Separation, Exit & Settlement Documentation
Separation documentation records how an employment ends and what each side owes the other. It includes the resignation or termination letter, the full and final settlement of dues, the relieving and experience letters and, where the exit is negotiated, a separation agreement with a release of claims.
An employer cannot contract out of what the law requires it to pay. Wages, notice pay, leave encashment, gratuity under the Payment of Gratuity Act, 1972 and, for workers, retrenchment compensation are owed whatever the agreement says. The agreement deals with what is paid on top, and on what terms.
When you need it
When a senior employee is exiting
Senior exits involve bonuses, equity, restrictions and announcements, and are usually negotiated.
When ending employment for performance
The contract, the notice terms and a fair process decide whether the termination can be defended.
When reducing headcount
A redundancy affecting workers has notice, compensation and, above a size threshold, government permission requirements.
When there is a dispute at exit
A settlement that pays an agreed sum in return for a release closes the matter for both sides.
When exits are handled inconsistently
A standard exit checklist and set of letters avoids missed payments and missing documents.
How the process works
Five stages. Timings are typical, not promised.
- 1
Check the contract and the law
One to two working daysReview the employment agreement, the policies and the employee’s category under labour law, to establish the notice required, the dues owed and any procedure that must be followed first.
Documents
- The employment agreement and any amendments
- Pay records and leave balance
- Any warnings, reviews or correspondence
- 2
Decide the route
Before anything is communicatedChoose between resignation, termination on notice, termination for misconduct after an inquiry, redundancy and a mutually agreed separation. Each has different consequences and risks.
- 3
Calculate the dues
A few working daysWork out salary to the last day, notice pay, leave encashment, bonus or incentive earned, gratuity, expense claims, any statutory compensation and the deductions that can lawfully be made.
- 4
Draft the documents
Commonly within a weekPrepare the letter, the settlement statement and, where the exit is agreed, a separation agreement covering the payment, a release of claims, confidentiality, return of property, intellectual property, references and the announcement.
- 5
Complete the exit
On and after the last working daySign the documents, recover devices and access, pay the dues within the period the law sets, and issue the relieving letter, experience letter and tax and provident fund documents.
Common questions
The final account between employer and employee: salary to the last working day, payment for unused leave, bonus or incentives earned, gratuity where due and expense claims, less notice pay owed by the employee, advances and tax.
The Code on Wages, 2019 requires wages to be paid within two working days where an employee is removed, dismissed or retrenched, or has resigned. Gratuity has its own period of thirty days from the date it becomes payable.
Under the Payment of Gratuity Act, 1972, to an employee who has completed five years of continuous service, on resignation, retirement, death or disablement, at fifteen days’ wages for each completed year. It cannot be waived by agreement.
For claims that can lawfully be settled, yes, if the employee signs voluntarily and receives something in return. A release does not take away statutory entitlements such as gratuity, provident fund or minimum wages.
For employees outside the definition of a worker, generally yes, on the notice in the contract. For workers, the Industrial Relations Code requires notice and retrenchment compensation, and dismissal for misconduct requires a fair inquiry first.
A worker with at least one year of continuous service who is retrenched is entitled to one month’s notice or pay in its place, and compensation of fifteen days’ average pay for each completed year of service.
It should not be used as leverage. Where the employee has served notice and handed over, courts have directed employers to issue relieving letters. Disputes about money can be pursued separately.
No. Section 12 of the Maternity Benefit Act, 1961 makes it unlawful to discharge or dismiss a woman during, or on account of, her absence on maternity leave.
Related
To discuss an employee exit, write to info@ireniclegal.com or call +91 96547 47331. Written by Adv. Kanika Marwaha Bindal; last updated 7 October 2026.