If the “we regret to inform you” email ever hits your inbox, don’t panic but do get informed.
Severance pay exists to soften the blow, and knowing how to calculate it could save you from stress while job-hunting.
Whether you’re going through a layoff or just preparing for what-ifs, here’s a breakdown of how severance pay works in Malaysia, including how to calculate it and what types of compensation you might be entitled to.
First off, what even is severance pay?
Severance pay is essentially a payout companies give when they let someone go, not because you slacked off or broke any rules, but usually because of restructuring, downsizing, or budget issues.
It’s meant to act like a financial cushion so you’re not totally stranded while looking for your next job.
Okay… but how do you know how much you’ll get?
Good question. This is where things get a bit math-y, but don’t worry, we’ll walk through it together. How much you receive depends mainly on three things:
- How long you’ve worked there
- Your monthly salary
- How your company calculates working days
Once you know that, the rest is just plugging numbers in.
Let’s talk about your length of service
This is a big one. In Malaysia, the law generally gives you more compensation the longer you’ve been with the company. Here’s how it works:
- Less than 2 years = 10 days’ salary per year
- 2 to 5 years = 15 days’ salary per year
- More than 5 years = 20 days’ salary per year
Think of it like a loyalty bonus, but for getting laid off.
Let’s walk through a real example
To make it clearer, imagine this. You’ve worked for 6 years as an IT manager. Your monthly salary is RM5,000, and your company calculates wages based on 27 working days a month.
- Since you’ve worked more than 5 years, you qualify for 20 days per year
- 6 years × 20 days = 120 days
- Daily wage = RM5,000 ÷ 27 ≈ RM185.19
- Your severance = 120 × RM185.19 = RM22,222.22
Not bad, right? Definitely helps cover your bills while you job-hunt.
Feeling lazy to calculate? There’s a tool for that
If math gives you a headache, there’s good news. Malaysia’s Ministry of Human Resources (MOHR) has a severance pay calculator online.
All you need to do is:
- Input your start and end dates
- Enter your total salary from the past 12 months (this includes commissions, OT, and allowances)
Click “Kira” and it’ll generate an estimate for you. Super easy.
This is just a rough estimate though. It’s not something you can use for legal claims. Always double-check with your HR or seek advice if you’re unsure.
So, what else might show up in your final payout?
Aside from basic severance, there are a few other types of compensation you could receive when you’re let go. These can make a big difference.
Let’s break them down:
1. Severance pay
The main one, based on how long you’ve been with the company.
Not subject to EPF, SOCSO, or EIS.
2. Gratuity
Some companies give this as a token of appreciation, especially for long-term staff.
Also not deducted for EPF, SOCSO, or EIS.
3. Payment in lieu of notice
If they didn’t give you proper notice before asking you to leave, they’ll usually pay you for that period.
No deductions here either.
4. Unused leave
If you’ve got annual leave that you didn’t take, they owe you that in cash.
Sick leave isn’t included.
This one does come with EPF, SOCSO, and EIS deductions.
What about your medical and insurance?
This is something people often forget to ask. Some companies might still cover your healthcare benefits for a while after you’re let go. That includes medical, dental, or vision insurance.
It’s not a guarantee, but if you’re unsure, just ask your HR before your last day.
TL;DR: Know your rights before you go broke
Getting laid off sucks. But not knowing what you’re entitled to? That’s worse. Whether you’re currently jobless or just planning ahead, it’s worth knowing how severance pay works in Malaysia.
And if the dreaded “we regret to inform you” email ever lands in your inbox, at least now you won’t panic. You’ll calculate.
