In Peninsular Malaysia and Labuan the statutory minimum for severance pay, called the termination benefit, is set by the Employment (Termination and Lay-Off Benefits) Regulations 1980 as a number of days' wages for each year of service. The number per year rises with total service, and the higher number then counts for every year worked. So the month that completes five years' service lifts the statutory minimum from 73.75 to 100 days' wages, by our arithmetic, a rise of more than a third. The Regulations, the source of what is commonly called severance pay or faedah penamatan, apply in Peninsular Malaysia and Labuan only. Sabah and Sarawak have their own Labour Ordinances, reportedly amended in 2025, which we could not open. The Regulations require at least 10, 15 or 20 days' wages for every year of service once an employee has twelve months' continuous service and the contract ends for most reasons other than resigning, dismissal for misconduct after due inquiry, or a contractual retirement age. A day's wages is a twelve-month average. Where wages, leaving out overtime and commission, are more than RM4,000 a month, the Regulations set no minimum unless the work is manual or another listed kind.
A resignation still qualifies under section 13(2) or 14(3) of the Employment Act (the employer's wilful breach, or an immediate threat of violence or disease to the employee or their dependants). The Regulations also exclude out-workers and, among other cases, renewal or re-engagement on terms no less favourable. Periods of service with gaps totalling thirty days or less add up for the twelve months. The Regulations' definition of a "lay-off" is narrower than the common meaning, requiring no work and no pay on at least twelve normal working days in four consecutive weeks.
The sixtieth month of service puts every earlier year on the top rate
Some guides apply the rates band by band, and one payroll firm's 2026 guide calls applying the highest rate to the whole service "legally incorrect". But Regulation 6(1) specifies ten days' wages "for every year of employment" where service is under two years, fifteen from two to under five, and twenty from five. The Department of Labour's formula and calculator agree.
| Service | Days a year | Days' wages |
|---|---|---|
| 1 year 11 months | 10 | 19.17 |
| 2 years | 15 | 30.00 |
| 4 years 11 months | 15 | 73.75 |
| 5 years | 20 | 100.00 |
On our arithmetic an ordinary month between the two- and five-year marks adds 1.25 days' wages. Completing the fifth year adds 26.25 at once, as much as 21 of those months, or about 0.86 of a month's pay; completing the second adds 10.83, thirteen times an ordinary month before it. Regulation 6(1) pro-rates an incomplete year "to nearest month" and does not say whether that rounding also decides the rate. At twenty years Malaysia's scale reaches 400 days' wages, the top band of Thailand's severance law, and keeps rising.
Twelve months of pay set a day's wages, overtime and commission included
Regulation 6(2) makes a day's wages the "average true day's wages" over the twelve completed months before the relevant date, the day the contract ends. Wages carry the meaning in section 2(1) of the Employment Act 1955, basic pay and "all other payments in cash" for work done, so overtime and commission count but housing, travelling allowance and annual bonus do not. The Department of Labour Peninsular Malaysia (JTKSM, Jabatan Tenaga Kerja Semenanjung Malaysia) gives "the formula set under" the Regulations in its retrenchment FAQ as twelve months' salary divided by 365. The 365 is JTKSM's presentation; the Regulation itself says only "average".
Ranking explainers divide by 26, 30 or 365; the 26 is from section 60I(1A), the monthly-rated ordinary rate of pay used for overtime, examined in our minimum wage guide. By our arithmetic, for a flat salary it gives a day's wage 17.0% above the twelve-month average. Where overtime, commission and allowances lift average wages by more than about 17% over basic pay, the divide-by-26 figure falls below the average instead.
Until 8 October 2026 our severance pay calculator divided monthly salary by 26 under its Malaysia preset and printed an amount at any salary and any length of service. The revision made that day divides twelve months' average wages by 365, as JTKSM does, and says when the Regulations set nothing. It reads the rate from whole years completed, an assumption it states on the page.
Monthly wages above RM4,000 leave most jobs outside the Regulations
Since 1 January 2023, paragraph 1A of the First Schedule disapplies section 60J, the Regulations' parent provision, to a person "whose wages exceeds four thousand ringgit a month", so exactly RM4,000 is inside. Paragraph 2 keeps four groups in at any wage: those doing manual labour for more than half their working time, those operating or maintaining commercial vehicles, supervisors of manual workers and listed ship's crew. Domestic employees are outside the benefit at any wage. For this test the Schedule leaves out overtime and commission, so an employee can be covered on basic pay while the day's wage still counts overtime. The threshold came from P.U.(A) 262/2022, a federal gazette order; before it, the Schedule's wage figure had been RM2,000 since 1 April 2012, under P.U.(A) 88/2012. The rest of the Schedule is in an earlier guide.
Leap days settle the tier on the Labour Department's calculator
JTKSM's calculator for monthly-salaried employees subtracts the start date from the last date of service, divides the days by 365 and applies the rate with no rounding to the month. The subtraction leaves out the last day, so a last date on the anniversary always reaches the next rate, and one a day earlier reaches it only when a 29 February falls inside the span. We ran a copy of its logic on all 7,665 start dates from 2000 to 2020, 29 February aside.
| Anniversary | Rate, last date on it | Rate, last date a day before |
|---|---|---|
| First | 10 days, all | Nil, 75.4% |
| Second | 15 days, all | 10 days, 51.6% |
| Fifth | 20 days, all | 20 days, all |
The fifth row never splits: every five-year span in that sweep holds a 29 February. The calculator leaves the choice of last date to the user. The page calls its result "pengiraan anggaran sahaja", an estimated calculation only.
Weeks of pay in lieu of notice come on top of the benefit
Regulation 6(4) makes the benefit "in addition to" any payment under section 13 of the Act, pay in lieu of notice. Where the contract is silent, section 12(2) sets four weeks' notice under two years' service, rising at the same two anniversaries and measured when notice is given. Regulation 11 requires payment within seven days of the relevant date, and regulation 12 a written statement of how it was calculated. We did not research how the payment is taxed.
Years of service in Singapore earn what the contract sets, guided by a norm MOM publishes
Singapore's Ministry of Manpower (MOM) says on its retrenchment page, last updated 14 July 2026, that employees with at least two years' service "are eligible for retrenchment benefit", with the amount left to contract, collective agreement or negotiation. An MOM answer begins "While retrenchment benefit is not mandated by law". The prevailing norm, the page says, is "between 2 weeks to 1 month salary per year of service", and in unionised companies whose agreement states the amount, "the norm is 1 month's salary for each year of service".
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