When someone just stops coming
A worker who goes home for a festival and does not return is a familiar story. Do not simply stop the salary and forget the person. Write to the last known address and phone number asking them to return or resign, follow your standing orders or rules on unauthorised absence, and then close the record with a reason. Once the separation is recorded, the wages already earned fall due within two working days like any other exit, so keep them ready.
Advances and the final settlement
Outstanding advances are the most common exit dispute in small businesses. Recover the balance from the final settlement only within the deduction rules, and show the calculation to the employee. Add wages for the days worked, any leave encashment due and any bonus the person has earned. Wages due have to be in the person's hands within two working days after the exit, and the full and final settlement should be explained line by line.
Worked example: gratuity for a munim of 22 years
A munim retires after 22 completed years, and his last drawn basic plus DA is ₹20,800 a month. Taking a month as 26 working days, 15 days' wages are ₹20,800 x 15 / 26 = ₹12,000. For 22 years, gratuity is 22 x ₹12,000 = ₹2,64,000. Families often want to give loyal staff something extra at retirement, which is generous, but the gratuity itself is an entitlement and should be calculated and paid as one, with any gift on top of it.
When a family member leaves the business
Family members leave too: a brother starts his own firm, a daughter-in-law moves to another city. If they were on the payroll, record the exit like any other: the last working day, the exit reason, handover of responsibilities, return of keys and cheque books, and settlement of dues. Clean records protect everyone if the family later divides the business or someone questions what was paid.
How to set it up in ZeniaHR
- Log every resignation, retirement or separation against the person's record; this sets the last working day and keeps the exit on file.
- Use the exit checklist for keys, cash, cheque books and handover, and choose the exit reason from the 20 structured options, family members included.
- Add leave encashment, any bonus due and the unrecovered advance to an off-cycle run as inputs, and release payment inside two working days.
- Before paying long-serving staff, compare your figures with the gratuity and settlement reports.
- Keep a relieving letter template in the HR letter library and issue the letter with the settlement.
Read more about employee records and exits in ZeniaHR.
Roles this applies to
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What should a small business do when an employee absconds?
Write to the employee's last known address and phone, asking them to return or resign within a set time. Follow your standing orders or rules on unauthorised absence, then record the separation with a reason. Keep the earned wages ready and pay them within two working days of recording the exit.
Can an advance be recovered from the final settlement?
Generally yes, as long as the recovery stays within the deduction rules under the Code on Wages. Show the employee the calculation, recover only the outstanding balance, and pay the rest of the dues inside two working days of the exit. Record the recovery on the settlement so there is no dispute later.
How is gratuity calculated for long-serving staff?
Once continuous service passes five years, gratuity is 15 days' wages per completed year of service, based on the last drawn wages. Counting a month as 26 working days, a worker with ₹20,800 basic plus DA and 22 completed years gets ₹2,64,000. You can check it with the gratuity calculator.