Indonesia Severance Pay Calculator

The maximum UP (Uang Pesangon) is 9 months of salary for employees with 8+ years of service. When combined with the UPMK (long service pay) of up to 10 months for 24+ years, and the applicable multiplier (e.g., 2x UP for prolonged illness, disability, or death), the theoretical maximum base payout can reach 28 months of salary before adding leave compensation and other entitlements.

No. PKWT employees are not entitled to severance pay (pesangon) or UPMK. Instead, when a PKWT contract ends or is terminated early, the employee is entitled to compensation money (uang kompensasi) calculated based on the length of the contract period. Early termination by the employer requires paying out the remaining contract value. This is governed by separate provisions under the Job Creation Law.

Monthly salary for severance purposes includes the basic wage plus all fixed allowances paid to the employee and their family. This includes fixed transport allowances, meal allowances, and other regular fixed payments. Variable components such as overtime, bonuses, commissions, and non-fixed allowances are generally excluded. If wages are set on a piece-rate or commission basis, the monthly salary is calculated as the average income over the last 12 months.

The Job Creation Law (UU Cipta Kerja) and its implementing regulation PP 35/2021 introduced several key changes: (1) Reduced some UP multipliers compared to the previous UU 13/2003; (2) Introduced the government-funded Job Loss Guarantee program (JKP) to supplement reduced severance; (3) Changed termination procedures to no longer require Industrial Relations Court approval in all cases; (4) Added new termination reason categories with specific multipliers. The net effect is that employer-paid severance is somewhat lower, but workers receive additional JKP benefits.

Yes. Under Indonesian labor law, employers must first engage in bipartite negotiations (direct negotiation between employer and employee) before proceeding with termination. If bipartite negotiations fail within 30 days, the parties may proceed to mediation, conciliation, or arbitration through the local Manpower Office (Disnaker). Only after these processes are exhausted can the matter be brought to the Industrial Relations Court. Termination without following proper procedure can be declared void.

Uang Pisah is a separate payment from UP and UPMK, applicable in cases where the employee resigns voluntarily or is terminated for certain reasons where UP does not apply (such as gross misconduct or absence without notice). The amount of Uang Pisah is not fixed by law but is determined by the company’s regulations, employment agreement, or collective labor agreement. It serves as a goodwill payment and is distinct from the statutory severance entitlements.

Yes, severance pay in Indonesia is subject to income tax (PPh 21) but at preferential progressive rates that are lower than regular income tax rates. Under Government Regulation PP 68/2009, the tax brackets for severance are: 0% on the first IDR 50 million, 5% on IDR 50-100 million, 15% on IDR 100-500 million, and 25% on amounts above IDR 500 million. These rates apply when severance is paid as a lump sum. If paid in installments over more than 2 years, regular income tax rates apply.