Malaysia Severance Pay Calculator

Frequently Asked Questions

• How is the Malaysian statutory minimum calculated here?+
  First the tool checks that the Regulations apply to you and that something is owed. If so, a day’s wages is twelve times your average monthly wages over the last twelve months, divided by 365, the formula the Department of Labour gives for the Regulations. That is multiplied by 10, 15 or 20 days and by your years of service, with an incomplete year pro-rated to the nearest month, so six years’ service is 120 days’ wages. If the Regulations do not apply, the tool says so instead of showing a figure.
• Am I covered if I earn more than RM4,000 a month?+
  Usually not, since 1 January 2023. Paragraph 1A of the Employment Act’s First Schedule, inserted by P.U.(A) 262/2022 and brought into force on that date by P.U.(A) 273/2022, disapplies section 60J, the termination-benefit provision, to a person whose wages exceed RM4,000 a month. For this test, wages leave out overtime, commission and subsistence allowance. The exceptions, covered at any wage, are manual labour for more than half of working time, operating or maintaining a commercial vehicle, supervising manual workers, and certain crew on Malaysian-registered vessels. Domestic employees are outside the termination-benefit Part altogether.
• What counts as wages for the day’s wage?+
  The Regulations use the Act’s section 2(1) definition: basic wages and all other cash payments for work done. That includes overtime, commission and most allowances. It leaves out housing, food, utilities and medical benefits, the employer’s provident-fund contributions, travelling allowance, special expenses, gratuity on discharge or retirement, and annual bonus. Enter the average of that total over the last twelve months.
• Why not monthly salary ÷ 26?+
  Because ÷ 26 is the Act’s ordinary rate of pay for a monthly-rated employee (section 60I), which serves other parts of the Act. Regulation 6(2) instead asks for the average true day’s wages over the twelve completed months before the relevant date. For a flat salary, ÷ 26 comes out about 17% above the twelve-month average. When overtime, commission or allowances add more than about 17% to basic pay, ÷ 26 on basic pay comes out below it. It is a different figure either way, so the Malaysia preset does not use it.
• How do the two-year and five-year tiers work?+
  The rate is set by total service and then applies to every year, not only the years past the boundary: under two years earns 10 days a year, two years or more but under five earns 15, five years or more earns 20. So 4 years 11 months is 73.75 days’ wages and 5 years is 100. The Regulations pro-rate an incomplete year to the nearest month but do not say whether that rounding also decides the rate, so the tool reads the rate from the whole years you have actually completed: a day short of the second anniversary stays at 10 days.
• Which dates should I enter?+
  The date your employment with this employer began, and the relevant date, which the Regulations define as the date with effect from which the contract is terminated. The tool counts a year as complete on its anniversary. Whether your relevant date is your last working day or the day after can move you across an anniversary, so check a close case with the Department of Labour.
• Does it apply in Sabah and Sarawak?+
  No. Section 1(2) of the Employment Act 1955 applies it to Peninsular Malaysia, and an order of 2000 (P.U.(A) 400/2000) extends it to Labuan. The Department of Labour Peninsular Malaysia states that Sabah and Sarawak remain under the Labour Ordinance (Sabah) Cap. 67 and the Labour Ordinance (Sarawak) Cap. 76. Choose Sabah or Sarawak and the tool tells you it does not compute those rules.
• When is nothing owed?+
  Under the Regulations, among other cases: with a continuous contract of less than twelve months; on retirement at an age the contract stipulates; on dismissal for misconduct after due inquiry; on voluntary resignation, unless you resigned under section 13(2) (the employer’s wilful breach of contract) or section 14(3) (an immediate threat of violence or disease); where your contract is renewed or you are re-engaged on terms not less favourable, or you unreasonably refused such an offer; where you leave before the employer’s notice expires without consent or payment; and where a new owner of the business offers to keep you on terms not less favourable and you unreasonably refuse. Out-workers are excluded entirely.
• Is notice pay included?+
  No. Regulation 6(4) makes the benefit additional to any payment in lieu of notice under section 13 of the Act. The employer must pay the benefit no later than seven days after the relevant date (regulation 11) and give a written statement of the amount and how it was calculated (regulation 12).
• What do the fixed and custom bases do?+
  They model a contract, company policy or collective agreement: monthly salary ÷ 26 × the days per year you choose × your years of service. They apply no coverage or eligibility test and are not the Malaysian statutory minimum. Use your own contract’s formula where it states one.
• Is this legal or financial advice?+
  No. It is an estimate of the statutory minimum from the figures you enter. Your contract may give more, and whether you are owed anything depends on facts the tool cannot check. For a dispute, contact the Department of Labour or a qualified adviser.