Glossary
What is full and final settlement?
What goes into a full and final settlement when an employee leaves, in what order, and how to pay it from the last payroll run.
Updated
In short
Full and final settlement is the last payment to a leaving employee: salary to the last working day, unused leave and any end-of-service benefit, less recoveries. SimpleERP pro-rates the final payslip; you add the other lines yourself.
Full and final settlement, also called final pay, is the last payment an employer makes when an employee leaves. It covers salary up to the last working day, unused annual leave, any end-of-service benefit the law or contract requires, and bonus or expenses owed, less tax and contributions withheld, notice shortfall where allowed and unrecovered advances. Many countries set a deadline for final pay.
Full and final settlement: a worked example
Ana M, welder at Harbour Steel Furniture, a fictional business paying in US dollars, leaves on 15 October 2026. She worked 11 of October's 22 working days. Her monthly gross is $1,950, she has 10 days of annual leave unused, and $600 of an advance is still due.
| Line | Working | Amount |
|---|---|---|
| Salary and allowance for 11 of 22 days | $1,950 × 11 ÷ 22 | $975 |
| Unused annual leave, 10 days | $1,760 ÷ 22 × 10 | $800 |
| Total earnings | $1,775 | |
| Pension, 5% of gross | 5% of $1,775 | −$88.75 |
| Advance recovery | Balance of the advance | −$600 |
| Net settlement | $1,086.25 |
FAQ
Questions, answered
What is included in full and final settlement?
Salary to the last working day, unused annual leave, any end-of-service benefit or severance due, bonus or incentives owed, and expense claims. Against that: income tax and contributions on the final pay, any notice shortfall the contract allows you to recover, and unrecovered advances or loans.
How long does an employer have to pay final pay?
It depends on the country, and sometimes on the state or the contract: some require final pay on the last day or within a few days, others by the next normal payday. Check the rules where you employ people.
How does SimpleERP handle an employee who leaves mid-month?
When you set a termination date, that month's run includes the employee once, pro-rated: days after the termination date count as unpaid. Later runs leave them out. Their attendance and payslip history stay on record.
Does SimpleERP compute leave payouts or end-of-service benefits?
SimpleERP does not compute them. Work them out, then open the final payslip in the run review and add each with Add line → Other earning. To recover an advance in full, raise its monthly recovery to the balance before generating the run.
Related
Keep reading
Leave encashment
Cash paid for unused annual leave, at year end or on leaving, worked out from a day's pay.
Read moreEmployee advance
Money paid ahead of salary, held as an asset and recovered from later payslips in instalments.
Read morePayslip
The statement of paid days, each earning, each deduction and the net pay an employee receives for a period.
Read more
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