Employment | Labour Law

Employee Full and Final Settlement Agreement Format

Updated settlement agreement format for recording final employment dues, agreed settlement amounts, withdrawal or closure of employment disputes, and lawful release of claims after separation from employment.

Current-law update: India's four Labour Codes were brought into force from 21 November 2025. A settlement that was formerly commonly described by reference to Section 18 of the Industrial Disputes Act, 1947 should now be examined under the Industrial Relations Code, 2020. Under Section 57(1) of that Code, a settlement arrived at by agreement between an employer and worker otherwise than in conciliation is binding on the parties to that agreement.
SettlementSections 57 and 58 of the Industrial Relations Code, 2020 govern the binding effect and operation of settlements.
Wage paymentSection 17 of the Code on Wages, 2019 generally requires wages due on removal, dismissal, retrenchment or resignation to be paid within two working days, subject to the statutory exceptions.
Statutory benefitsGratuity, bonus, provident fund and other statutory entitlements should be separately identified and cannot safely be treated as extinguished merely by a broad waiver if the governing law does not permit waiver.

Employee Settlement Agreement - Updated Sample Format

This is a general specimen. For a statutory industrial-dispute settlement, use the prescribed form and signing/filing requirements under the applicable Industrial Relations Rules in addition to adapting the commercial clauses below.

EMPLOYEE FULL AND FINAL SETTLEMENT AGREEMENT

This Settlement Agreement is made on ____________ at ____________ between:

M/s ____________________________, having its office at ____________________________________________________________, through its authorised signatory ____________________________, hereinafter referred to as the "Employer";

AND

Mr./Ms. ____________________________, employee ID ____________, formerly employed as ____________________________, residing at ____________________________________________________________, hereinafter referred to as the "Employee".

Recitals

A. The Employee joined the Employer on ____________ and worked lastly as ____________________________.

B. The employment ended / is agreed to end on ____________ by reason of resignation / retirement / termination / retrenchment / mutual separation / fixed-term expiry.

C. Certain employment dues and/or claims arose between the parties concerning ____________________________________________________________.

D. The parties, after discussion and without admission of liability except as expressly recorded, wish to settle the identified dues and disputes on the following terms.

1. Full and Final Settlement Amount

Subject to this Agreement, the Employer shall pay the Employee a total gross amount of ₹____________, comprising the following amounts, as applicable:

  1. Unpaid salary/wages: ₹____________
  2. Notice pay / notice-period adjustment: ₹____________
  3. Leave encashment: ₹____________
  4. Bonus/incentive/commission: ₹____________
  5. Gratuity: ₹____________
  6. Retrenchment/other statutory compensation: ₹____________
  7. Reimbursements/expense claims: ₹____________
  8. Ex gratia / disputed-claim settlement consideration: ₹____________
  9. Other: ____________________________ - ₹____________

2. Payment

The net amount payable after deductions required by law shall be paid on or before ____________ by bank transfer / cheque / other lawful mode to ____________________________________________________________. Nothing in this clause extends any shorter statutory time limit applicable to wages or other dues.

3. Statutory and Social-Security Dues

Provident fund, pension, employee insurance, gratuity, bonus and other statutory benefits shall be processed and paid in accordance with the applicable Labour Codes, schemes, rules and other law. Any amount not legally capable of being waived shall remain governed by the relevant statute notwithstanding this Agreement.

4. Settlement of Identified Claims

Upon actual receipt of the amounts agreed above, the Employee accepts the settlement in discharge of the employment-related monetary claims specifically identified in this Agreement up to the date of separation, except rights or claims that cannot lawfully be waived or that are expressly reserved below: ____________________________________________________________.

5. Reinstatement / Re-employment Claim

Where the separation itself is part of the negotiated dispute, the Employee agrees, to the extent legally permissible and in consideration of the settlement, not to pursue the identified claim for reinstatement/re-employment arising from the dispute described in Recital C. This clause does not prevent enforcement of this Agreement or any non-waivable statutory right.

6. Pending Proceedings

The parties shall place this settlement, where necessary, before the competent Conciliation Officer, authority, Tribunal, court or other forum in proceeding No. ____________ and shall take lawful steps for disposal/withdrawal/closure of the settled dispute. No proceeding shall be treated as automatically terminated merely by signing this Agreement where an order of the competent forum is legally required.

7. Industrial Relations Code Settlement

If the Employee is a "worker", the dispute is an "industrial dispute", and this document is intended to operate as a settlement under the Industrial Relations Code, 2020, the parties shall comply with Sections 57 and 58 of that Code and the prescribed Industrial Relations Rules. Where the Central Government is the appropriate Government, the memorandum of settlement shall be executed in the prescribed Form I under Rule 4 of the Industrial Relations (Central) Rules, 2026.

8. Employer Property and Records

The Employee confirms that all Employer property in the Employee's possession, including devices, records, identity cards, access credentials, documents and other assets, has been returned except: ____________________________________________________________.

9. Service / Experience Documents

The Employer shall issue the relieving letter, service certificate, experience certificate or other separation documents required by applicable law, standing orders, contract or Employer policy, as the case may be.

10. Confidentiality and Continuing Obligations

Lawful confidentiality, intellectual-property, data-protection and post-employment obligations that validly survive termination shall continue according to their terms and applicable law. Nothing prevents either party from making disclosures required by law or to a competent statutory authority.

11. No Admission

Except for the payment and obligations expressly acknowledged in this Agreement, the settlement is entered to resolve the identified dispute and shall not by itself constitute an admission of allegations that remain disputed.

12. Voluntary Execution

The parties state that they have read and understood this Agreement, have had reasonable opportunity to obtain independent advice, and sign it voluntarily without coercion, fraud or undue influence.

13. Entire Settlement of Identified Dispute

This Agreement records the complete settlement of the claims and matters expressly identified herein. Any amendment shall be in writing and signed in accordance with applicable law.

14. Governing Law and Jurisdiction

This Agreement shall be governed by Indian law. Statutory labour forums, authorities and courts shall retain the jurisdiction conferred on them by law. Subject thereto, any contractual dispute concerning this Agreement shall be dealt with by the competent forum having territorial and subject-matter jurisdiction.

Signatures

For M/s ____________________________

Name: ____________________________
Designation: ____________________________
Authorised Signatory
Date: ____________

Employee

Name: ____________________________
Signature: ____________________________
Date: ____________

Witnesses

1. Name, address and signature: ____________________________________________

2. Name, address and signature: ____________________________________________

Receipt of Full and Final Settlement

RECEIPT

I, ____________________________, acknowledge receipt of ₹____________ (Rupees ________________________________________________ only) from M/s ____________________________ on ____________ by bank transfer / cheque / other mode, transaction/reference No. ________________, towards the amounts specified in the Employee Full and Final Settlement Agreement dated ____________.

This receipt confirms actual payment only and shall be read together with that Settlement Agreement and applicable statutory rights.

Employee Signature

Witness 1: ____________________________

Witness 2: ____________________________