Severance Pay


Severance Pay

By: Magna Carta Law Office


In addition to any other kind of money agreed by the employer to pay to the employee, Severance Pay is the compensation that an employer provides to an employee who has been laid off or terminated, whose job has been eliminated, who through mutual agreement has decided to leave the company, or who has parted ways with the company because the company can no longer operate its business or for other reasons.


When there is termination without cause, it is compulsory that the employer give a written notice and make severance payment to the employee according to the length of uninterrupted service, as follows:

Period of Employment Rate of Severance Pay

120 days or more but less than 1 year 30 days

1 year but less than 3 years 90 days

3 years but less than 6 years 180 days

6 years but less than 10 years 240 days

10 years up 300 days


This shall not apply to an employee whose employment is contractual or for a definite period and the employment is terminated at the end of that period. Employment for a definite period is allowed for employment in a specific project which is not the normal business or trade of the employer and requires a definite date to commence and end the work, or for work which is occasional with a definite ending or completion, or for work which is seasonal and the employment is made during the season. Such work shall be completed within a period not exceeding two years and the employer shall make a written contract with the employee at the beginning of the employment.


According to the Labour Protection Act, an employer may not pay severance pay to an employee when employment is terminated upon any of the following conditions:

  1. The employee is performing his/her duties dishonestly and/or intentionally committing a criminal offence against the employer;

  2. The employee is wilfully causing damage to the employer;

  3. The employee is committing negligent acts causing serious damage to the employer;

  4. The employee is violating work rule, regulations, or lawful and just order of the employer after written warning has been issued by the employer, except for a serious case with no requirement for the employer to give warning;

  5. The employee has not reported for work for three consecutive working days without justifiable reason regardless of whether there is a holiday in between;

  6. The employee is being sentenced to imprisonment by a final court judgment.



If the employee is required to leave his/her job immediately, the employer will be required to pay compensation in lieu of an advance notice equivalent to the employee’s wage to be paid until the effective date of the notice.  However, this shall not apply to employees being terminated with cause.


If an employee feels that he/she has been wrongfully dismissed and thinks that the employer violates with the employee’s compensation entitlement; the employee has the right to file a complaint to the Labour Office.