General Rules on Severance Payment in Myanmar

Under Notification No. 84/2017 issued by the Ministry of Labour, employees in Myanmar are entitled to severance payment if their employment is terminated by the employer for reasons unrelated to gross misconduct, such as redundancy, downsizing, or restructuring.

Severance payment is not required in cases of:

• Voluntary resignation by the employee, or
• Termination due to gross misconduct by the employee.

The amount of severance is based on the employee’s length of continuous service with the employer, as detailed in the table below.

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Background of the Case Study

A foreign-owned business consulting company operating in Myanmar employed a foreign national as a consultant under a permanent employment agreement. The contract was signed on 1 August 2018, and the consultant commenced work on 1 September 2018.

By March 2020, the company's management observed a significant decline in business activity and workload. As a result, the firm decided to implement a reduction in workforce and planned to terminate certain employees due to redundancy.

The employer intended to notify the consultant of the termination of his employment on 1 April 2020. At the time, the consultant was earning a monthly salary of USD 3,000.

Questions from the Employer

1. Is the employee eligible for severance payment? If so, how much should it be?
2. What requirements must the employer comply with in relation to the termination of the employee?

Grounds for Termination

Under Myanmar law, an employer may terminate an employee for reasons other than gross misconduct, such as redundancy or business restructuring, provided that:

• Sufficient notice is given; and
• Severance payment is made as required under Notification No. 84/2017.

In this case, since the employee did not engage in gross misconduct, the employer may lawfully proceed with termination. However, the employer must ensure that the employee receives both appropriate notice and the required severance payment in compliance with Myanmar labour regulations.

Notice Period

As previously noted, when terminating an employee, the employer is required to provide sufficient notice in accordance with the terms of the employment contract.

According to Clause 15(b)(3) of the Standard Employment Contract, an employer must give at least one month’s written notice prior to termination.

In this case, the consulting firm intended to notify the consultant of the termination on 1 April 2020. Therefore, in compliance with the notice requirement, the consultant’s last working day should have been 30 April 2020. Alternatively, if the employer wished for the consultant to cease work immediately, a payment in lieu of notice equivalent to one month’s salary would be required.

Calculation of Severance Payment

As previously noted, if the termination notice was issued to the employee on 1 April 2020, the required one-month notice period would extend the employment through 30 April 2020.

While it is permissible under Myanmar law for an employer to relieve an employee of their duties during the notice period, the notice period must nonetheless be included in the total length of service when calculating severance entitlements. Moreover, where the employee is not required to work during the notice period, the employer is obligated to make a payment in lieu of notice equivalent to one month’s salary.

Employment Duration

• Commencement Date: 1 September 2018
• Effective Termination Date: 30 April 2020
• Total Duration of Service: 1 year and 8 months (inclusive of the notice period)

Entitlements Payable to the Employee

In accordance with Notification No. 84/2017:

• The employee is entitled to severance pay equivalent to one month’s salary, as the period of service exceeded one year but was less than two years.
• As the employer elected not to require the employee to work during the notice period, a payment in lieu of notice equivalent to one month’s salary is also payable.

Summary of Payments

• Severance Payment: USD 3,000
• Payment in Lieu of Notice: USD 3,000
• Total Amount Payable: USD 6,000

This amount represents the employee’s full legal entitlement arising from the termination, assuming no other contractual benefits or accrued entitlements (e.g., unused leave) remain outstanding.

How We Can Assist

We provide comprehensive legal and advisory services to both employers and employees in connection with employment termination and severance matters under Myanmar law. Our team is equipped to advise on regulatory compliance, contractual obligations, and dispute mitigation in line with local legal standards and best practices.

For Employers

We assist employers in ensuring lawful, compliant, and risk-managed terminations through the following services:

• Review and Drafting of Employment Agreements, with tailored provisions addressing termination, notice periods, severance obligations, and post-employment restrictions.
• Legal Advisory on Termination Procedures, including analysis of grounds for termination, statutory requirements, and calculation of severance and other final entitlements.
• Preparation of Termination Documentation, such as termination notices, mutual separation agreements, and payment acknowledgments.
• Compliance with Regulatory Filings, including support with required submissions to the relevant township labour office and coordination of official translations.
• Risk Management and Dispute Avoidance, offering guidance on handling employee grievances and minimising legal exposure.
• HR Training and Internal Policy Development, ensuring management teams are equipped to handle employment matters in accordance with Myanmar law.

For Employees

We also support individual employees in understanding and asserting their rights upon termination. Our services include:

• Review of Employment Contracts and Termination Letters to assess legal compliance and determine eligibility for severance and other benefits.
• Calculation of Entitlements, including severance pay, notice period compensation, unused leave, and other contractual benefits.
• Advisory on Dispute Resolution Options, including informal negotiation, mediation, and formal complaint processes through the Department of Labour.
• Representation in Legal Proceedings, should a dispute arise regarding wrongful termination or non-payment of entitlements.
• Assistance with Settlement Agreements, ensuring the employee’s rights are protected during any negotiated exit.

Our aim is to ensure that both employers and employees are fully informed of their legal rights and obligations, and that the termination process, when necessary, is carried out lawfully, fairly, and with minimal risk of dispute.