> ## Documentation Index
> Fetch the complete documentation index at: https://docs.hitaji360.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Separation (offboarding)

> A separation is the formal record of an employee leaving — a resignation, a termination, a retirement, a layoff, or the end of a fixed-term contract.

A separation is the formal record of an employee leaving — a resignation, a termination, a retirement, a layoff, or the end of a fixed-term contract. In Hitaji 360 the separation drives the whole offboarding: it carries an exit checklist (return the laptop, revoke access, conduct the exit interview), it terminates the employee and ends their contract when the checklist is done, and it computes and posts the **final settlement** — gratuity, leave encashment, and the recovery of any outstanding advances and loans.

The settlement is where HR meets accounting. When you post it, Hitaji 360 runs an *off-cycle settlement payroll run* for the leaver (so terminal pay is taxed properly), draws down any gratuity that was being accrued, recovers what the employee still owes, and posts the lot to the general ledger. This page covers the whole flow.

**You'll find this at:** `/hr/separations` (list) and `/hr/separations/:id` (detail).

> 📷 *Screenshot: the Separations list with the "Initiate Separation" button — to be added.*

***

## Before you start

* **Which business am I in?** A separation belongs to one business. If you run more than one, confirm the business switcher is correct first — a separation is invisible (and un-editable) to users working in a different business.
* **The employee needs an active employment contract.** You cannot initiate a separation for someone with no active contract; the form blocks it and tells you to add one first. The contract must belong to the same employee being separated.
* **Date sanity.** The last working date cannot be more than a year in the past, and the notice date (if given) cannot fall after the last working date.

***

## The separation lifecycle (statuses)

| Status                       | Meaning                                                                                                                                           | What you can do                                                    |
| ---------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ |
| **Pending**                  | Just initiated; the offboarding hasn't started.                                                                                                   | Start the process, cancel.                                         |
| **In Process** (`InProcess`) | The exit checklist is being worked through.                                                                                                       | Tick activities off, cancel.                                       |
| **Completed**                | Every activity is done (Completed or Skipped). The employee is now **terminated** and their contract **ended**; the settlement becomes available. | View settlement, post settlement, link/schedule an exit interview. |
| **Cancelled**                | The separation was abandoned.                                                                                                                     | View only.                                                         |

Two automatic moments:

* **When the last activity is ticked off**, the separation flips to **Completed**, sets the employee's status to *Terminated*, and ends their employment contract.
* A separation can only be cancelled while it is **Pending** or **In Process**.

***

## Initiating a separation

From the Separations list choose **Initiate Separation** (you can also start one from the **Separation** tab on an employee's profile).

> 📷 *Screenshot: the Initiate Separation dialog — to be added.*

| Field                   | Required | Notes                                                                                                                                                                                |
| ----------------------- | -------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| **Employee**            | Yes      | The person leaving. Their active employment contract is found automatically.                                                                                                         |
| **Separation Type**     | Yes      | **Resignation**, **Termination**, **Retirement**, **Layoff** or **Contract End**.                                                                                                    |
| **Last Working Date**   | Yes      | Defaults to today. Drives settlement and the off-cycle run's period.                                                                                                                 |
| **Notice Date**         | No       | When notice was given; cannot be after the last working date.                                                                                                                        |
| **Separation Template** | No       | Pick an active template to copy an exit checklist onto the separation (see [Separation templates](/hr/user/lifecycle/separation-templates)). Only shown when active templates exist. |

The separation is created in **Pending**. Choose **Start Process** to move it to **In Process** and begin working the checklist.

***

## The exit checklist (activities)

Each activity row shows its sequence number, title, optional description, who it is **assigned to**, its **due date**, and its status (**Pending**, **In Progress**, **Completed** or **Skipped**). Due dates are computed from the offboarding start plus the template's day-offset.

Choose **Complete** on an activity to tick it off (it records when it was completed). Activities can only be completed while the separation is Pending or In Process. When every activity is Completed or Skipped, the separation completes itself — and the termination and contract-end side-effects fire.

***

## The exit interview

A separation has an **Exit Interview** panel. If one is already linked, you can open it from here; if not, choose **Schedule Exit Interview** to create one tied to this separation and employee. See [Exit interviews](/hr/user/lifecycle/exit-interviews).

***

## The final settlement

Once a separation is **Completed**, the **Settlement** panel appears with the computed figures. The settlement is created as a **Draft**:

| Line                 | How it's computed                                                                                                             |
| -------------------- | ----------------------------------------------------------------------------------------------------------------------------- |
| **Gratuity**         | Completed years of service × monthly gross × the gratuity rate (months-per-year-of-service from payroll settings; default 1). |
| **Leave Encashment** | Available leave days × (monthly gross ÷ 26).                                                                                  |
| **Advance Recovery** | Sum of the employee's outstanding salary/work advances and employee loans still owing. Shown as a deduction.                  |
| **Asset Recovery**   | Defaults to zero; a manual figure for unreturned assets. Shown as a deduction.                                                |
| **Net Payable**      | Gratuity + Leave Encashment − Advance Recovery − Asset Recovery.                                                              |

When everything looks right, choose **Post Settlement**. A confirmation warns you this posts to accounting and cannot be reversed.

> ⚠️ **Current state:** The detail page shows the settlement figures and a **Post Settlement** button, but does not currently expose an *edit* form for the draft amounts in the UI (the back end supports editing a draft, e.g. to set asset recovery, via `PATCH .../settlement`). If you need to adjust figures before posting, that adjustment isn't available on this screen today. (Flagged for the team.)

### What posting does (the off-cycle run, gratuity draw-down, and recovery)

Posting the settlement is a multi-step financial action, all stitched together so a mid-way failure can be safely retried without double-paying:

1. **Off-cycle settlement payroll run.** Hitaji 360 creates an **OFF\_CYCLE** payroll run for just this leaver, injects the terminal benefits (Gratuity and Leave Encashment) as earnings, and submits it. Because it goes through payroll, **terminal benefits are taxed** — PAYE is withheld according to each component's tax treatment, and statutory contributions apply where configured. If the leaver's exit month is already closed, the run is posted into the next open period instead of failing. See [Running payroll](/hr/user/payroll/running-payroll).
2. **Gratuity draw-down.** If gratuity was being accrued monthly for this employee, the accrued provision sitting in *gratuity payable* is drawn down and netted against the run's fresh gratuity expense. See [Gratuity](/hr/user/payroll/gratuity).
3. **Recovery.** Outstanding advances and loans are recovered out of the terminal net pay, and each loan/advance sub-ledger is cleared (loans marked Closed, advances Settled). Recovery can never exceed the leaver's net accrued pay — if it would, posting is refused and you'll need to recompute.
4. The settlement flips to **Posted**.

> If the employee has no active salary structure, the run can't generate a payslip and posting fails with a clear message asking you to activate a salary structure first.

***

## Behind the scenes — the accounting

Posting a settlement produces several balanced entries. In plain double-entry terms:

**The off-cycle settlement run (terminal pay):**

|                                                    | Debit            | Credit                   |
| -------------------------------------------------- | ---------------- | ------------------------ |
| **Gratuity expense**                               | Gratuity amount  |                          |
| **Payroll expenses** (leave encashment)            | Leave encashment |                          |
| **Salary payable** (net owed to leaver, after tax) |                  | Net terminal pay         |
| **PAYE / statutory payable**                       |                  | Tax & statutory withheld |

**Gratuity draw-down** (only if gratuity was being accrued):

|                                                        | Debit          | Credit         |
| ------------------------------------------------------ | -------------- | -------------- |
| **Gratuity payable** (release the accrued provision)   | Accrued amount |                |
| **Gratuity expense** (offsets the run's fresh expense) |                | Accrued amount |

**Recovery of advances & loans** (withheld from terminal net):

|                                                     | Debit            | Credit          |
| --------------------------------------------------- | ---------------- | --------------- |
| **Salary payable**                                  | Recovered amount |                 |
| **Loan receivable** (per loan) / **Staff advances** |                  | Amounts cleared |

The net effect is that the leaver's terminal pay is recognised and taxed, any gratuity already provided for is consumed rather than double-counted, and what they still owed the business is netted off before the final payment.

***

## Permissions

| Action                                                                | Permission |
| --------------------------------------------------------------------- | ---------- |
| View separations & settlement                                         | `hr:read`  |
| Initiate, start, complete activities, cancel, edit a draft settlement | `hr:write` |
| **Post a settlement to accounting**                                   | `hr:admin` |

> Posting is the only separation action that needs the elevated `hr:admin` slug — it commits money to the ledger.

***

## Related

* [Separation templates](/hr/user/lifecycle/separation-templates) — the reusable exit checklists
* [Exit interviews](/hr/user/lifecycle/exit-interviews) — the exit conversation linked to a separation
* [Gratuity](/hr/user/payroll/gratuity) — how gratuity is accrued and drawn down at separation
* [Running payroll](/hr/user/payroll/running-payroll) — the off-cycle run that pays terminal benefits
* [Employee loans & loan types](/hr/user/payroll/employee-loans) — what gets recovered at separation
* [Onboarding](/hr/user/lifecycle/onboarding) — the mirror-image joining process