Severance: only for economic dismissals and unfair dismissal

By Equipo Saplic Published on 11/08/2026 Updated on 11/08/2026

It is not a general leaving payment. The Employment Act is explicit about the limited circumstances that trigger it.

In this guide
  1. When it is owed
  2. When it is not owed
  3. The one-year qualifying period
  4. How it is calculated
  5. The pension rule that catches people out
  6. Gratuity if you are exempt from pension
  7. Payment deadlines

This is the most misunderstood entitlement in Malawian employment law. Severance allowance is not owed every time someone leaves a job.

When it is owed

The Employment Act provides that severance allowance is payable on termination resulting from:

  • Redundancy or retrenchment
  • Economic difficulties
  • The employer's technical, structural or operational requirements
  • Unfair dismissal by the employer

The Act says these circumstances and not any other. That wording is deliberate and narrow.

When it is not owed

If you resign, or if you are summarily dismissed for serious misconduct, severance does not arise.

The one-year qualifying period

You must have completed one year of service to be entitled to severance allowance.

How it is calculated

The scale increases with length of service:

  • 1 to 5 years: two weeks' wages for each year of employment
  • 6 to 10 years: three weeks' wages for each year
  • 11 years and above: four weeks' wages for each year

So someone with four years of service and a monthly wage of K100,000 would receive roughly half a month's wage for each of those four years.

The pension rule that catches people out

Here is the point most people do not know: pension replaced severance compensation.

If you are on a pension scheme, no severance payment is due — the law avoids double payment.

So before assuming you are owed severance, check whether you are enrolled in a pension scheme. That single fact decides the answer.

Gratuity if you are exempt from pension

Where an employer has been exempted from providing pension benefits, the Act requires gratuity instead, payable on retirement, termination or death after a three-month qualifying period.

The gratuity is 5% of monthly salary for each completed month of service — which works out to roughly 60% of the final monthly salary for each completed year.

Payment deadlines

Section 53 requires wages and other remuneration due on termination to be paid within seven days. Pension benefits must be paid within six weeks.

Frequently asked questions

When is severance allowance owed in Malawi?
Only on redundancy, retrenchment, economic difficulties, the employer’s technical, structural or operational requirements, or unfair dismissal. The Act says these circumstances and not any other.
How is severance calculated?
Two weeks’ wages per year for 1 to 5 years of service, three weeks per year for 6 to 10 years, and four weeks per year from 11 years upward.
Do I get severance if I am on a pension scheme?
No. Pension replaced severance compensation, so no severance is due if you are on pension — the law avoids double payment.
What is gratuity and when does it apply?
Where the employer is exempt from providing pension, gratuity is payable instead after three months of service: 5% of monthly salary for each completed month, about 60% of final monthly salary per year.
How quickly must I be paid after termination?
Section 53 requires wages and other remuneration within seven days. Pension benefits must be paid within six weeks.

Sources

Put this into practice

Create your free profile and apply to the active openings in Malawi.

Continue with Google I would rather sign up with my email

It is free and we never ask for a card.