Final Settlement
Final Settlement is the last document of a man's employment. Everything he is owed and everything he owes sits on it as lines, each one traced back to the document it came from, and the three totals at the top are worked out from those lines every time it is saved.
What it is for
A man leaves and five departments hold a piece of the answer. Payroll knows his salary to the last day, Time Management knows his leave balance, the loan officer knows what he still owes, stores knows whether he returned his tools, training knows whether his bond is served. Settled by hand, those five pieces are copied onto one sheet and three of them are wrong by the time it is signed.
So this screen reads them instead of asking you to re-type them. Open it, name the man, set his last working day, and the lines come up from the documents that already hold the figures, each carrying the number of the document it came from. You then check them, type what the system cannot know, and save. Every save re-reads the sources, re-prices only the lines nobody has touched, and re-adds the totals.
One rule governs the whole document and is worth saying first, because it is the thing people get wrong. Everything on the lines is a positive amount. What separates money owed to him from money he owes is the Payable tick, not a minus sign. A recovery is a positive amount with Payable cleared. A negative amount is refused.
This is the screen a client will tell you ought to fill itself completely, so be exact about where that is true. Item by item:
Comes up by itself:
- Service (Years), worked out from the joining date and the last working date. It is derived and cannot be typed, because the gratuity is priced off it.
- Salary to the last working day, as the days of the final month served at one day's pay, where one day's pay is his gross salary over a thirty day month. The description spells the period out.
- The notice shortfall recovery, but only once you have typed the notice days - the shortfall days at the same daily rate.
- Leave encashment, read from the leave encashment document raised for the separation, one line per leave type with that document as the reference. If no such document exists, the still open encashable balance is shown instead, priced on the leave group's own basis and divisor as they stood on the last working day, with the minimum balance the group normally makes a man keep deliberately waived, because he is leaving. The day rate arithmetic is at the maths.
- Loan recovery, one line per loan document that still has uncleared installments, at the total of those installments, with the loan's number as the reference.
- A training bond recovery, where the bond is not released and is not already attached to another settlement.
- Clearance still pending from the departments, which appears as an Other line described as clearance pending, because there is no separate clearance component.
- Gratuity, but only when a Gratuity Policy is named on the document. See below.
Typed by you, today, in this system:
- Notice Period (Days) and Notice Shortfall (Days). Nothing works out how much notice he owed or served, and the shortfall line cannot appear until you have typed them.
- The Gratuity Policy itself. Name it and the gratuity is priced. Leave it empty and there is no gratuity line at all.
- The Resignation or Separation link, the Payment Date, the Payment Reference, the Posted tick and the Remarks.
- An Advance Recovery line. Nothing fills it. An advance that was recorded as a loan comes up by itself under Loan Recovery, so Advance Recovery is for an advance held outside the loan screens.
- A Contribution Scheme Settlement line, if the client settles a provident fund balance on the settlement.
- Tax. There is no tax component on this document and nothing on it calculates tax. A client who expects the leaver's tax position for the year to be worked out here will not find it. Work the position out, raise a Tax Adjustment so the record for the year is right, and put the amount on this document as a line, payable or recovery as the case may be, with the adjustment number as the reference.
The gratuity deserves its own paragraph, because it is the biggest number on most settlements. When a policy is named, the service band on that policy gives the days of pay per year served, falling back to the policy's own flat rate when no band matches. The years credited are the service years as they stand, or whole years only if the policy does not prorate a part year. The quantity is days per year times credited years, and the rate is the policy's basis over a thirty day month, read as the basis stood on the last working day and not as it stands today, so a settlement filed six weeks late does not pay on a revision he never worked under. Below the policy's minimum service the line stays at zero, deliberately, because a nil gratuity line on the document shows that gratuity was considered. And the policy's eligibility flags - the ones that would say gratuity is payable on resignation but not on dismissal - are not applied, because nothing on the separation carries a coded reason to test them against. Whether a leaver is entitled to gratuity at all is a decision a person still has to make. If he is not entitled, delete the line.
Two last things to say to a client on day one. A typed line is never overwritten: once anybody has touched a line's quantity, rate or amount, every later save leaves it exactly as it is, which is what makes a negotiated or court-ordered gratuity safe to type in. And this document does not post itself and does not pay anything. It reports the leave encashment rather than paying it again - Leave Encashment is still what pays it - it writes nothing to the ledger, and the Posted tick is a note somebody sets by hand once the payment has been made.
Every field, in plain words
Basic Data
| Field | What it means | What to put in it | Notes |
|---|---|---|---|
| Transaction | The settlement number | PYFS-000037 | Required. It numbers itself and must be unique |
| Transaction Date | The date the settlement is prepared | 22 Feb 2026 | Required |
| Employee | Who is leaving | Rashid Mehmood | Required. Pick him from the list |
| Name | The employee in words | Rashid Mehmood | Fills itself. Leave it |
| Resignation / Separation | The separation document this settles | EPRE-000221 | Pick it from the list. It is the paper authority for the settlement, so fill it even though nothing forces you to |
| Joining Date | The day he joined | 14 Aug 2019 | Required. Take it from his employee record. With the last working date it is what the service years are worked out from, so a wrong joining date means a wrong gratuity |
| Last Working Date | His last day on the payroll | 15 Feb 2026 | Required. It cannot be before the joining date. Everything on the document is read as it stood on this date |
| Service (Years) | How long he served | Fills itself | Leave it. Worked out from the two dates and rounded to two decimals. It cannot be typed, and the gratuity is priced off it |
| Notice Period (Days) | The notice his contract required | 30 | Type it. It cannot be negative. Nothing works it out for you |
| Notice Shortfall (Days) | How many of those days he did not serve | 15 | Type it. It cannot be more than the notice period. A figure more than zero puts a recovery line on the settlement at one day's pay per day |
| Gratuity Policy | Which gratuity policy applies to him | GP-STAFF | Pick it from the Gratuity Policy list. No policy named means no gratuity line. Naming the wrong one means a wrong gratuity, so check it against the client's rules for his grade |
| Gross Payable | Everything owed to him | Fills itself | Leave it. The total of the lines with Payable ticked, recomputed on every save |
| Gross Recovery | Everything he owes | Fills itself | Leave it. The total of the lines with Payable cleared |
| Net Settlement | What he actually gets, or owes | Fills itself | Leave it. Payable less recovery. A negative figure here means he owes the company money, which is a real outcome and not an error |
| Payment Date | When the settlement was paid | 28 Feb 2026 | Type it when it is paid |
| Payment Reference | How it was paid | Cheque 004417, HBL Gulberg | Type it. This is what somebody will ask for in two years |
| Posted | Says the settlement has been taken to the accounts | Tick it when accounts confirm | A note only. Nothing is written to the ledger by this screen |
| Remarks | The story of the settlement | Resigned, notice shortfall of 15 days recovered, gratuity per staff policy, cleared by stores 20 Feb | Write it properly. It is the only place the reasoning survives |
Details
One line per component. The lines that come up filled are described above; add the rest by hand.
| Field | What it means | What to put in it | Notes |
|---|---|---|---|
| Line # | The line number | Fills itself | Leave it |
| Component | What kind of item this line is | GRAT | Required. Every line must have one. The nine values are listed below |
| Wage Type | The wage type the amount belongs to, where the client wants the settlement analysed by wage type | GRATUITY | Optional. Pick it from the Wage Type list |
| Name | The wage type in words | Gratuity | Fills itself from the wage type. Leave it |
| Description | What this line is | Gratuity 30 days per year, 6 years | Filled for you on a line that came up by itself. Write it on a line you add, and write it for a reader who was not there |
| Quantity | How many days, or units, the line is for | 180.00 | On a generated line it is filled. Quantity times rate is written into Amount whenever both are present |
| Rate | What one of them is worth | 2,666.67 | On a generated line it is filled |
| Amount | What the line is worth | 480,000.60 | Required. It cannot be negative, not even on a recovery. Leave quantity and rate empty and type the amount directly for a line that is just a figure |
| Payable | Whether this is money owed to him | Ticked for a payment, clear for a recovery | This is what makes a line a recovery. A recovery is a positive amount with Payable cleared |
| Reference no | The document the line came from | PYLE-000118 | Filled for you on a generated line. Fill it on a line you add. It is what makes the settlement auditable |
The nine components:
SALSalary to Last Working Day - comes up by itself.LEAVELeave Encashment - comes up by itself, from the encashment document or from the open balance.GRATGratuity - comes up when a gratuity policy is named.NOTICENotice Period Shortfall - comes up once you have typed the shortfall days.LOANLoan Recovery - comes up by itself, one line per loan.ADVAdvance Recovery - typed. Use it for an advance that is not held as a loan.BONDTraining Bond Recovery - comes up by itself from an unserved bond.CONTRIBContribution Scheme Settlement - typed.OTHEROther - anything else, and also where pending clearance comes up.
How to configure it
- Before the first settlement: the Gratuity Policy set up with its service bands, its basis and its minimum service, and the client's rule written down for which grade gets which policy.
- Have the separation recorded, the clearance done, and the leave encashment raised if the client encashes leave on separation.
- Decide, with the client, whether the leaver's final month goes through the ordinary payroll or through this document. It cannot sensibly go through both.
- Open the screen. Pick the employee, then set the Joining Date and the Last Working Date. Check them against his employee record before going further - the gratuity stands on them.
- Type the Notice Period and the Notice Shortfall.
- Name the Gratuity Policy if he is entitled to gratuity, and leave it empty if he is not.
- Let the lines come up and read every one. Check each generated line against the document in its Reference no, especially the loans.
- Delete the salary line if payroll has already paid him for that month, and delete the gratuity line if the client's rules do not give him gratuity for this kind of separation.
- Add the lines nothing fills: an advance held outside the loan screens, a contribution settlement, the tax position, anything the client has agreed.
- Check Gross Payable, Gross Recovery and Net Settlement, write the Remarks, and save.
- Get it approved and paid, then come back and fill the Payment Date, the Payment Reference and the Posted tick.
Scenarios
A man leaves on the fifteenth
This is the case the screen is built for, and it is worth walking through.
He is not in the February Payroll run at all, because a man whose resignation date falls on or before the end of the period is left out of the run. So his February pay is on this document, as the salary line for fifteen days at one day's pay.
Set his Last Working Date to the fifteenth. The salary line comes up for fifteen thirtieths of a month. His leave encashment comes up, either from the encashment document or from his open balance. His loans come up, one line each, at the installments still uncleared. His gratuity comes up if you name the policy. You type the notice days, and the shortfall line appears if he left early. You check the totals and save.
What you still have to think about: his tax for the year, which nothing here calculates, and whether the client's rules actually give him gratuity for resigning.
Payroll already paid him for that month
Delete the salary line. The document cannot tell whether a payroll run has already paid that month - it prices the days he served and spells the period out in the description so that you can see what it has assumed. Deleting the line is the right answer; zeroing it leaves a confusing line behind.
The gratuity figure was negotiated
Type it. Once quantity, rate or amount on the gratuity line has been touched, no later save will price it again. Put the authority in the line's Description or in Remarks, because a gratuity that does not match the policy is the first thing anybody checks.
He is not entitled to gratuity because he was dismissed
Delete the line. The policy's eligibility flags are not applied here, because nothing on the separation carries a coded reason for the system to test, so the line appears whenever a policy is named and the service is long enough. The decision is yours, and the Remarks are where it belongs.
His salary was being held pending an inquiry and the inquiry found against him
The held amount is not on this document by itself, because neither Request for Salary Hold nor the Salary Block tick is read by anything. Add it as a line: Other, the amount, Payable cleared, the hold request number as the reference, and the reason in the description.
Nothing came up at all
The screen refuses to save an empty settlement and tells you to check the recurring salary, clearance, bond and loan documents, or to add a line by hand. It is almost always one of two things: no recurring salary record covering the last working date, so there is no gross salary to price a day on, or a last working date left empty.
He owes more than he is owed
Net Settlement comes out negative and that is a correct outcome, not an error - a man with four months of a car loan left and two days of pay due does owe the company money. The client then has to recover it, which is outside this screen.
What it is connected to
- Reads the gross salary on his Recurring Payments and Deductions record as it stood on the last working day.
- Reads the leave encashment document raised for the separation, or his open encashable balance, and reports it. Leave Encashment is what pays it.
- Reads every Employee Loan data record with uncleared installments, one line each.
- Reads the training bond and the pending clearance.
- Prices gratuity from the Gratuity Policy named on the document.
- Is not read by Payroll and does not post to the ledger. Tax Adjustment is where the leaver's tax position is recorded.
If something looks wrong
- "It says nothing was found to settle" - usually no recurring salary record covering the last working date, or no last working date. Check both before adding lines by hand.
- "It refuses a negative amount" - a recovery is a positive amount with Payable cleared. There are no minus signs on this document.
- "No gratuity line appeared" - no gratuity policy is named, or his service is below the policy's minimum, or the policy has no days per year on the band and no flat rate.
- "The gratuity is too high or too low" - check the joining date first, then the policy's basis and whether it prorates a part year. The basis is read as it stood on the last working day.
- "A line we edited was overwritten" - it was not. A touched line is never re-priced. If a figure changed, somebody changed it.
- "The leave encashment is on the settlement and on his payslip" - it was paid by the encashment document. This document reports it so that the settlement is complete. Decide with the client whether the line stays on the settlement as information or is deleted.
- "There is no tax on the settlement" - correct, and there is no component for it. Work it out, raise a tax adjustment, and add the line.
- "Nothing happened in the accounts after we ticked Posted" - the tick is a note. This document writes nothing to the ledger.