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Terminal Benefits Calculator Severance Pay Calculator
Calculate severance pay and termination benefits based on the Employment Act. Accurate calculations for 15 days salary per year of service.
Employment Details
Results Summary
Final Benefits Amount
K0
Total severance pay based on years of service
Calculation Details
| Benefit Type | - |
| Monthly Basic Salary | K0.00 |
| Years of Service | 0 |
| Terminal Benefits | K0.00 |
Terminal Benefits Legal Framework (Employment Code Act, Sections 52-59)
Governing Laws
Employment Code Act, 2019 → Sections 52-59 (termination entitlements: notice, severance, redundancy, gratuity, leave)
Income Tax Act (Cap 323) → Section 21 (tax treatment of gratuities, leave pay, and compensation for loss of office)
Key Principle: Different terminal benefits have different tax treatments. Redundancy pay enjoys a K2,000,000 tax exemption.
Types of Terminal Benefits
1. Notice Pay (Employment Code Act s.53)
- Purpose: Compensation when employer/employee does not serve required notice
- Amount: Equivalent to salary for statutory notice period (1 week to 3 months based on service)
- Taxable: ✅ Yes, treated as normal emoluments subject to PAYE, NAPSA, NHIMA
2. Severance Pay (Employment Code Act s.54)
For fixed-term contracts and certain terminations:
- Rate:
- Minimum 25% of basic pay earned during contract period, OR
- 2 months basic pay per year for medical discharge/death
- Taxable: ✅ Yes, subject to PAYE, NAPSA, NHIMA (not covered by any exemption in Income Tax Act)
3. Redundancy Pay (Employment Code Act s.55; Income Tax Act s.21(5))
- Rate: At least 2 months basic pay per completed year of service
- Basis: Basic salary only, not gross
- Taxable: ⚠️ Partially exempt - First K2,000,000 is tax-free, balance taxed at normal PAYE rates
- Condition: Position must be genuinely redundant
4. Leave Pay (Employment Code Act s.36-37; Income Tax Act s.21(2))
- Entitlement: All accrued but unused annual leave must be paid out
- Formula: (Full monthly pay × Accrued leave days) ÷ 26
- Taxable: ✅ Yes, fully taxable under PAYE (employee may elect to spread across period it relates to)
- Payment: Must be paid on last working day
5. Gratuity (Employment Code Act s.73; Income Tax Act s.21(1))
- Rate: At least 25% of basic pay earned during contract (for contracts ≥ 2 years)
- Eligibility: Fixed-term and long-term contracts
- Taxable: ✅ Yes, fully taxable as emoluments at PAYE rates
6. Payment Timeline (Section 66)
Legal Requirement: All terminal benefits must be paid on the last working day. Late payment may result in legal action by the employee.
7. Download Official Legislation
Access the complete Employment Code Act for detailed legal requirements:
Employment Code Act No. 3 of 2019 (PDF)
Official government legislation - Sections 52-59 cover terminal benefits
Types of Terminal Benefits
- Severance Pay: Minimum 15 days pay per year of service
- Gratuity: 25% of basic salary for permanent employees
- Redundancy: Minimum 2 months pay per year served
- Leave Pay: Payment for unused annual leave
- Medical Termination: Tax-exempt lump sum payment
Terminal Benefits - Frequently Asked Questions
You are entitled to terminal benefits when your employment ends due to redundancy, retirement, medical grounds, death, or completion of a fixed-term contract. The type and amount of benefits depend on the reason for termination.
Severance pay is 25% of basic pay for fixed-term contracts or 2 months per year for medical/death cases. Redundancy pay is specifically for position elimination and is calculated at 2 months basic pay per year of service. Redundancy pay is also tax-exempt, while severance pay is taxable.
It depends on the type: Redundancy packages are tax-exempt. However, severance pay, notice pay, leave pay, and gratuity are all subject to PAYE tax. Medical termination benefits may also be tax-exempt in certain cases.
According to Section 66 of the Employment Code Act, all terminal benefits must be paid on your last working day. Failure to pay on time is a violation of the law and you can take legal action against your employer.
If you resign voluntarily, you are still entitled to payment for unused leave days. However, you are not entitled to severance pay or redundancy pay. You may be entitled to gratuity if you're on a fixed-term contract that includes gratuity provisions.
Leave pay is calculated as: (Full Monthly Pay × Unused Leave Days) ÷ 26. This includes all accrued but unused annual leave. The payment is taxable and must be paid on your last working day along with other terminal benefits.