General Rules on Severance Payment in Myanmar

Under Notification No. 84/2017 of the Ministry of Labour, if an employment contract is terminated by an employer for reasons not related to an employee’s gross misconduct (e.g. redundancy) the employee will be entitled to severance payment set out in the table below:

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Severance payment in case of an employee’s dismissal or resignation is not required.

Background of the Case Study

A foreign-owned company providing business consulting services in Myanmar employed a foreign individual as a consultant. The permanent employment agreement between the employer and the employee was signed on 1 August 2018 with the consultant's first day of work on 1 September 2018. By the beginning of March 2020, the management of the consulting firm had noticed that the amount of work was declining. Consequently, the firm has decided to let some employees go. The employer intended to notify the concerned consultant about his termination on 1 April 2020. The employee’s monthly salary was USD 3,000.

Questions from the Employer

• Is the Employee eligible for severance payment? If so, how much should it be?
• What requirements with respect to termination of the employee does the employer need to comply with?

Grounds for Termination

It appears that under Myanmar law an employer can terminate an employee for reasons other than gross misconduct, if sufficient notice is given and severance payment is paid.

In this case, the employee has not committed gross misconduct, therefore, the employer could proceed with termination but must have given sufficient notice and pay an appropriate severance payment.

Notice Period

As discussed, upon termination the employer needs to give sufficient notice to the employee. In principle, in case of termination, an employer needs to give at least one-month notice to an employee (Clause 15 (b) (3) of the Standard Employment Contract). Therefore, in this case, the consulting firm should have notified the consultant on 1 April 2020 stating that his last day of employment would be on 30 April 2020.

Calculation of Severance Payment

As mentioned above, if a termination notice is provided to the employee on 1 April 2020, a one-month notice period would need to be observed with the employee’s last day of employment on 30 April 2020. In practice, an employee in Myanmar may be required by an employer not to work during a notice period. Such a notice period, however, needs to be included in the total duration of employment when calculating a severance payment. In addition, a payment in lieu of notice needs to be paid.

The employee worked for the employer from 1 September 2018 until 30 April 2020 (a notice period was included in the total duration of employment). In other words, the employee’s employment lasted for one year and eight months. Under Notification No. 84/2017, if an employee worked at least one year, but less than two years, they are entitled to a severance payment equal to one-month salary. Therefore, the employee should have been paid a severance payment equal to his one-month salary or USD 3,000. In addition, the consulting firm had to pay the former employee a payment in lieu of notice because it wished him to leave immediately upon notice on 1 April 2020. Because a notice period is one month, a one-month salary or USD 3,000 should have been paid in addition to a severance payment. Therefore, the total payment to the employee including his severance payment and payment in lieu ofnotice was USD 6,000.