Your pay and service
The Regulations set a minimum. If your contract or collective agreement gives more, that applies.
Next: leave due when you leave and your notice period.
How the benefit is calculated
Days' wages for each year of service, at a rate set by your total length of service.
| Total service with the employer | Days' wages for each year |
|---|---|
| Less than 2 years | 10 |
| 2 to less than 5 years | 15 |
| 5 years or more | 20 |
Source: Employment (Termination and Lay-Off Benefits) Regulations 1980, regulation 6.
- A day's wages: for a monthly-paid employee, monthly wages ÷ 26, the ordinary rate of pay in the Employment Act.
- Part years: an incomplete year is pro-rated to the nearest month.
- Who is covered: employees with at least 12 months of continuous service, earning RM4,000 a month or less, or doing manual or other listed work, regardless of pay.
- Not owed: on resignation, dismissal for misconduct, retirement under the contract, or when you refuse an offer of renewal on terms no less favourable.
Minimum benefit at common salaries
| Monthly wages | Years of service | Rate | Minimum benefit |
|---|---|---|---|
| RM2,000 | 1.5 | 10 days a year | RM1,154 |
| RM1,700 | 4 | 15 days a year | RM3,923 |
| RM3,000 | 3 | 15 days a year | RM5,192 |
| RM3,000 | 6 | 20 days a year | RM13,846 |
| RM4,000 | 10 | 20 days a year | RM30,769 |
Foundific calculations under regulation 6 of the 1980 Regulations, with a day's wages of monthly wages ÷ 26.
What else to expect
- Notice: you are still owed notice, or wages in lieu of it, under your contract or section 12.
- Report to JTKSM: employers must report retrenchments to the Labour Department, normally at least 30 days before the date.
- EIS: if you contributed to the Employment Insurance System, you may claim job search allowance and training from PERKESO after losing your job.
- Leave: leave due for your final months is set out in the annual leave calculator.
Common questions
How much retrenchment benefit will I get in Malaysia?
At least 10 days' wages for each year of service if you worked under 2 years, 15 days from 2 to under 5 years, and 20 days from 5 years, with part years pro-rated to the nearest month.
I earn more than RM4,000. Am I covered?
The Regulations cover employees earning RM4,000 a month or less, and manual workers at any pay. Above that, the benefit depends on your contract, any collective agreement, and what the employer offers.
When must it be paid?
JTKSM states that termination benefits are due within seven days of the termination.
Is the termination benefit taxable?
Compensation for loss of employment has a tax exemption of RM20,000 for each completed year of service, under paragraph 15, Schedule 6 of the Income Tax Act 1967.
Sources
The 1980 Regulations and JTKSM
- Employment (Termination and Lay-Off Benefits) Regulations 1980, JTKSM copy. Copy kept in data/my/employment-act/raw. Checked 21 October 2026.
- JTKSM, Employees' retrenchment: frequently asked questions.
- Employment Act 1955, First Schedule: the RM4,000 wage limit for these provisions.