Severance Calculation in Myanmar — The Notification 84/2015 Guide

When severance is payable

Severance is owed when:

• Employer terminates without cause (e.g. redundancy, restructuring)
• Employer retrenches due to economic or operational reasons
• Employer closes the business

Severance is NOT typically owed when:

• Employee resigns voluntarily
• Employee is dismissed for serious misconduct (fraud, theft, violence — following the 3-warning procedure for other misconduct)
• Employment ends due to expiry of a genuine fixed-term contract
• Employee retires at the agreed retirement age (may trigger gratuity instead)

The severance schedule (Ministry of Labour Notification 84/2015)

⚠️ Verification note: The anchor points at <6 months (nil), 6m–1yr (0.5m), 1–2yr (1m), 10–20yr (8m), and 25+ (13m) are widely confirmed. Intermediate bands vary across secondary sources — the table above is the most common published structure but is not independently verified by QHRM. Always confirm the applicable months with your labor lawyer or directly with the township Labour Exchange Office before closing a termination.

The salary base for severance

What to include:

• Last monthly basic salary
• Regular monthly allowances (housing, transport, meal) that are part of total compensation
• Fixed cost-of-living adjustments

What to exclude:

• Overtime payments (explicitly excluded by common interpretation)
• One-off bonuses (annual bonus, project bonus)
• Incentive payments tied to specific performance

Edge case — performance-linked allowance: If a performance allowance is paid every month as part of regular compensation (e.g. a "sales base allowance" paid even with zero sales), it is arguably part of the base. If it varies materially month-to-month, it typically is excluded. When uncertain, include it and document the reasoning — favoring the employee reduces dispute risk.

Worked example — 8-year service retrenchment

Scenario: Employee has 8 years 4 months of continuous service. Monthly package: basic MMK 800,000 + transport MMK 50,000 + meal MMK 50,000 = MMK 900,000 total. OT last month was MMK 120,000.

• Severance months: 8 years falls into the 8 to <10 years band → 6 months [VERIFY]
• Base for severance: MMK 900,000 (excluding OT)
• Severance payable: 6 × 900,000 = MMK 5,400,000

Plus any unused leave encashment, 30-day notice pay (if not served), and gratuity (if applicable per company policy).

Worked example — 10-year service with mixed allowances

Scenario: 10 years 2 months continuous service. Basic MMK 600,000 + transport MMK 30,000 + housing MMK 200,000 + quarterly incentive averaging MMK 60,000/month = MMK 890,000 monthly average.

• Severance months: 10–20 years band → 8 months (this anchor point is widely confirmed)
• Base: MMK 890,000 if quarterly incentive is regular and material; or MMK 830,000 if incentive treated as variable and excluded. Conservative — include when in doubt. Using 890K: 8 × 890,000 = MMK 7,120,000

Severance vs. notice pay vs. gratuity — don't confuse them

Three distinct payments can be owed at termination:

1. Severance — mandatory under Notification 84/2015 for employer-initiated termination. Based on service length.
2. Notice pay (salary in lieu of notice) — 30 days' pay under ESDL 2013 if notice period is not served. Always owed if notice not given, regardless of reason for termination.
3. Gratuity — optional under company policy, often 1/2 or 1 month per year of service. Not statutory, but many Myanmar employers provide it.

Employer-initiated termination without cause typically triggers severance + notice pay + unused leave encashment (+ gratuity if company policy). These stack — they are not alternatives.

What about retrenchment / collective redundancy?

For collective retrenchment (multiple employees at once), best practice is:

1. Announce the retrenchment with reasons (economic, technological, reorganization)
2. Consult with affected employees or their representatives
3. Notify the township Labour Exchange Office
4. Pay severance per the schedule + notice + leave encashment
5. Document the business reason thoroughly

Collective retrenchment is higher scrutiny — a disgruntled group can collectively file a labor dispute. Clean process and clear documentation matter.

Tax treatment of severance

• Severance up to the statutory amount is generally treated as tax-exempt or concessionally taxed under Myanmar PIT rules.
• Severance above statutory amount (enhanced payments, ex-gratia) may be fully taxable as regular income.
• Unused leave encashment is taxable as salary.
• Gratuity — tax treatment depends on whether it is a statutory-equivalent or discretionary payment.

[VERIFY] Confirm current tax treatment with your tax advisor. Union Tax Law specifics on severance taxation change periodically.

The 7-step severance calculation checklist

1. Confirm length of continuous service (in years and months) as at the termination date.
2. Identify the applicable severance months from the Notification 84/2015 schedule.
3. Identify the salary base (monthly basic + regular allowances, excluding OT and one-off bonuses).
4. Calculate severance = months × salary base.
5. Add notice pay if notice not served (30 days' salary).
6. Add unused leave encashment at current daily rate.
7. Add gratuity if per company policy.

Document all 7 components in a final settlement letter (bilingual). Get the employee's signed acknowledgment.

6 common severance mistakes

1. Using current salary × 0.5 months for a 6-month employee instead of 0.5 × previous monthly salary. The base is the last monthly salary.
2. Excluding housing or transport allowance. Regular monthly allowances are included.
3. Including overtime in base. Explicitly excluded.
4. Confusing notice pay with severance. Both are owed for employer termination.
5. Not offering severance because the employee "agreed to resign." If a resignation is effectively employer-pressured, labor courts can re-classify it as employer-initiated termination.
6. Oral-only settlement. Always document in a signed final settlement letter.

How QHRM automates severance calculation

• Length of service calculated automatically from hire date
• Severance schedule pre-configured with Notification 84/2015 brackets
• Salary base calculation that excludes OT and flags variable components for review
• Final settlement letter generated bilingually (EN + MY)
• Leave encashment auto-calculated from unused balance
• Notice pay computed if notice period not met
• Audit trail of the full calculation for labor inspection

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Frequently asked questions

Q: Does severance apply to probationers? If the probationer has completed less than 6 months of service, no severance is payable under the schedule. However, notice pay may still apply depending on the contract.

Q: What if the employee was on a fixed-term contract that expired? Genuine expiry of a fixed-term contract does not trigger severance. But courts have re-classified back-to-back renewals as continuous employment — so if you have 3+ successive 1-year contracts, severance risk exists.

Q: Can we pay severance in installments? Myanmar best practice is lump-sum at final settlement. Installment payment is possible by mutual agreement, documented in writing.

Q: What if the business is closing and cannot afford full severance? This is a complex area requiring labor lawyer involvement. Possible approaches: partial severance + payment plan, labor dispute arbitration, or formal insolvency. Do not simply close without addressing severance.

Next steps

Sources

• Myanmar Ministry of Labour Notification 84/2015 — summary via Tilleke & Gibbinstilleke.com
• Lexology — Termination and severance in Myanmarlexology.com
• DFDL Myanmar — Employment Law Updatesdfdl.com
• ILO NATLEX — Myanmar Employment and Skill Development Law 2013natlex.ilo.org