How to Calculate Severance Pay When Resigning or Getting Laid Off?

In the professional world, the term severance pay often comes up when an employee ends their working relationship, whether by resigning or due to termination. However, many employees in Indonesia still lack a clear understanding of what severance pay is, when they’re entitled to receive it, and how to calculate it.

This article will walk you through everything you need to know about severance pay—including how to calculate it—along with how recruitment agencies and employment agencies like RecruitFirst Indonesia can support you during your career transitions.

What Is Severance Pay?

Severance pay is a sum of money given by a company to an employee when their employment ends under certain conditions. The amount and terms of severance pay are regulated under Indonesia’s Manpower Law No. 13 of 2003 and further detailed in Government Regulation (PP) No. 35 of 2021, part of the Omnibus Law.

Who Is Entitled to Severance Pay?

1. Employees Who Resign Voluntarily
   • Not all resigning employees are entitled to severance pay.
   • Severance pay may be granted if there is a specific clause in the employment contract, company regulations, or collective labor agreement (CLA).
   • If there’s no such clause, the company is not legally required to provide severance pay upon voluntary resignation.
2. Employees Who Are Terminated (Laid Off)
   • Employees who are laid off typically have a greater chance of receiving severance pay, especially if the termination is not due to serious misconduct.
   • In some cases, severance pay is granted alongside other forms of compensation such as tenure appreciation and compensation for unused entitlements.

Components Included in the Calculation

According to PP No. 35/2021, compensation for terminated employees may consist of:

• Severance Pay (Uang Pesangon)
• Tenure Appreciation Pay (Uang Penghargaan Masa Kerja)
• Compensation for Rights (Uang Penggantian Hak)
• Severance Bonus, if stated in company policies

For resignations, only the severance bonus may apply—and even that is optional unless formally agreed upon in company policies.

How to Calculate Severance Pay

Here’s a sample calculation for an employee who is laid off:

Example:

• Years of service: 5 years
• Base salary: IDR 6,000,000
• Fixed allowance: IDR 1,000,000

Steps:

1. Severance Pay:
   • For 5 years of service → 5 months’ salary
   • Total: IDR 7,000,000 × 5 = IDR 35,000,000
2. Tenure Appreciation Pay:
   • For 5 years of service → 2 months’ salary
   • Total: IDR 7,000,000 × 2 = IDR 14,000,000
3. Compensation for Rights:
   • Example (remaining leave, THR, etc.): IDR 3,000,000
4. Total Compensation:
   • IDR 35,000,000 + IDR 14,000,000 + IDR 3,000,000 = IDR 52,000,000

Note: If there is an additional severance bonus in your contract, this can be added to the final amount.

What If There’s No Severance Pay for Resignation?

If you resign and your company doesn’t provide severance pay, you generally can’t demand it unless a clause was included in your employment agreement. That’s why it’s crucial to carefully review your contract before signing.

The Role of Recruitment and Employment Agencies

In times of resignation or layoffs, many professionals feel lost or uncertain about their next move. This is where recruitment and employment agencies come in. They not only assist jobseekers in finding new opportunities but also help them understand their employment rights.

For instance, RecruitFirst Indonesia, a reputable recruitment company under HRnetGroup, assists both clients and candidates through transparent hiring processes, legal awareness, and career planning strategies. As a trusted headhunter, RecruitFirst is committed to placing top talent while supporting employees through transitions with clarity and care.

Conclusion

Calculating severance pay upon resignation or termination requires a solid understanding of Indonesian labor laws and the specific agreements in your employment contract. While severance pay for resignations is usually optional, terminated employees are more likely to receive compensation backed by legal standards.

If you’re going through a career transition or simply want to learn more about your rights and recruitment processes, don’t hesitate to contact RecruitFirst Indonesia, a trusted employment agency ready to help you make the next smart move in your career.

Contact us today for career consultation or recruitment solutions tailored to your business needs.