How to calculate severance pay

This time we will discuss how to calculate employee severance pay when layoffs in accordance with the law.


Unstable business situations sometimes require companies to take extreme steps to reduce workers, namely termination of employment or laying off of employment.


On the other hand, employees can also convey their own initiative by resigning. Even though the employment relationship has ended, there is a compensation payment that must be considered by the company.


This obligation may be familiar to us as severance pay. However, actual severance pay is only one of them.


Apart from severance pay, employees who are terminated by the company also have the right to receive a Work Period Award (UPMK), as well as a compensation for rights (UPH).


The obligations of this company are regulated in the Manpower Act No. 13 of 2003 Article 156 Paragraph 1, as follows:


In the event of termination of employment, employers are required / obliged to pay severance pay and / or reward money for the period of work and compensation for entitlements that must be received.


Table of contents :

Calculation of the amount of severance pay and UPMK for employees

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Calculation of the amount of severance pay and UPMK for employees

Based on the Manpower Act No.13 of 2003, Article 156 Paragraphs 2 and 3, the following are the calculation provisions:


severance pay calculation


In contrast to layoffs that occur due to company initiatives, layoffs made at the initiative of employees or employee resignations do not result in payments for severance pay and UPMK by the company.


Even so, companies are still required to pay compensation for compensation (UPH) for employees who resign.


And, if the employee is included in the non-management committee (duties and functions do not represent the employer directly), then the company will also provide a share.


The amount and implementation of segregation payment payments must be stipulated in company regulations or work agreements. This is in accordance with the Manpower Act No.13 of 2003, Article 162.


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Regarding the Right to Reimbursement of Wages (UPH), the law has detailed the rights of employees who can be referenced. These rights, namely:


Entitlement to Unclaimed and Unused Annual Leave. There is no standard way to calculate the conversion of holiday values ​​to rupiah. However, the following methods are common in some companies:severance pay calculation

Moving costs or expenses for employees and their families to a new city / workplace.

Housing and health compensation is set at 15% of the total severance pay and UPMK that will be received by employees.

Other matters stipulated in work agreements, company regulations, or collective working agreements.

The component of “wages” which is used to calculate everything (both severance pay, UPMK, and UPH), is the regular salary that employees receive every month.


Fixed wage consists of basic salary and allowances which are received in a fixed amount each month.


Therefore, the attendance allowance, which may vary in amount each month, is not included in the intended “wages”.


Sample case :


While working at PT Sejahtera, Rita received a basic salary of 2.5 million / month, with a communication allowance of 1 million / month.


He also gets 70,000 meals per day (obtained only when employees are present at the office). After 4 years and 7 months of work, he was laid off on 14 September.


Meanwhile, the annual leave entitlement taken is 4 out of 12 days / year of leave entitlement. How much obligation should the company pay to Rita?


The calculation of severance pay for employees at layoffs:


It is known that the wages earned are:

= basic salary + fixed allowance

= 2,500,000 + 1,000,000

=  3,500,000

Severance pay for employees with a work period of 4 years and 7 months ( 5 months of wages )

= 5 x 3,500,000

=  17,500,000

Period of Employment Award (UPMK) for employees working period of 4 years 7 months ( 2 months of wages )

= 2 x 3,500,000

=  7,000,000

Rights compensation:

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– Leave entitlement = (Proportional number of unclaimed leave rights / Number of working days in 1 month) x fixed wages in 1 month

= ((Right to leave Jan to Sep) – 4 days / 25 days) x 3,500,000

= 9 – 425 x 3,500,000

= 525 x 3,500,000

=  700,000

– Housing and Medical Rights = 15% x amount of severance pay and UPMK

= 15 100 x (17,500,000 + 7,000,000)

= 3,675,000


Therefore, the company’s total liabilities that must be paid to Rita are:

= severance pay + UPMK + UPH

= 17,500,000 + 7,000,000 + (700,000 + 3,675,000)

= 28,875,000


Another provision that needs to be considered is the reason for someone’s dismissal, because this affects the amount of severance pay which is the right of the employee.


The company is required to provide severance pay 2x (twice) the fold of the provisions listed in the table, if:


The company undergoes mergers, acquisitions, status changes, or changes in ownership, and the company refuses to continue working with employees;

Companies layoffs for efficiency reasons;

The employee dies (company obligations are paid to the heirs);

Retired employees, and the company never enrolls employees in a pension plan;

An application for dismissal is submitted by the employee to the industrial relations dispute settlement agency, and is granted. Employees can submit this application for the reasons stated in the Manpower Act No. 13 of 2003 Article 169 paragraph 1;

Layoffs were filed by employees due to prolonged illness, disability due to workplace accidents, and unable to perform their job after more than 12 months.

In the previous example, if Rita had a job termination because she had retired, the company never included her in the pension plan.


Then Rita’s severance pay will be doubled, which is 35,000,000 (2 x 17,500,000). The total liabilities to be paid by the company to Rita is 46,375,000.

by Abdullah Sam
I’m a teacher, researcher and writer. I write about study subjects to improve the learning of college and university students. I write top Quality study notes Mostly, Tech, Games, Education, And Solutions/Tips and Tricks. I am a person who helps students to acquire knowledge, competence or virtue.

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