General information for website publication. This note is intended for awareness purposes only and does not constitute legal advice.
Recent reporting has created the impression that every employee who resigns is automatically entitled to a complete “full and final settlement” within two days. The legal position is more nuanced.
Under Section 17(2) of the Code on Wages, 2019, where an employee is removed, dismissed, retrenched, or resigns, the wages payable are to be paid within two working days. The statutory phrase matters. The law refers to wages payable, not the broader expression often used in HR practice, namely “entire full and final settlement.”
This means that, upon resignation, an employer cannot casually defer salary and other wage components that have become payable merely by citing internal process or administrative delay. At the same time, the law does not mean that every disputed exit-related amount of every description is automatically compressed into a rigid two-day settlement window. The first legal inquiry always is: what part of the employee’s claim qualifies as wages under the Code?
Another area of confusion concerns older employment contracts. The coming into force of the Labour Codes did not wipe out all pre-existing service contracts. Section 61 of the Code on Wages gives overriding effect to the Code only where there is something inconsistent with it in another law, award, agreement, settlement, or contract of service.
Therefore, an employment contract entered into before 21 November 2025 does not vanish altogether. It continues to operate except to the extent it conflicts with the Code. A contractual clause requiring 30 days, 60 days, or 90 days’ notice on resignation does not automatically become void merely because the Code is now in force.
That said, a notice-period clause cannot be used in a manner that defeats a statutory wage-payment obligation. In practical terms, an employer may still insist on lawful notice, may regulate release terms in accordance with contract, and may examine consequences of short notice in accordance with law. But the employer should not treat the notice clause as a blanket licence to withhold wages that have otherwise become payable on resignation.
Equally, employees should avoid assuming that the phrase “2-day settlement” automatically covers every possible terminal claim without distinction. The statutory right is strongest in relation to wages payable. Other exit-related claims may depend on their nature, the governing legal framework, and the facts of the particular case.
Practical Takeaway
The better legal position may be stated simply:
The Code strengthens timely payment rights upon resignation, but it does not erase employment contracts altogether. It overrides them only where inconsistency begins.
Accordingly, in any real dispute, the decisive questions usually are:
- Whether the person falls within the statutory definition of “employee”;
- Whether the amount claimed answers the statutory meaning of “wages”; and
- Whether the employer’s reliance on the contract is consistent with the Code.
Disclaimer
The material on this page is provided for general informational purposes only. It does not solicit or advertise, and it should not be treated as legal advice or as a substitute for professional consultation. The legal position may vary depending on the facts of each case and subsequent legislative or judicial developments.