Step-by-step severance calculation for 20+ years of service
Walk-through assumes an employee on indefinite contract, post-probation, terminated by the employer at the 20-year mark. All amounts in MMK.
Step 1 — Confirm severance entitlement at 20 years of service
| Tenure | Severance entitlement |
|---|---|
| 10 years (base) | 9 × month's salary |
| 10 + each additional year | +1 × month's salary, subject to cap |
| 20 years | 9 + 10 = 19 × month's salary (uncapped baseline) |
| 25 years | 9 + 15 = 24 × month's salary baseline (subject to cap) |
Step 2 — Apply the rate to last drawn monthly salary
| Item | Value |
|---|---|
| Last drawn monthly basic salary | e.g. MMK 2,000,000 |
| Multiplier (20 years of service) | × 19 |
| Severance payable (uncapped) | MMK 38,000,000 |
If the current notification imposes a cap, severance reverts to the cap.
Step 3 — Combine with notice and final settlement components for 20+ years of service
At 5+ years tenure the notice period is 3 months.
- Outstanding wages — pro-rated.
- Leave encashment — accrued earned leave × daily rate.
- Notice pay — 3 months if not served.
- Severance — 19 × month's salary at 20 years (or capped figure).
- Gratuity / contractual benefits — pay per contract.
- Timeline — within 7 days of last working day.
Tax treatment of long-tenure severance
Severance is part of assessable PIT income in the year of payment. A 19-month lump sum will materially push the employee into the 15-25% bands. Withhold PAYE conservatively in the payment month and reconcile at year-end. The 20% basic relief and dependent allowances apply against total annual taxable income.
Employer takeaway
For 20+ years of service, severance is the 10-year base of 9 months plus 1 month per additional year — at exactly 20 years that is 19 months' salary, subject to any cap in the current notification. Add 3 months' notice pay if notice is not served, plus leave encashment and outstanding wages. Pay within 7 days, withhold PAYE on the lump sum, and remit to IRD by the 15th. Retain final settlement records 7 years post-exit.
Variations on 20+ years of service
- Resignation — no severance; employee serves 3 months' notice or forfeits.
- Gross misconduct — no severance.
- Voluntary retirement scheme (VRS) — typically pays per a negotiated package higher than ESDL minimum.
- 30 years of service — 9 + 20 = 29 months baseline, subject to any cap.
- See 10-year severance and 5-year severance.
Common severance mistakes at 20+ years of service
- Failing to apply the +1 month per additional year above 10 years.
- Capping severance at 9 months when the notification's incremental schedule applies.
- Withholding PAYE on the lump sum at flat last-month rate and forgetting year-end reconciliation.
- Not issuing relieving + experience letters at final settlement.
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