized process to post employee’s resignation.
(Financial Express)
Preparedness and Challenges for Employers
While the intent of the new rule is clear, its implementation presents challenges for employers of all sizes. Smaller businesses (MSMEs) may struggle with limited HR resources and cash flow constraints. Larger organizations with a national presence may face hurdles in coordinating asset returns, exit formalities, and aligning various internal systems. Therefore when you post employee’s resignation, it’s important to be prepared.
Leveraging Technology for Efficient Off-boarding
The key to compliance lies in adopting technology-enabled off-boarding processes. Integrated HRMS platforms that encompass attendance, payroll, asset management, and finance can significantly streamline the exit process. Clear, automated workflows, departmental clearances completed before the last working day, and real-time approvals are crucial for meeting the stringent two-day deadline. Investing in these systems is imperative to efficiently post employee’s resignation and manage the associated administrative tasks.
Enforcement and Penalties for Non-Compliance
The Code on Wages includes provisions for monitoring and enforcement of the two-day settlement rule. While there may not be a specific penalty solely for missing the two-day deadline, penalties can arise from underpayment or incorrect payments. The law provides for monitoring by Inspector-cum-Facilitators, penalties up to ₹50,000 for underpayment, and ₹20,000 for contravention of any provision. This strong enforcement framework encourages employers to prioritize compliance.
A Positive Step Towards a Fairer Labor Ecosystem
The two-day settlement rule represents a significant advancement in India’s labor laws, offering improved transparency and reduced financial uncertainty for employees transitioning between jobs. By modernizing HR systems and streamlining exit processes, Indian companies can embrace this reform and contribute to a more efficient and equitable labor environment. As HR professionals post employee’s resignation and implement these new regulations, they’re shaping a more positive experience for departing employees.
Disclaimer: This article provides general information regarding labor law changes and should not be considered legal advice. Consult with a legal professional for specific guidance related to your situation.
Image Credit: Financial Express
