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JAKARTA, Public Relations of the Constitutional Court—The Constitutional Court’s Center for Research, Case Review, and Library Management (Puslitka) held a focus group discussion(FGD) on “Basis and Direction of Severance Pay Calculation Policy” on Thursday (17/1) at the Hall of the Constitutional Court. Nine constitutional justices, Constitutional Court Secretary General, and researchers were in attendance.

“The FGD will be discussing the implementation of Article 167 paragraph (3) of Law No. 13 of 2003. We hope the speakers will provide insights on [the topic],” said Chief Justice Anwar Usman in his opening address.

Secretary General M. Guntur Hamzah explained, “Severance pay is money given by an employer to its worker as a result of termination of employment. Its amount is generally appropriated with the worker’s monthly salary. To this amount, other components can also be added, such as allowances, leave, health insurance benefits, and others, which are employees\' rights in the company.”

Guntur said that the Government’s regulation of severance pay is aimed at bridging gap between worker and employer due to error in employment termination. It is monetary payment from employer to worker due as a result of employment termination, proportionate to the worker’s years of service.

Article 167 paragraph (3) of Law No. 13 of 2003 on Manpower, which reads, “If the employer has included the worker/laborer whose contributions/premiums paid by the employer and the worker/laborer, then that which is calculated with the severance pay shall be the pension whose contributions/premiums have been paid by the employer” is deemed problematic. However, Guntur said, it is considered multi-interpretive because in practice there is neglect in the calculation of severance pay based on contributions/premiumsthathave been paid by the employee as exemplified in the severance pay calculation in the Elucidation to Article 167 paragraph (3) of Law No. 13 of 2003.

“Based on the elaboration, there are several questions to answer: What is the basis to the severance pay calculation? Why is the severance pay calculated only with the pension whose contributions/premiums have been paid by the employer? What if it is calculated with the contributions/premiums that have been paid by the employee? What are the best practices of severance pay calculation in other countries? How should it be set as not to lead to multi-interpretation?” Guntur said.

Article for Reference

In response, Bank Rakyat Indonesia (BRI) Human Capital Director R. Sophia Alizsa answered the question on the basis to the severance pay calculation and the severance pay calculated only with premiums that have been paid by the employer.

“Article 167 of the Manpower Law is the basis for BRI to calculate severance pay. Especially Article 167 paragraph (3) of the Manpower Law mentioned earlier. The implementation of BRI policies also comply with Article 167 paragraph (3) of the Manpower Law,” Sophia said.

Sophia also answered the question on best practices for calculating severance pay in other countries. "At the moment we are focusing on complying with the applicable rules in Indonesia," Sophia said. On the question of the formulation of the calculation of severance pay so as not to cause multiple interpretations, Sophia explained, "The regulator can issue a detailed explanation letter regarding the implementation of Article 167 paragraph (3) of the Manpower Law."

Bank Mandiri’s Compliance and Human Capital Director Agus Dwi Handaya said, "We believe that the spirit of the Manpower Law provides minimal limits. Even if we provide additional compensation, we consider it an addition to the minimum [compensation] at stake. So in our opinion, what has been implemented by Bank Mandiri and BRI has met the minimum [requirement], even though there is additional [compensation] from us," said Agus.

After the presentations, a discussion was held. Constitutional Justice Enny Nurbaningsih said, "The Elucidation to Article 167 paragraph (3) of the Manpower Law, whether implemented in practice as outlined in Article 167 paragraph (3) of the Manpower Law. [It] is highly possible in practice in other places there are different interpretations of the elucidation to the article."

Constitutional Justice Wahiduddin Adams commented on the Elucidation to Article 167 paragraph (3) of the Manpower Law regarding the calculation of severance pay, whether or not it had been implemented at BRI and Bank Mandiri. "Are there examples? Is it exactly as stated in the Elucidation to Article 167 paragraph (3) of the Manpower Law?" he asked.

Agus Dwi Handaya explained that severance pay must be given by the company in the event of termination of employment, pension can either be given or not. Even if the company has a pension program, employees can either participate or not.

“The Pension Law only regulates maximum contribution of 20 percent of the worker’s salary. In addition to that, the pension contribution can also be paid either entirely by the company, or by the company and the worker,” Agus stressed. (Nano Tresna Arfana/LA/Yuniar Widiastuti)

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