Labour Codes 2-Day F&F Rule: Key changes to know before resigning

Labour Codes & Tax Rules Update: Code on Wages' 2-day F&F settlement (effective Nov 2025) now applies alongside pending salary structure changes under Labour Codes. Companies must complete full and final (F&F) settlements within two working days of an employee's last working day under Section 17(2) Code on Wages, 2019 - already active since November 21, 2025. When fully implemented, changes in basic salary structure, PF contributions and gratuity eligibility would impact monthly take-home pay and long-term savings.

2-day F&F rule (effective since Nov 2025)

One of the most significant changes already in force is the strict timeline for clearing dues when an employee exits a company.

Until November 2025, employees often had to wait anywhere between 45 and 90 days to receive pending salary, leave encashment and other dues. Delays were common, especially in sectors with high attrition.

Under Section 17(2) Code on Wages 2019 (notified Nov 21, 2025), employers must settle all dues within two working days of the last working day.

This rule applies across situations - resignation, termination or retrenchment. If a company fails to comply, it can be treated as a legal violation, and employees can seek redressal through the labour department, including a claim for interest on delayed payments.

Gratuity rules under Labour Codes (when fully implemented)

The Labour Codes framework would make gratuity more accessible and time-bound when rules are finalized.

Earlier, employees typically needed to complete five years of continuous service to qualify for gratuity. Labour Codes propose lowering this threshold for fixed-term employees (FTEs) to one year of service.

When implemented, gratuity would be paid within 30 days, ensuring faster access to retirement-linked benefits.

Read More: From April 1, 2026: How your in-hand salary changes under new Income Tax Act — Check details

Salary Structure Changes Proposed (pending full implementation): Basic pay would account for at least 50 per cent of CTC when Labour Codes rules are finalized. This would affect:

Higher PF contributions: Since PF is calculated on basic salary, a higher base would lead to increased monthly contributions

Better gratuity payouts: Gratuity would also be linked to higher basic pay

Lower take-home salary: With higher deductions towards PF, monthly in-hand salary may reduce slightly

Take-home salary could drop by around 2-5 per cent depending on existing structure, even as long-term savings improve.

Employer impact when fully implemented

Employers would see higher compliance costs.

Industries such as IT, BPO and retail - where basic salaries were often kept low - may face 5-15 per cent increase in statutory expenses due to higher PF and gratuity liabilities when implemented.

This could influence salary hikes, hiring strategies and compensation structures.

What employees should check before resigning?

The 2-day F&F rule is already active (Nov 2025). Employees planning to switch jobs should:

Notice period compliance

Ensure notice period is served properly. Any shortfall could be adjusted against final settlement within the two-day window.

Investment proofs and tax details

Submit documents in advance for correct tax deductions.

Payroll compliance

Confirm with HR whether company systems comply with 2-day F&F rule (already effective) and prepare for future Labour Code implementation.