How is leave encashed on resignation in Myanmar?

What Myanmar law says

On resignation in Myanmar, unused annual leave is encashed and paid as part of the final settlement under the Employment and Skills Development Law (ESDL) 2013. The standard formula is:

Encashment = (Monthly salary ÷ 30) × Unused annual-leave days

The Leave and Holidays Act mandates this entitlement; employers cannot withhold it as a discretionary bonus. The same rule applies under the Factories Act 1951 for factory workers and the Shops and Establishments Act for office, retail, and hospitality staff.

Casual leave and sick leave are not encashable on resignation — they lapse at exit just as they lapse at year-end.

Final settlement components

Component	Treatment
Outstanding wages to last working day	Paid in full
Unused annual-leave encashment	(Monthly salary ÷ 30) × unused-days
Notice pay (if pay in lieu was agreed)	Per ESDL schedule
Severance	Not payable on voluntary resignation
Contractual gratuity	Per the contract
Outstanding expense reimbursements	Paid in full
Total payable timeline	Within 7 days of last working day

How the encashment is computed

• Determine unused balance. Carry-forward + current-year pro-rata accrual to last working day, less any annual leave taken during notice. Pro-rata current-year accrual is typically 0.83 days per completed month.
• Identify the salary base. Use ordinary monthly salary — base salary plus fixed allowances treated as salary in the contract. Exclude bonuses, OT, and reimbursements.
• Apply the formula. (Monthly salary ÷ 30) × unused-days. The /30 calendar-day divisor is the dominant Myanmar payroll convention.
• Reflect on the final settlement statement. Show as a separate line item, with the calculation visible.
• Withhold PIT but not SSB. Encashment is part of taxable salary income for PIT under PAYE.

Worked examples

Example 1 — full-year leaver. Employee on MMK 600,000/month resigns with 8 unused annual-leave days at last working day:

• Daily salary = 600,000 ÷ 30 = MMK 20,000
• Encashment = 8 × 20,000 = MMK 160,000

Example 2 — mid-year leaver with carry-forward. Employee on MMK 1,000,000/month, joined Jan 2024, resigns 30 June 2026. Carry-forward into 2026: 12 days. 6 months × 0.83 = ~5 days accrued in 2026. Took 4 days during notice. Unused balance: 12 + 5 − 4 = 13 days:

• Daily salary = 1,000,000 ÷ 30 = MMK 33,333
• Encashment = 13 × 33,333 = MMK 433,333

For the underlying entitlement and accrual rules, see annual leave encashment and annual leave accrual. For the same calculation on involuntary exit, see leave encashment on termination.

Edge cases and exceptions

• Resignation during probation. Statutory annual leave has not yet accrued; encashment is zero unless the contract grants pro-rated leave with no clawback.
• Daily-wage workers. Encashment uses the daily wage × unused days; no /30 conversion needed.
• Resignation while on maternity. The unused balance is encashed at exit even if leave overlapped with maternity.
• Sick leave at exit. Sick balance is not encashable; only annual leave is.
• Foreign workers. Same encashment treatment.
• Pay in lieu of notice. If notice is paid out, encashment runs alongside pay-in-lieu and shows separately on the settlement.
• Factory vs office. Same rule; only inspection regime differs.

Frequently asked questions

Does this entitlement apply to employees on fixed-term contracts?

Yes. Fixed-term contract employees in Myanmar receive the same statutory leave floor as permanent employees once they meet the relevant service-tenure thresholds. The Leave and Holidays Act, the Factories Act 1951, and the Shops and Establishments Act do not distinguish between fixed-term and indefinite contracts for leave purposes — eligibility is set by months of continuous service. Contract expiry is not termination, so unused annual-leave balance is encashed at the end of the contract using (monthly salary ÷ 30) × unused-days. See the bucket E pages on fixed-term contracts for the contract-side rules.

How does this interact with payroll and SSB?

All paid leave is treated as ordinary salary income for Myanmar payroll purposes. PIT is withheld through PAYE on every payslip that includes leave pay. SSB contributions (2% employee + 3% employer, capped on a wage base of MMK 300,000/month) continue during paid leave because the employee is still earning wages. SSB contributions pause only during unpaid leave. Encashment of accrued annual leave at exit is part of taxable salary for PIT but practitioners differ on SSB treatment of the lump sum — confirm with the township SSB office on filing.

What records does the township labour office expect?

Inspectors typically request the leave register for the past 12 months, medical certificates for sick leave over 3 days, maternity / paternity SSB filings, final settlement worksheets for recent leavers, and the public-holiday gazette for the current year. Records must be retained for at least 7 years under both the Factories Act 1951 and the Shops and Establishments Act. Keeping a clean per-employee leave file with tagged entries makes inspections quick and defensible. Digital records from a payroll system are acceptable provided they can be printed on demand.

Common leave-law mistakes

• Refusing encashment on resignation. Encashment is statutorily owed; not contingent on goodwill.
• Withholding final settlement pending exit clearance. Wage withholding is a separate violation.
• Using a /22 working-day divisor without contractual basis. The /30 calendar-day method is the Myanmar convention.
• Failing to withhold PIT on encashment. Encashment is taxable salary income.
• Skipping the final-settlement worksheet. The labour office expects a documented breakdown.