New Labor Code 2025: What is the biggest worry in the mind of a salaried employee when he thinks of changing jobs? More than the joy of joining at a new place, there is more stress about when the old company will pay the outstanding money (Full and Final Settlement). It has often been seen that after resignation, employees had to make rounds of HR and Finance departments for their hard-earned money. Sometimes this wait would stretch for 45 to 60 days, due to which the household budget was bound to deteriorate.
But, now this arbitrariness is going to become history. The new Labor Code, which came into effect from November 21, 2025, has given great relief to crores of employees of the country. According to the new rules, now companies will have to settle the accounts of the employees within just 48 hours i.e. two working days of their departure. This change is not only for fixed-term employees, but will be equally strictly applicable for permanent staff also.
Final settlement in just 48 hours
This change under the Code on Wages, 2019 has greatly speeded up the entire settlement process. Talking about the old system, companies often took full advantage of the 30-day grace period provided under the Payment of Wages Act. Many times, it was extended further on the pretext of paperwork. During this period, the employee had to face financial crunch, especially when he was shifting to a new place.
The new rule has eliminated this ‘time gap’. Now as soon as an employee breaks his bond with the company, the clock will start ticking and the company will have only two working days to clear the salary.
Be it resignation or layoff, rules apply in every situation
The most important thing about this new rule is that it does not discriminate based on how the employee has separated from the company. Whether you have resigned on your own will, the company has terminated you, there has been a layoff, or the company itself has closed down, the rules will apply equally to everyone.
According to Arjun Paleri, Partner, BTG Advaya, Section 17(2) of the Wage Code 2019 clearly states that except for some statutory payments like gratuity, the entire salary and dues of the employee should be paid within two days of the last working day. This provision removes all the misconceptions that existed earlier regarding salary limit or job profile. Now this rule is applicable to every level of employee.
Crackdown on lateness of companies
Why did companies delay Full and Final (FnF) till now? A major reason for this was that they used to process all the payments like salary, leave encashment and gratuity together. Since the legal deadlines for each payment were different, companies used to make all the payments at the end of the month or after 45 days as per their convenience.
Ashish Philip, executive partner of Lakshmikumaran and Sridharan Attorneys, says that the new code determines the accountability of employers. Now companies cannot shy away by saying that “the process will take time.” They will have to upgrade their payroll system so that salaries can be released within two days. This change demands a major cultural shift in the corporate world, where withholding employee’s money will no longer be easy.
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