New Labour Codes: Companies Can No Longer Withhold Your Salary Upon Resignation!

New Labour Codes: Major Relief for Employees Leaving Their Jobs! A new labor law has come into effect across the country starting April 1st. Now, whether you resign or are terminated, your former employer is legally required to settle all your dues—down to the last penny—within just two days. Previously, this process could drag on for as long as 45 days. This new regulation stands to directly benefit millions of employees.

Companies Can No Longer Withhold Your Salary Upon Resignation

Changing jobs or leaving one's position for any reason is a routine part of every working professional's career. However, employees often face immense frustration and difficulty when trying to retrieve their own hard-earned money from a former employer. Under the previous system, employees frequently had to endure a lengthy wait—ranging from 40 to 45 days, and occasionally even up to 90 days—to receive their Full and Final (FnF) settlement.

During this period, experiencing financial strain and mental stress was a common occurrence. However, this outdated and exhausting system is now set to change. Under the government's new labor laws, employees will now receive all their outstanding dues within just two working days of leaving their job.

45-Day Hassle Ends: Settlements to be Completed in Just 2 Days

Previously, whenever an employee resigned or was terminated by a company, the final settlement process—often under the guise of bureaucratic paperwork—would take months to complete. Employees would find themselves caught in a stressful bind, juggling the pressure of starting a new job with the ordeal of making repeated rounds to their former employer's HR department. Waiting more than 45 days to receive one's salary had a direct and adverse impact on household budgets.

Changing jobs or leaving one's position

However, the landscape is now poised to change completely. The new regulation, set to come into force on April 1, 2026, will provide significant and direct relief to the entire working class. According to the new provision, under any circumstance involving an employee's departure, it is now mandatory for the company to settle their full dues within just two days. This ensures that employees will no longer have to depend on companies or plead with them to access their own accumulated funds.

What is this New Labor Law?

This significant change has been introduced under the ‘Code on Wages, 2019’. The scope of this new law covers every scenario in which an employee's tenure with a company comes to an end. Whether you resigned voluntarily, were terminated for any reason, or the company itself ceased operations; in every instance, the full settlement of your outstanding dues is guaranteed to be completed within two working days.

What is Included in the Full and Final (FnF) Settlement?

When we speak of a "Full and Final" settlement, it implies more than just your salary for the last month. It encompasses several other crucial components that the company is now legally required to settle within the stipulated timeframe:

1.Final Salary: The full salary corresponding to the actual number of days you worked up until your last working day.

2.Unused Leave (Leave Encashment): The cash equivalent for any leave days you did not utilize during your tenure with the company.

3. Bonuses and Incentives: Any pending bonuses determined based on your performance and the company's specific policies.

4. New Gratuity Rule: In certain specific cases, the provision for Gratuity has now been extended to employees who have completed even just one year of service. As per the regulations, the payment of this gratuity must be made within 30 days. This serves as an additional financial safety net for employees.

5.Reimbursements:Expenses incurred for official work... Any travel undertaken, or any other such expense that you paid for out of your own pocket, will also be reimbursed as part of this settlement.

6.Necessary Deductions: From this total amount, deductions—such as taxes, any salary advances previously received, outstanding loans in your name, or charges for unreturned company property (e.g., laptops, ID cards)—will also be adjusted during this process.