How is termination compensation calculated in Sri Lanka?

The Commissioner of Labour awards a set number of months of salary per completed year of service, on a declining scale: 2.5 months for each of years 1–5, 2.0 for years 6–14, 1.5 for years 15–19, 1.0 for years 20–24, and 0.5 for years 25–34. Multiply the total months by your last-drawn monthly salary, then apply the caps.

What is the maximum compensation the Commissioner of Labour can award?

Two ceilings apply. The formula itself tops out at 48 months of salary (reached at 34 years of service). Separately, the total award is capped at Rs 2,500,000, raised by Cabinet from the earlier Rs 1,250,000. Whichever ceiling gives the lower figure governs the payout.

Is termination compensation different from gratuity in Sri Lanka?

Yes. Gratuity under the Payment of Gratuity Act is half a month's salary per year of service, payable on leaving after five years at a workplace with 15+ employees. Termination compensation under the TEWA is a separate, larger award for non-disciplinary dismissal or retrenchment. You can be entitled to both. They are not alternatives.

Who is covered by the Termination of Employment of Workmen Act?

The Act protects workmen in the private sector at establishments that have employed 15 or more workers over the previous six months, once the worker has completed at least 180 days in the year before termination. Government employees, and very small establishments below the worker threshold, fall outside its scope.

Can my employer fire me without paying compensation in Sri Lanka?

For a covered workman, non-disciplinary termination (retrenchment, redundancy, closure) generally requires either the worker's written consent or the prior written approval of the Commissioner of Labour, who fixes compensation. Dismissal for genuine, proven misconduct after due process is a different regime and may carry no statutory compensation.

What salary figure should I enter?

Use your last-drawn total monthly remuneration, the gross monthly pay in force at the time of termination. The Commissioner applies the formula to this figure. Allowances that form part of regular monthly wages are usually included; one-off bonuses are not. If your pay structure is complex, confirm the reckonable figure with the Department of Labour.

Does the partial-year month count matter?

Yes. Months beyond your last full year are pro-rated at the rate of the band your next year of service would fall into. For example, at 7 years and 6 months, the 6 extra months are pro-rated at the 6–14 band rate of 2.0 months/year, adding 0.5 × 2.0 = 1.0 month to the total.

Is this calculator legal advice?

No. It computes the standard gazette formula the Commissioner applies and is meant for planning and sanity-checking a settlement offer. The Commissioner has case-by-case discretion, and disciplinary dismissals and out-of-scope establishments are treated differently. For a binding position, consult the Department of Labour or a labour lawyer.

Sri Lanka · Finance

Sri Lanka Termination Compensation Calculator (TEWA)

Work out the statutory compensation owed for a non-disciplinary termination under the Commissioner of Labour's formula. Enter your salary and length of service to see the months earned, the band-by-band breakdown, and the final amount after the 48-month and Rs 2,500,000 caps.

By Induwara Ashinsana· Co-Founder, Ryzera TechnologiesUpdated Jul 16, 2026

Termination compensationTEWA formula

Dept. of Labour formula

Last-drawn monthly salary (Rs)

Your total gross monthly remuneration at the time of termination.

Completed years of service

Full years worked (1–45).

Additional months (partial year)

Months beyond the last full year (0–11).

Salary presets

Months of salary earned

22.5 mo

= 22.5 full-year

Gross compensation

Rs 2,250,000

22.5 × Rs 100,000

Final compensation payable

Rs 2,250,000

Cap status

No cap applied

Full formula amount payable

Band-by-band breakdown

Service band	Years	Rate / year	Months
Years 1–5	5	2.5 mo	12.5
Years 6–14	5	2 mo	10
Total months of salary			22.5

Cross-checked: 22.5 full-year months match the Department of Labour cumulative table for 10 years of service.

Standard gazette formula for compensation in lieu of reinstatement under the Termination of Employment of Workmen Act. Non-disciplinary terminations of covered workmen only, not legal advice.

How it works

When an employer ends the job of a covered private-sector workman for a non-disciplinary reason, retrenchment, redundancy, restructuring or closure, the Termination of Employment of Workmen (Special Provisions) Act empowers the Commissioner-General of Labour to award compensation in lieu of reinstatement. The Department of Labour publishes a standard formula the Commissioner applies, which this calculator follows exactly.

The formula pays a declining number of months of salary for each completed year of service, banded by seniority:

Years 1–5: 2.5 months of salary per year
Years 6–14: 2 months of salary per year
Years 15–19: 1.5 months of salary per year
Years 20–24: 1 months of salary per year
Years 25–34: 0.5 months of salary per year

The calculation runs in five steps:

Walk your completed years through the bands, adding years-in-band × band-rate for each band you reach.
Pro-rate any partial year at the rate of the band your next year would fall into: (months ÷ 12) × next-band-rate.
Add the two to get total months of salary, capped at the formula ceiling of 48 months (reached at 34 years, service beyond that adds nothing).
Multiply the capped months by your last-drawn monthly salary to get gross compensation.
Apply the monetary ceiling: the final payout is the lower of the gross figure and Rs 2,500,000. That cap was raised by Cabinet from the earlier Rs 1,250,000.

The band cumulative totals, 12.5 months at 5 years, 30.5 at 14, 38.0 at 19, 43.0 at 24 and 48.0 at 34, are transcribed from the Department of Labour table. The calculator cross-checks its band walk against this cumulative column, so the whole-year total always reconciles to the published figures.

Worked examples

10 years, Rs 100,000 salary, under both caps

Years 1–5: 5 × 2.5 = 12.5 months
Years 6–10: 5 × 2.0 = 10.0 months
Total: 22.5 months of salary
22.5 × Rs 100,000 = Rs 2,250,000
Below the 48-month and Rs 2,500,000 caps → Final: Rs 2,250,000

20 years, Rs 150,000 salary, monetary cap binds

Years 1–5: 12.5 · Years 6–14: 9 × 2.0 = 18.0 → 30.5
Years 15–19: 5 × 1.5 = 7.5 → 38.0
Year 20: 1 × 1.0 = 1.0 → 39.0 months
39.0 × Rs 150,000 = Rs 5,850,000
Exceeds the Rs 2,500,000 cap → Final: Rs 2,500,000

7 years 6 months, Rs 80,000 salary, partial year

Years 1–5: 12.5 · Years 6–7: 2 × 2.0 = 4.0 → 16.5
Partial year: 6 ÷ 12 = 0.5 year in the 6–14 band (2.0/yr)
0.5 × 2.0 = 1.0 month → 17.5 months total
17.5 × Rs 80,000 = Rs 1,400,000
Below both caps → Final: Rs 1,400,000

Frequently asked questions

Sources & references

The bands, the 48-month ceiling and the Rs 2,500,000 monetary cap were last cross-checked against these sources on 2026-07-16. This tool computes the standard gazette formula only; it is not legal advice, and the Commissioner retains case-by-case discretion.

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