The calculation of employee severance pay in Indonesia is clearly regulated by various regulations, particularly Government Regulation No. 6 of 2025 concerning Amendments to Government Regulation No. 37 of 2021. This regulation addresses the implementation of the unemployment insurance program.
This regulation stipulates that workers who are subject to termination of employment are entitled to compensation in the form of a cash amounting to 60 percent of their wages for a maximum of six months.
Additionally, the amount and payment mechanism for severance pay are also regulated by Law No. 11 of 2020 on Job Creation, which amends previous labor regulations.
Severance Pay Components According to the Law
Generally, employee severance pay consists of three main components based on applicable labor regulations:
1. Severance Pay
Basic compensation is given based on the employee's length of service. Longer periods of service result in greater compensation.
2. Long Service Pay
An additional award for employees who have worked for a certain period of time, usually more than 3 years.
3. Compensation for Entitlements
Compensation for unfulfilled employee rights, such as unused annual leave, transportation costs, and housing-related compensation.
How to Calculate Severance Pay
Based on Government Regulation No. 35 of 2021 and the latest Job Creation Law, the following is the calculation scheme for severance pay for permanent employees during layoffs:
- Employment period less than 1 year: entitled to 1 month's salary
- Employment period 1 to < 2 years: 2 months' salary
- Employment period of 2 to less than 3 years: entitled to 3 months' salary
- Employment period of 3 to less than 4 years: entitled to 4 months' salary
- Employment period of 4 to less than 5 years: entitled to 5 months' salary
- Employment period of 5 to less than 6 years: entitled to 6 months' salary
- Employment period of 6 to less than 7 years: entitled to 7 months' salary
- Service period of 7 to < 8 years: 8 months' salary
- Service period of 8 years or more: 9 months' salary
Meanwhile, service award money is given starting from a service period of 3 years with the following conditions:
- 3-6 years: 2 months' salary
- 6-9 years: 3 months' salary
- 9 years and above: an increase of 1 month for every 3 years of service thereafter.
Compensation for entitlements includes rights such as remaining leave, transportation costs, and others, which must be calculated proportionally.
Example of Severance Pay Calculation
Suppose an employee who has worked for 5 years with a monthly salary of Rp 7,000,000 is laid off, then the calculation is as follows:
- Severance Pay: 5 months x Rp 7,000,000 = Rp 35,000,000
- Service Award: 2 months x IDR 7,000,000 = IDR 14,000,000
- Compensation for Unused Leave (e.g., remaining vacation days): IDR 5,000,000
Total Severance Pay = IDR 54,000,000.
Calculating severance pay accurately requires accurate attendance and service period data. In the digital age, companies can use online attendance apps like iPresens to manage employee attendance, presence, and data efficiently and in real-time.
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