How to Guide: Calculating Termination Benefits
Learn how to calculate termination benefits under Malaysian employment law using Regulation 6. Includes formulas, eligibility rules, and real-life examples.
Regulations 6 of the Employment (Termination & Lay-Off Benefits) Regulations 1980 provides the minimum quantum of compensation required for termination of employment in Malaysia. This section is applicable to all forms of termination except for the following 3 circumstances:
Where the employee has resigned from employment voluntarily
The employee is retired
The employee is terminated on grounds of misconduct after due inquiry
The minimum quantum for payment is based on an employee’s length of service:
Years of service | Quantum |
Less than 1 year | No compensation required |
>1 year but less 2 years | 10 days for every completed year |
>2 years but less than 5 years | 15 days for every completed year |
5 or more years | 20 days for every completed year |
Here are some examples:
Example 1:
Mr. Smith was retrenched after 5 years and 3 months of service. His salary is fixed at RM3800 per month.
5 years 3 months = 5.25 years
Average true days wages = 3800 x 12 / 365 = 124.93 (per day)
Termination benefits = 5.25 years x 124.93 x 20 days
Mr. Smith will be entitled to RM13,117.65
Example 2:
Ms. Rose was terminated on medical grounds after serving the Company for 22 years and 8 months. Her salary is RM2600 per month.
22 years 8 months = 22.66 years
Average true days wages = 2600 x 12 / 365 = 85.47
Termination benefits = 22.66 years x 85.47 x 20 days
Ms. Rose will be entitled to RM38,735.00
