Severance pay in Indonesia is among the largest costs of ending an employment relationship — and one of the most commonly underestimated by foreign employers. Under Government Regulation PP 35/2021 (the implementing rule of the Job Creation Law), a terminated permanent employee can be entitled to a package that, depending on the reason for termination and length of service, exceeds a full year's salary. This guide sets out exactly how it is calculated in 2026, how the reason for termination changes the amount, how Indonesia compares with the rest of Southeast Asia, and how an Employer of Record removes the risk entirely.
The short answer: Indonesian severance has three parts — uang pesangon (severance pay), uang penghargaan masa kerja (long-service reward) and uang penggantian hak (compensation of rights). The base amounts come from the length-of-service tables below, and then a multiplier of 0.5x to 2x is applied depending on why the employment ended.
The three components of Indonesian severance
Every statutory termination payment in Indonesia is built from three elements:
Uang Pesangon — the core severance pay, scaled to years of service.
Uang Penghargaan Masa Kerja (UPMK) — a long-service reward for employees with three or more years of service.
Uang Penggantian Hak (UPH) — compensation of rights: unused annual leave and other entitlements set out in the contract or collective labour agreement.
For all three, "wage" means basic salary plus fixed allowances — not variable pay such as performance bonuses.
Uang Pesangon: severance pay by length of service
The base severance entitlement rises with tenure, capping at nine months of wage:
Years of service | Uang Pesangon (months of wage) |
|---|---|
Under 1 year | 1 |
1 to under 2 years | 2 |
2 to under 3 years | 3 |
3 to under 4 years | 4 |
4 to under 5 years | 5 |
5 to under 6 years | 6 |
6 to under 7 years | 7 |
7 to under 8 years | 8 |
8 years or more | 9 |
Uang Penghargaan Masa Kerja (long-service reward)
Employees with three or more years of service also receive UPMK, on top of pesangon:
Years of service | UPMK (months of wage) |
|---|---|
3 to under 6 years | 2 |
6 to under 9 years | 3 |
9 to under 12 years | 4 |
12 to under 15 years | 5 |
15 to under 18 years | 6 |
18 to under 21 years | 7 |
21 to under 24 years | 8 |
24 years or more | 10 |
The reason for termination sets the multiplier
This is where most miscalculations happen. PP 35/2021 applies a multiplier to the pesangon (and sometimes UPMK) based on the ground for termination. The same employee, with the same tenure, can be owed anywhere from nothing to twice the base pesangon:
Reason for termination (PHK) | Uang Pesangon | UPMK | Also owed |
|---|---|---|---|
Resignation (voluntary) | None | None | Uang pisah + UPH |
Mutual agreement | 1x | 1x | UPH |
Efficiency (company still profitable) | 1x | 1x | UPH |
Efficiency or closure due to losses | 0.5x | 1x | UPH |
Company closure (not due to losses) | 1x | 1x | UPH |
Merger or acquisition (employee declines to continue) | 1x | 1x | UPH |
Retirement | 1.75x | 1x | UPH |
Prolonged illness or permanent disability | 2x | 1x | UPH |
Death of the employee | 2x | 1x | UPH |
Serious violation or criminal act | None | None | Uang pisah + UPH |
PP 35/2021 defines roughly nineteen distinct termination scenarios, each with its own multiplier and procedure. Always confirm the exact figure for your specific situation before acting.
Worked example
An employee with 6 years of service and a wage of Rp 12,000,000 per month, terminated on the ground of efficiency due to company losses (pesangon at 0.5x):
Pesangon: 7 months x 0.5 = 3.5 months, or Rp 42,000,000
UPMK: 3 months x 1 = 3 months, or Rp 36,000,000
UPH: unused leave and other entitlements (varies)
Base total of about Rp 78,000,000, plus UPH — roughly 6.5 months of salary.
How Indonesia severance compares across Southeast Asia
Severance is one area where Indonesia protects employees more than most of its neighbours. Here is how the statutory baselines compare in 2026:
Country | Statutory severance (baseline) | Roughly, at 5 years' service |
|---|---|---|
Indonesia | Pesangon 1 to 9 months + UPMK 2 to 10 months, x0.5 to 2 by reason | About 6 to 9 months' pay |
Thailand | Tenure-based, 30 up to 400 days of wages | About 6 months (180 days) |
Philippines | Half to 1 month per year of service (by reason) | About 2.5 to 5 months |
Malaysia | 10 / 15 / 20 days' wages per year of service by tenure | About 2.5 months |
Vietnam | Half a month per year (largely offset by state unemployment insurance) | Often minimal in practice |
Singapore | No statutory severance; about 2 weeks to 1 month per year by practice | Discretionary |
Read the right way, this is a feature, not a drawback. Higher statutory protection is one reason Indonesian professionals commit to employers for the long term — and severance is only ever paid when you actually terminate someone. Manage hiring and retention well, and it becomes a cost you rarely incur.
Why Indonesia is still Southeast Asia's best team-building base
On the metric that actually matters — total value — Indonesia wins. The country offers a deep pool of professionals with genuine multinational and global experience, available at a fraction of the cost of an equivalent hire in Singapore, Australia or Western markets, and with strong productivity. A more protective severance regime does not change that calculus; it simply rewards employers who build stable, well-supported teams.
That is exactly where MixWork's Employer of Record in Indonesia comes in. As the legal employer, MixWork runs the correct PHK procedure, applies the right multiplier for the termination reason, calculates UPH accurately and settles the payment — keeping you clear of the Industrial Relations Court. Just as importantly, MixWork's focus on retention and employee well-being means lower turnover and fewer severance events in the first place, while our outsourcing model keeps your team highly productive from day one. You get MNC-grade talent, handled compliantly, without carrying the statutory risk yourself.
Disclaimer: This guide is general information, current as of July 2026 and based on PP 35/2021 and the Job Creation Law. Severance multipliers and procedures are scenario-specific and subject to change. Confirm the exact entitlement for your situation with qualified Indonesian legal counsel before calculating or paying severance. MixWork provides EOR and HR services and does not provide legal advice.
