Whenever the organization requires manpower, the organization prefers the employees who are already associated with them, such as contract employees or interns. If suitable, the contract employees can be converted into regular employees.
While converting the employee, there can be an effect on tax calculations. To avoid taxation errors, you must first settle the contract employee and then add him/her as a regular employee.

To convert the contract employee to a regular one, you must first process full and final settlement of a contract employee and after that add the settled employee as a new employee.

Process full and final settlement of a contract employee

To process the full and final settlement of a contract employee, from the greytHR Admin portal, hover over the 9 dots and go to Payroll > Payroll Inputs > Final Settlement. The Final Settlement page opens.

Click the Settle Employee button. The Settlement page opens.
Note: Alternatively, you can navigate to Actions > Payroll > Monthly Actions > Settle Resigned Employee. The Settlement page opens.
Under Step 1: Employee, select the Search Employee option to search for a particular employee.
In the Search Employee search box, search for the contract employee.
Click Next. Step 2: Resignation Details section appears.
Under Step 2: Resignation Details, from the Resignation Submitted On dropdown calendar, select the date of the employee's resignation.
From the Leaving Date dropdown calendar, select the employee's last day.
From the Leaving Reason dropdown list, select the employee's reason for leaving the organization.
From the Settlement Date dropdown calendar, select the settlement date of the employee.
Click Next. Step 3: Notice Pay section appears.
Under Step 3: Notice Pay, select the Notice Required checkbox to activate the notice period for the employee.
In the Notice Period text box, enter the number of days to be served as the notice period.
Based on the Notice Period you have entered system calculates the Shortfall in Notice days automatically.
Click Next. Step 4: Work Days section appears.
Under Step 4: Work Days, read and understand the notifications displayed.
Under the Days Worked column, enter the number of days the employee has worked.
Click Next. Step 5: Leave Encashment section appears.
Under Step 5: Leave Encashment, enter the employee's leave details.
Click Next. Step 6: Remarks section appears.
Under Step 6: Remarks, read and understand the note. To make a different choice regarding the IT declaration, click click here.
In the Remarks text box, enter the remarks, if any.
Click Finish to complete the full and final settlement of the contract employee. A success message appears.

After the Full and Final settlement is done for the settled employe, you can add them as a regular/new employee.

To add the settled employee as a regular/new employee click here:

Frequently Asked Questions:

Why is it mandatory to process full and final settlement before converting a contract employee to a regular employee?

Processing full and final settlement ensures that payroll and income tax calculations for the contract period are closed correctly. This prevents tax mismatches when the employee is added again as a regular employee.

Can I directly convert a contract employee to a regular employee without settlement?

No. You must first complete the full and final settlement of the contract employee and then add the employee again as a new regular employee.

Where can I process the full and final settlement in greytHR?

To process the full and final settlement of a contract employee, from the greytHR Admin login, hover over the 9 dots and go to Payroll > Payroll Inputs > Final Settlement. The Final Settlement page opens.

Click the Settle Employee button. The Settlement page opens.
Note: Alternatively, you can navigate to Actions > Payroll > Monthly Actions > Settle Resigned Employee. The Settlement page opens.
Under Step 1: Employee, select the Search Employee option to search for a particular employee.
In the Search Employee search box, search for the contract employee.
Click Next. Step 2: Resignation Details section appears.
Under Step 2: Resignation Details, from the Resignation Submitted On dropdown calendar, select the date of the employee's resignation.
From the Leaving Date dropdown calendar, select the employee's last day.
From the Leaving Reason dropdown list, select the employee's reason for leaving the organization.
From the Settlement Date dropdown calendar, select the settlement date of the employee.
Click Next. Step 3: Notice Pay section appears.
Under Step 3: Notice Pay, select the Notice Required checkbox to activate the notice period for the employee.
In the Notice Period text box, enter the number of days to be served as the notice period.
Based on the Notice Period you have entered system calculates the Shortfall in Notice days automatically.
Click Next. Step 4: Work Days section appears.
Under Step 4: Work Days, read and understand the notifications displayed.
Under the Days Worked column, enter the number of days the employee has worked.
Click Next. Step 5: Leave Encashment section appears.
Under Step 5: Leave Encashment, enter the employee's leave details.
Click Next. Step 6: Remarks section appears.
Under Step 6: Remarks, read and understand the note. To make a different choice regarding the IT declaration, click click here.
In the Remarks text box, enter the remarks, if any.
Click Finish to complete the full and final settlement of the contract employee. A success message appears.

After the Full and Final settlement is done for the settled employe, you can add them as a regular/new employee.

Which resignation date should be selected for a contract employee?

You should select the actual resignation date submitted by the contract employee, along with the correct leaving date and settlement date.

Is notice period applicable for contract employees?

Notice period applicability depends on your organization’s policy. If required, you can enable the Notice Required option and enter the applicable notice period days.

How is shortfall in notice period calculated?

The system automatically calculates the shortfall in notice days based on the notice period entered and the employee’s actual working days.

What should be entered in the Work Days section?

You must enter the actual number of days worked by the employee during the final payroll cycle to ensure accurate salary calculation.

Can leave encashment be processed for contract employees?

Yes, if your organization allows leave encashment for contract employees, you can enter the applicable leave details in the Leave Encashment step.

What happens after completing the full and final settlement?

Once the settlement is completed successfully, the employee is marked as settled. You can then add the same person as a new regular employee in the system.

Will the employee’s previous payroll data carry forward after conversion?

No. Payroll data from the contract period will not carry forward. The employee will start fresh as a regular employee with new payroll and tax calculations.

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