Severance pay in Indonesia: Evidence from a small-scale survey during the onset of COVID-19 pandemic

From the survey we found evidence that the majority of respondents who experienced negative labour market shocks during COVID-19 pandemic were put on furlough rather than being terminated outright. This finding is related to the fact that most employers expected that the slowdown due to the pandemic would be short-lived, and that they could resume their business activities once the pandemic is over.

Concerning the terminated workers from the sample, we found evidence that the majority did not receive the entitlements that they were legally entitled to. A slight majority of the terminated fixed-term (PKWT) workers surveyed were not eligible for severance payments, but among the terminated PKWT workers who were eligible, 91.7 per cent did not receive any severance pay. The situation was somewhat better among permanent (PKWTT) workers, as 42.2 per cent of terminated PKWTT workers did receive at least some severance pay, but many of them did not receive the full amount. Based on respondents’ answers, PKWTT workers who were eligible to receive severance pay were, on average, entitled to payments worth 30 million Indonesian rupiah. However, these workers, on average, received only 3.8 million rupiah (13 per cent of the entitled amount), with a majority – as previously noted – receiving no severance at all.

Meanwhile, the vast majority of workers who were put on furlough received either no salary or a reduced salary, with only a 20 per cent having received their full salary while on furlough. Moreover, the majority of the sample who experienced furloughed also claimed that their employers unilaterally imposed the wage reductions without making any agreement with the workers.