The same tenure can be worth nothing or 25 months of salary

By Equipo Saplic Published on 12/08/2026 Updated on 12/08/2026

What changes is why the employment ended.

In this guide
  1. Three separate components
  2. The pesangon table
  3. Long service pay
  4. The multiplier depends on the ground
  5. The legal framework
  6. Fixed-term contracts are different
  7. Not at-will

Indonesia has some of the highest statutory severance obligations in the world, and one variable drives all of it: the reason for termination.

Three separate components

Employer-initiated termination — PHK, or Pemutusan Hubungan Kerja — can trigger up to three payments:

  • Uang Pesangon — severance pay
  • Uang Penghargaan Masa Kerja — long service pay
  • Uang Penggantian Hak — compensation of rights

They are separate and can stack.

The pesangon table

Scales with tenure: 1× monthly salary for under one year, 2× for one to two years, rising to 9× at eight or more years — where it caps.

Long service pay

A separate table entirely, from 2× at three years to 10× at twenty-four or more years.

The multiplier depends on the ground

Here is the part that changes everything. Employer-initiated termination for efficiency or business reasons triggers the full 1× multiplier table.

Certain other causes reduce it to 0.5×.

So the same employee, same tenure, same salary can be owed anywhere from nothing to 25 or more months of salary, depending on why the employment ends.

Establish which ground your employer invoked before doing any arithmetic.

Law No. 13 of 2003 on Manpower, as amended by the Job Creation Law (Law No. 6 of 2023, ratifying the Omnibus Law regulation of 2022). The operational detail sits in Government Regulation No. 35 of 2021 — PP 35/2021 — which specifies the formula for each component and the multipliers per termination reason.

Constitutional Court Decision No. 168/PUU-XXI/2023, issued in October 2023, is the most recent significant development.

Fixed-term contracts are different

PKWT employees are not entitled to Pesangon or Long Service Pay.

They receive a proportional Compensation Pay instead: months worked ÷ 12 × one month's salary, paid at each contract renewal point and at final expiry.

Not at-will

Indonesia does not default to employment-at-will. Employers must follow specific, legally defined procedures before terminating anyone.

Frequently asked questions

What are the three severance components?
Uang Pesangon (severance pay), Uang Penghargaan Masa Kerja (long service pay) and Uang Penggantian Hak (compensation of rights). They are separate and can stack.
How does the pesangon table work?
One times monthly salary for under a year, two for one to two years, rising to nine times at eight or more years, where it caps.
Why does the reason for termination matter so much?
Because efficiency or business reasons trigger the full 1× multiplier table while certain other causes reduce it to 0.5×. The same tenure can be worth nothing or 25+ months.
Do fixed-term employees get severance?
No. PKWT employees are not entitled to Pesangon or Long Service Pay. They receive proportional Compensation Pay: months worked divided by 12, times one month’s salary.
Is Indonesia an at-will jurisdiction?
No. Employers must follow specific, legally defined procedures before terminating any employee.

Sources

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