Severance Pay in Indonesia: Notice Period and Termination
Severance pay in Indonesia depends on the reason and years of service. See the scales, a worked example and the notice an employer must give.
References (6)
- UU No. 13 Tahun 2003 on Manpower, as amended by UU No. 6 Tahun 2023 (Article 81). Article 151 covers notifying the employee and talks between the two sides. Article 151A lists when no notification is needed. Article 153 lists the reasons an employer may not use.
- The same law. Article 156 sets severance pay, long-service pay and compensation of rights. Article 157 sets the wage base. Article 157A covers duties while a dispute runs. Article 60(1) allows probation of up to three months.
- PP No. 35 Tahun 2021, in force 2 February 2021. Article 15 covers compensation at the end of a fixed-term contract. Article 36 lists the reasons for ending employment. Articles 37 to 39 cover the notification letter, the report to the manpower office and the employee’s refusal. Article 40 repeats the scales. Articles 43, 44, 50, 52 and 56 set what is paid for the reasons shown here. Articles 49 to 52 and 54 cover separation pay.
- Constitutional Court decision No. 168/PUU-XXI/2023, 31 October 2024. It reads the severance scale as a minimum, and allows a refused dismissal to take effect only after a final decision.
- UU No. 2 Tahun 2004 on industrial relations disputes. Articles 3 to 5 set talks between the two sides, then mediation or conciliation, then the court. Article 7 makes a signed mutual agreement binding.
- PP No. 37 Tahun 2021 on the job-loss scheme, as amended by PP No. 6 Tahun 2025. Article 20(3) lists the proof an employee needs to claim.
Severance pay in Indonesia is worked out from two things: the reason the employment ends and how long the employee has served. An employer ending a permanent employee’s contract gives the reason, sends written notice 14 working days before the leaving date, and pays an amount from two legal scales, based on basic wage plus fixed allowances. MAM works the figures out with you before you speak to the employee.
Written on 12 October 2026
This page states the law in force on 12 October 2026. A new manpower law has been passed by parliament, according to press reports. On 14 October 2026 we found no sign that it was in force; our guide to employment law in Indonesia says where it stands. We will revise this page when it takes effect.
What the employer pays
For ending employment (pemutusan hubungan kerja, or PHK), the law names three payments, and a fourth that takes the place of severance in some cases (Manpower Law (UU) 13/2003, Article 156, as amended by the Job Creation Law (UU) 6/2023, for the first three; Government Regulation (PP) 35/2021, Articles 49 to 52 and 54, for separation pay):
- Severance pay (uang pesangon), on a scale by years of service.
- Long-service pay (uang penghargaan masa kerja), on a second scale that starts at three years.
- Compensation of rights (uang penggantian hak): annual leave not yet taken and not yet lapsed, the cost of travel back to where the employee was hired, and anything else the contract, company regulations or collective agreement promise.
- Separation pay (uang pisah), paid in some cases where no severance is due, such as resignation, in the amount the contract, company regulations or collective agreement set.
Severance and long-service pay are calculated on the basic wage plus fixed allowances, not on total pay (Article 157(1)).
How severance pay in Indonesia is calculated
Find the employee’s length of service on the scale, then multiply by the number for the reason, from the second table.
The scale, by length of service
| Severance | Long service | |
|---|---|---|
| Under 1 year | 1 month | None |
| 1 year | 2 months | None |
| 2 years | 3 months | None |
| 3 years | 4 months | 2 months |
| 4 years | 5 months | 2 months |
| 5 years | 6 months | 2 months |
| 6 years | 7 months | 3 months |
| 7 years | 8 months | 3 months |
| 8 years | 9 months | 3 months |
| 9–11 years | 9 months | 4 months |
| 12–14 years | 9 months | 5 months |
| 15–17 years | 9 months | 6 months |
| 18–20 years | 9 months | 7 months |
| 21–23 years | 9 months | 8 months |
| 24+ years | 9 months | 10 months |
The severance column is a minimum (Constitutional Court decision 168/PUU-XXI/2023).
How the reason changes the amount
| Severance | Long service | Article | |
|---|---|---|---|
| Resignation | None | None | Article 50 |
| Efficiency, for losses | 0.5 × | 1 × | Article 43(1) |
| Efficiency, to prevent loss | 1 × | 1 × | Article 43(2) |
| Closure, for losses | 0.5 × | 1 × | Article 44(1) |
| Closure, not for losses | 1 × | 1 × | Article 44(2) |
| After warning letters | 0.5 × | 1 × | Article 52(1) |
| Urgent breach | None | None | Article 52(2) |
| Retirement | 1.75 × | 1 × | Article 56 |
In every case the employee also receives compensation of rights. Where the table shows no severance, the employee receives separation pay instead. Other reasons, such as a merger or acquisition, long illness or death, each has its own line in PP 35/2021, Articles 41 to 57.
Older guides still quote a doubled severance for redundancy and a 15% housing and medical allowance. Both were removed from the law (UU 6/2023, Article 81).
A worked example
An employee with five years of service, on a basic wage of IDR 12,000,000 and a fixed allowance of IDR 3,000,000, is dismissed in an efficiency measure to prevent a loss (PP 35/2021, Article 43(2)).
| Description | IDR |
|---|---|
| Monthly wage base Basic wage and fixed allowances | 15,000,000 |
| Severance pay 6 months × 1 | 90,000,000 |
| Long-service pay 2 months × 1 | 30,000,000 |
| Severance and long-service pay | 120,000,000 |
Compensation of rights (untaken leave and the other items listed above) is paid on top. Had the company already been making a loss, the severance line would take the lower multiple in the table.
Notice period and how an orderly exit runs
-
Explain the reason
The employer tells the employee why the employment must end.
-
Written notice
The letter states the reason and what will be paid.
-
The employee answers
The employee refuses in writing, with reasons.
-
Report or agreement
The employer reports a termination the employee does not refuse.
-
Final payment
The final payment goes through payroll.
The reason comes first (UU 13/2003, Article 151(2)). The letter goes 14 working days before the leaving date, or seven during probation (PP 35/2021, Article 37(3) and (4)), and an employee who refuses has seven working days to say so (Article 39(1)). If no refusal comes, the employer reports the termination to the manpower office (Article 38). Where the two sides negotiate, they sign what they agree as a mutual agreement, which binds both (UU 2/2004, Article 7).
No notification is needed when an employee resigns, reaches the retirement age in the contract or company regulations, or reaches the end of a fixed-term contract (UU 13/2003, Article 151A). An urgent breach can also end employment without the usual notification, but only if that kind of breach is written into the contract, the company regulations or a collective agreement (PP 35/2021, Article 52(2) and (3)).
If the employee does not agree
The two sides talk first. If they cannot agree, the matter goes to mediation (or conciliation, if both sides choose it) through the local manpower office, and only after that to the Industrial Relations Court, the specialist labour court (UU 2/2004, Articles 3 to 5). The employment ends only once the decision is final, and until then both sides keep to their obligations. The employer may suspend the employee but keeps paying the wage (UU 13/2003, Articles 151(4) and 157A, as read by the Constitutional Court).
Questions employers ask
What is the notice period for ending an employment in Indonesia?
Do I need court approval to dismiss an employee in Indonesia?
Does an employee who resigns get severance pay?
Can I dismiss an employee during probation?
Can an employee be dismissed while sick or pregnant?
Do fixed-term employees get severance pay?
Around the exit: EOR, stay permit and the job-loss scheme
Where we are the legal employer under an employer of record arrangement, the cost of ending an employment is agreed with you before the hire. A foreign employee who leaves also needs their stay permit cancelled. For an Indonesian employee, the manpower office’s receipt for the termination report is one of the proofs for a claim under the state job-loss scheme (PP 37/2021, Article 20(3), as amended by PP 6/2025). Our guide to BPJS social security covers the scheme.
Severance paid in one go is taxed at its own final rates, set out in our guide to severance pay tax.
Our HR consulting team advises on each step, calculates what is owed and prepares the mutual agreement where both sides settle. The final settlement is then paid through payroll.