The forty five day or sixty day settlement cycle is a policy, not a statute. The statutory position, since the codes commenced on 21 November 2025, is much tighter, and knowing the difference turns a request into a demand.
Wages: two working days
The Code on Wages, 2019 sets time limits for payment of wages generally, and then deals separately with the exit. Where an employee has been removed or dismissed from service, or retrenched or has resigned from service, or became unemployed due to closure of the establishment, the wages payable are to be paid within two working days of the removal, dismissal, retrenchment or resignation. Two qualifications sit alongside it: the appropriate Government may provide a different time limit where it considers that reasonable, and the provision does not affect a time limit provided by any other law in force.
The two working day rule attaches to wages as the Code defines them: basic pay, dearness allowance and retaining allowance, with the excess added back where the excluded allowances exceed one half of total remuneration, and with conveyance allowance, house rent allowance, remuneration under an award or settlement and overtime allowance expressly taken into the computation for the purpose of payment of wages. So the sum due on exit is not merely the basic pay for the days worked.
Leave encashment: also two working days
The Occupational Safety, Health and Working Conditions Code, 2020 deals with leave separately and reaches the same place. Where a worker is discharged or dismissed, quits, is superannuated or dies in service during a calendar year, that worker or the heir or nominee is entitled to wages in lieu of the leave to credit, even if the worker has not completed the qualifying period ordinarily needed to take the leave. Payment is due before the expiry of the second working day from the discharge, dismissal or quitting, and within two months where the exit is on superannuation or death.
Gratuity: thirty days, with interest for delay
The gratuity chapter of the Code on Social Security, 2020 runs on its own timetable. As soon as gratuity becomes payable, the employer must determine the amount whether or not an application has been made, give written notice of the amount to the person entitled and to the competent authority, and arrange to pay within thirty days from the date it becomes payable. If it is not paid within that period, the employer must pay simple interest from the date it became payable to the date of payment, at a rate not exceeding the rate notified by the Central Government for repayment of long term deposits, unless the delay was due to the employee's own fault and the employer has obtained the competent authority's written permission for the delay. Where the amount or the entitlement is disputed, the employer must deposit with the competent authority what it admits to be payable, and the authority decides after inquiry. Our guide on gratuity rules, eligibility and calculation in India works through the computation you should be checking against the employer's figure.
| Head | When it is due | Source |
|---|---|---|
| Wages for days worked, and other wage components | Two working days from removal, dismissal, retrenchment or resignation | Code on Wages, 2019 |
| Wages in lieu of leave to credit | Before the expiry of the second working day, or two months on superannuation or death | Occupational Safety, Health and Working Conditions Code, 2020 |
| Gratuity | Thirty days from becoming payable, then simple interest | Code on Social Security, 2020 |
| Notice pay, retention bonus, variable pay, incentives | As the contract or the policy provides | Contract of employment |
| Relieving letter and experience certificate | No statutory clock | Contract and practice |
What the two day rule does not do
- It does not cover the contractual heads. A retention bonus, a discretionary incentive or a deferred variable payout falls due when the contract says, and the argument about those is a contractual one. Read the appointment letter and the policy before you frame the demand; our guide on what an Indian employment agreement should contain sets out which of those clauses actually bind.
- It does not settle a notice period dispute. An employer may claim notice pay if the contract provides for it and may adjust it where the contract allows adjustment. What it cannot do is treat a notice dispute as a reason to withhold statutory dues indefinitely.
- It does not authorise a deduction. Any deduction from the final payment must fall within the closed list of purposes the Code on Wages allows, and total deductions in a wage period cannot exceed fifty per cent of wages.
Enforcing it
Send an itemised demand on the last working day itself, head by head, with the amount and the basis for each, and quote the two working day requirement for the wage heads and the thirty day requirement for gratuity. Ask for the employer's own computation if it disputes yours. If nothing moves, the wage heads go to the authority appointed under the Code on Wages, which may order compensation of up to ten times the amount determined and certifies recovery to the Collector, and the application is ordinarily made within three years of the claim arising. Gratuity goes to the competent authority under the gratuity chapter of the Code on Social Security, 2020. Where the settlement dispute is really the tail end of a contested exit, the two fights are one, and our guide on wrongful termination and employee rights in India sets out the sequence for the larger claim.