Indonesian Labor Law Sets an Exact Severance Pay Formula. Here's How Long That Money Actually Has to Last
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8 min read
In November 2022, GoTo laid off 1,300 employees, about 12% of its workforce at the time. Every one of them was legally owed a specific amount of money, not negotiated case by case, but calculated straight from Indonesia's severance pay formula, written into government regulation. If you have never been through a layoff (PHK) in Indonesia, you probably do not know that formula exists, let alone that the exact same years of service can produce a payout that differs by more than 50%, depending on one detail: the stated reason for your termination.
Indonesian severance law, formally Government Regulation (PP) No. 35 of 2021, the implementing rule under the Job Creation Law, does not pay out a single lump sum. It adds up to three separate components, each with its own formula.
Uang pesangon (UP), severance pay itself, scales with years of service:
| Years of service | Severance pay (UP) |
|---|---|
| Under 1 year | 1 month's wage |
| 1 to under 2 years | 2 months |
| 2 to under 3 years | 3 months |
| 3 to under 4 years | 4 months |
| 4 to under 5 years | 5 months |
| 5 to under 6 years | 6 months |
| 6 to under 7 years | 7 months |
| 7 to under 8 years | 8 months |
| 8 years or more | 9 months (the cap) |
Uang penghargaan masa kerja (UPMK), a separate long-service award, only starts after 3 years and scales on its own track:
| Years of service | Long-service award (UPMK) |
|---|---|
| 3 to under 6 years | 2 months |
| 6 to under 9 years | 3 months |
| 9 to under 12 years | 4 months |
| 12 to under 15 years | 5 months |
| 15 to under 18 years | 6 months |
| 18 to under 21 years | 7 months |
| 21 to under 24 years | 8 months |
| 24 years or more | 10 months (the cap) |
Uang penggantian hak (UPH), compensation for rights, covers whatever annual leave you have not used, plus relocation costs back to where you were originally hired, plus anything else your employment contract or company policy adds on top. One thing UPH used to include and no longer does: the old 2003 labor law added a flat 15% of your severance and long-service pay combined, meant to cover housing and healthcare. The Job Creation Law removed that 15% as a legal right. Some companies still pay it voluntarily; it is no longer guaranteed by statute.
Both "months" figures use your wage, defined as basic salary plus fixed allowances, not bonuses or performance pay. When GoTo ran this exact formula on its 1,300 laid-off employees in 2022, the reported numbers lined up with the table: under a year of service got one month's pay, employees around five to six years in got six months, and anyone past eight years hit the 9-month cap on severance pay alone. GoTo also added one extra month's pay on top, voluntarily, which the formula itself does not require.
Here is what the GoTo example does not show: the severance and long-service tables above are not what most laid-off workers actually receive. They get multiplied by a factor that depends entirely on why the company let them go.
| Reason for termination | Severance (UP) multiplier | Long-service (UPMK) multiplier |
|---|---|---|
| Company is already losing money, cutting staff for efficiency | 0.5x | 1x |
| Company closes from sustained losses, force majeure, or bankruptcy | 0.5x | 1x |
| Force majeure that does not close the company | 0.75x | 1x |
| Merger, acquisition, or efficiency cuts before the company is losing money | 1x | 1x |
| Company closes for reasons other than losses | 1x | 1x |
| Retirement | 1.75x | 1x |
| Death, or permanent disability from a workplace accident | 2x | 1x |
| Resignation | 0x | 0x |
Run the math on a real case. Take someone with 6 years of service earning Rp5,729,876 a month, Jakarta's 2026 minimum wage (UMP), set by the governor's decree that took effect this January. At 6 years, the tables above give 7 months of severance pay and 3 months of long-service award.
(7 x wage) + (3 x wage) = 10 x monthly wage
That is Rp57,298,760 before any multiplier. Now apply the reason:
Same tenure, same wage, same employer type of exit. The only thing that changed is the stated reason, and the payout is about 54% higher in the second scenario. Neither figure includes uang penggantian hak, since that depends on how many leave days you have banked.
This entire structure applies only to PKWTT employees, workers on permanent, indefinite contracts. If you are on a PKWT, a fixed-term contract, you are covered by a different mechanism entirely: uang kompensasi PKWT, calculated pro rata to how much of your contract term you actually completed, not the severance and long-service tables above.
Resigning voluntarily also does not trigger severance or long-service pay at all, both multipliers land on 0x. You still keep uang penggantian hak (unused leave and any agreed relocation costs), and some companies pay an additional uang pisah, separation money, but the law does not set a fixed amount for that. It is whatever your employment contract or company policy says, if anything.
One change matters for anyone reading this after 2024. On 31 October 2024, Indonesia's Constitutional Court ruled that the word describing these tables, "paling banyak" (at most, a cap), had to be read instead as "paling sedikit" (at least, a floor). The dollar figures in the tables did not change, but their legal character did: an employer can now legally agree to pay more than the table, and the table itself is the minimum a court or mediator will enforce, not the maximum an employer can be forced to pay.
A severance payout this size feels like a windfall the day it lands. It is not one. It is a number of months of income, paid up front, that has to cover you until the next paycheck starts, and Indonesia's own labor market data suggests that gap is rarely short. BPS recorded an open unemployment rate of 4.85% as of August 2025, and separately, research from LPEM FEB UI found that fresh graduates take an average of 19.8 months to land a first job in the current market. That second figure measures a different group, people who have never worked before, not someone re-entering the workforce after years of experience, so treat it as a sign the hiring market is slow right now, not as your own personal timeline.
The honest way to use your payout is the same math this series has already walked through for budgeting an irregular income: take your real, current monthly essential spending, not what you wish it were, and divide your total severance payout by that number. The result, in months, is your actual runway. If your regular emergency fund was already sized for 3 to 12 months depending on dependents, your severance payout is what extends that runway further while you look for the next role, not a separate pot to spend freely. It is also a completely different thing from your BPJS Ketenagakerjaan JHT and JP retirement payout, which stays untouched until retirement age and should not be tapped to cover this gap.
The simplest way to keep that runway honest is to actually watch it shrink. Log your severance payout as the starting balance of your portfolio on NetWort's Dashboard, then track your total value the same way you would track any other holding as you draw against it month by month. Watching the number fall in real time is a much stronger signal to slow spending than checking a bank balance you have half stopped looking at.