Employee Exit Formalities and why is it required?

Exit Formalities
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Companies have to let go of their employees regularly on a voluntary or involuntary basis, and there has to be a process for the existing employees as there is for the joining. Employee exit is an important event, the HR needs to ensure that all the exit formalities are properly followed. Following the correct procedure helps to maintain the records and keeps the company away from mismanagement.

The exit process also keeps things flowing smoothly and ensures healthy relations with the ex-employees. It’s beneficial for employer branding as well as talent management.


Read More: How HR software can ease your full and final (F&F) settlement process?


What Is an Employee Exit Formality?

There are set of processes and documentation that need to be followed for the exiting employee. These exit formalities are also known as the offboarding process. The employee exit process remains the same whether the employee leaves of their own will or of being terminated by the organization.

There are many things in the exit formalities, such as exit interviews, full and final settlement, documentation, asset recovery, and much more. Let’s discuss in detail when these things are important.


Why do we need Exit Formalities?

The exit formalities are important not just for the employee, but so the employer. Offboarding is the last bite of the experience that the employee going to get with the organization. These employee exit formalities may redefine their entire experience with the company, whether positive or negative. As an employer or the concerned HR person, you need to ensure that it adds a positive aspect to the employer branding aspect of your organization.

If you want to retain the employee longer or make consider coming back to your organization in the future, the employee exit process can be your last chance, so make it count.


Knowledge transfer

Knowledge transfer is a crucial aspect of the employee exit process, essential to maintaining the productivity of the company. Design a proper process where all the essential information from the employee will be transferred to the new hire or another employee who is a good fit for being closest to a job profile.

It is good to ensure that there is no dependency in the organization on any task. If the dependency is on the employee leaving the company, it can obstruct the workflow. In such cases, ensure that the details of the key aspects and the contacts are shared with their colleagues before they exit.


Pending projects

There might be a few responsibilities of employee that you want them to complete before leaving their exit. Setting the right goals and deadlines for the project can help in keeping the employee engaged during their notice period. Also, know about the task and project you want them to complete before their last day.

Figure out what is the right goal that will keep them engaged, as a business your company does not suffer much because they are the critical member of an assignment. At the same time, make sure that he/she is not suffering stress in your company during their notice period. Always remember that the employee who worked for you is working as a live testimony of what it is like to work in a company. If you make employees overwork during the notice period, the employer branding that you are sending out with them is utterly negative.


Recover company assets

The human resource department needs to ensure that all the company assets are being recovered from the exiting employee before their last day. There can be various physical assets that the departing employee is holding such as a computer, laptop, accommodation facility, keys to particular areas, or the assents like a vehicle. You can do this with proper records in the HRMS software or device a proper system to keep proper records of the assets assigned to the staff and recovery for the same.

Along with the physical assets, you need to recover the intellectual assets too. These can be paid tools and software and other work-related services provided to the employee. The primary responsibility of the IT department is that the employee does not have access to the company’s computer or email account.

It’s common practice to divert the client’s emails to the new employee taking up the position or to the relevant member of the team. Inform the clients that the person they were connected to no longer works with the company and provide them with the details of the person who will be handling their work onwards.

You also need to ensure that the employee no longer has access to the company’s assets and information. You can simply change the passwords for the same. This is an official process and should be conducted accordingly. The employee must be informed that it is a part of the employee exit process and all rights reserved by the company over existing projects.


The full and final settlement

The full and final settlement of the employee has to be done before their last day. The settlement includes previously unpaid salaries, bonuses, and reimbursements. The encasement of the non-utilized leaves also needs to be done. The final settlement also includes the pension if the employee is retiring, as well as gratuity if it’s applicable.



Once the resignation of the employee has been excepted and other efforts to retain the employee are failed as well, the HR department should proceed with the paperwork. The exit formalities are important and should be done correctly. This is a crucial process for the employee as well as the employer. It is a good practice to have a standard process and an employee exit formalities documentation checklist.

At the time of employee leaving the company, HR needs to get the nondisclosure agreement and other documents signed by the employee to ensure the security of the company. They also need to check if there is a pending salary or other payments due from the employer’s end and clear it.

After going through the theory of the full and final settlement, give employees their relieving letter, with mention of their designation, compensation, and correct tenure with dates.


What is the exit interview?

An exit interview is a conversation with the departing employee to get a better insight into the functions and work environment of your organization. The exit interviews can provide you access to insight that other employees may fail to give you.



In the case you think the employee is too valuable to let go, you can try to convince them to stay in the company with a better offer. In the exit interview, there is an opportunity to understand what offer can be more desirable to the employee. It can be better pay, promotion, new responsibility, or sometimes just a few improvements in their work environment. The retention of the employee can save your company significant costs in the recruitment process.

An exit interview is an important part of the employee exit process. Here, you get to tell your departing employee that you value them as your employee and will be happy to welcome them again sometime in the future, even if you currently fail to retain them.


Read More: Tips to increase employee retention rate


Know the “why?”

During an exit interview, when an employee is on the notice period, he/she is likely to give you a more honest opinion about the company or the workplace than anybody else. When an employee is serving the notice period, they are not bothered about what their seniors will be thinking about them or what if they get on the wrong foot with an HR if they express their opinion. Resulting in the courage to speak their truth without sugar-coating anything.

There are a few things that may have led them to leave the job that they otherwise feel difficult to share. For example, the whole team of the departing employee can be suffering due to the same senior or a manager that is very difficult to work with. When you get to know the reason from the existing employee, you can take action to resolve the issue. This way, you can stop the departing employee and other team members from leaving a company as well.


Scope of Improvement

The exit interviews or the employee can give you perspective on what is it like to work as an employee of the company. Many companies prefer to wait for the exit interview until the very last day of an employee. This is because they think that if the employee is interviewed during the early notice period won’t be as beneficial as on the last day or during the last few days of their working days.

  • Some common questions to be asked in an exit interview are?
  • Why are you leaving the organization?(Why? or Why not?)
  • What would make you stay longer?
  • Would you recommend this employer to your friends and family?
  • What are your recommendations for the company?



Employee exit formalities are a set of procedures that need to be followed before an employee’s last working day in the company. The procedure starts with recognizing the resignation letter. According to the needs of the firm and the employees’ performance, you can try to convince them to stay in the firm longer.

Once it is made clear that they are leaving, start with the documentation, asset recovery, knowledge transfer, full and final settlement, and also conduct the exit interviews. The proper exit process ensures smooth workflow and ease for both employee and employer.

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