How is leave encashment calculated in Myanmar?
Leave encashment in Myanmar is paid at the employee's daily wage × the number of unused earned-leave days at exit. Daily wage is monthly basic ÷ 30 (or per contract). Leave encashment is part of final settlement (within 7 days), is taxable as wages, and applies to earned/annual leave only — not casual or medical leave.
Step-by-step leave encashment calculation in Myanmar
Walk-through assumes a monthly-paid employee leaving the company with unused earned leave days. All amounts in MMK. Encashment applies to earned (annual) leave only — casual leave, medical leave, and maternity leave are typically not encashable.
Step 1 — Establish the daily wage
| Basis | Calculation |
|---|---|
| Standard Myanmar payroll convention | Monthly basic salary ÷ 30 days |
| Working-day basis (some contracts) | Monthly basic salary ÷ 26 working days |
| Daily-wage workers | Contractual daily rate |
Example: monthly basic MMK 600,000 → daily wage = MMK 20,000 (30-day) or MMK 23,077 (26-day).
Step 2 — Count unused earned leave days
Earned leave under the Leave & Holidays Act accrues monthly during service (typical: 10 days/year of earned leave for non-factory employees, often higher for factory workers).
| Item | Value |
|---|---|
| Earned leave accrued YTD | e.g. 8 days |
| Earned leave taken YTD | e.g. 3 days |
| Unused earned leave | 5 days |
Step 3 — Convert to encashment amount
| Item | Calculation | Amount |
|---|---|---|
| Unused earned leave × daily wage | 5 × MMK 20,000 | MMK 100,000 |
| Carried-forward earned leave (if applicable) | per company policy / contract | variable |
Tax treatment of leave encashment
Leave encashment is part of assessable income for PIT and is taxed in the year of payment as ordinary salary income. It is paid in the final settlement and is subject to PAYE in the payment month. SSB applies up to the monthly cap if the employer is SSB-registered.
Employer takeaway
Leave encashment is unused earned leave × daily wage. Use 30-day or 26-day basis per contract — be consistent. Pay in the final settlement within 7 days of last working day. Withhold PAYE on the lump sum and remit to IRD by the 15th of the following month. Show on the final settlement statement separately. Retain leave registers and final settlement records 7 years post-exit.
Variations on leave encashment
- Casual / medical leave — typically not encashable; lapses at year-end or exit.
- Carried-forward earned leave — only if company policy permits carry-forward. Many Myanmar employers cap carry-forward at 30 days.
- Resignation — earned leave still encashable at exit.
- Termination for misconduct — earned leave is still owed; encashment is a wage right.
- See severance at 2 years.
Common leave encashment mistakes
- Encashing casual or medical leave (not encashable).
- Computing daily wage on basic + allowances when contract specifies basic only.
- Mixing 26-day and 30-day basis between leave deduction and encashment.
- Skipping PAYE on the encashment lump sum.
- Leave and Holidays Act — earned leave provisions
- Employment & Skills Development Law (ESDL) 2013 — final settlement
- Payment of Wages Law — payslip rules
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