What’s on the agenda today?
Hey {{First Name| there}},
A member of the TSOW community asked a quiet but urgent question last week:
"Can anyone help me with the new FNF clearance rules changed by govt?"
That question has been sitting in a lot of HR inboxes — mostly deferred. Until a settlement dispute makes it impossible to defer any further.
Here's what changed. And what HR needs to do right now.
In This Edition We Cover
What India's new Labour Codes actually changed about FnF settlement
The 50% wage rule and why it's silently changing your PF liability
Why most companies are non-compliant without knowing it
The HR compliance checklist to close the gap
1️⃣The 2-day rule is now law
Under Section 17(2) of the Code on Wages, 2019 — part of India's consolidated Labour Codes that repealed 29 older labour laws — Full and Final Settlement must happen within two working days of an employee's last day.
Not 30 days. Not 45 days. Two working days.
This applies regardless of salary level, designation, or industry. Dismissed, retrenched, or resigned — the clock is the same. Most Indian companies still run FnF processes that take 3–6 weeks. That isn't just an internal SLA problem. It's a statutory violation.
2️⃣The 50% wage rule is quietly changing your PF liability
The new Labour Codes introduced a uniform definition of "wages." Basic Pay + Dearness Allowance must together constitute at least 50% of an employee's total CTC.
If allowances exceed 50% of total remuneration, the excess is automatically added back to "wages" — and PF, gratuity, overtime, and ESIC are all calculated on this revised base.
This is why the TSOW community was asking about PF on special allowances last week. Many companies designed salary structures to cap PF liability — and the new definition closes that gap.
3️⃣Where companies keep going wrong
🚩Holding the final salary until asset recovery is complete — two separate processes; one cannot legally block the other
🚩Running a 30-day FnF cycle regardless of exit type — the 2-day rule doesn't care about your payroll cycle
🚩Calculating gratuity on basic salary instead of the revised wage definition — understated liability, future legal risk
🚩Making the relieving letter conditional on IT access revocation — legally separate
🚩Ignoring earned but unused leave encashment — mandatory, not optional
4️⃣The HR compliance checklist
✅Map your current FnF cycle time — if it's over 2 working days, you have a gap
✅Separate asset recovery from the salary settlement process
✅Audit your salary structure against the 50% wage threshold
✅Automate gratuity calculation using the new wage definition inside your HRIS
✅Ensure your payroll system can run off-cycle settlements for exits
Two Numbers Your BGV Vendor Hopes You Never Ask For
❓ Pop quiz for anyone about to sign a BGV vendor contract:
What's your vendor's P95 turnaround time? (Not median. The median hides the 20% of cases that ruin your hiring pipeline.)
What's their amber rate? (If it's above 10%, you're paying for checks that produce no usable result.)
If you don't know both numbers, you're buying blind.
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🎉 What’s Coming Up!
TSOW HR Meetup in Coimbatore | Saturday, May 9
An interactive session for HRs who want less theory and more “this worked for us.” Seats are limited — save yours now!
TSOW HR Meetup in Bangalore | May 16
A HR meetup for meaningful dialogue and shared learning.
. — Get your seat while spots last.TSOW HR Meetup in Indore | May 16
Connect, learn, and grow with Indore’s HR community. — Don’t miss your chance to be in the room!
The TSOW Newsletter reaches you every Tuesday. Got something to share? You know where to find us.
