Indonesia's parliament approved higher severance benefits as part of a new labour law, according to Reuters reporting on the legislation. The move increases payouts owed to workers who lose their jobs and stands as a central component of the country's employment overhaul. Lawmakers in Jakarta endorsed the provisions in the latest round of parliamentary debate.

What does Indonesia's parliament decide?

Indonesia operates under a unicameral system, with the House of Representatives (Dewan Perwakilan Rakyat, or DPR) holding legislative authority. The body comprises 575 members elected for five-year periods and sits in Jakarta. Bills pass through committee review before reaching a full plenary vote, after which the President signs the measure into law.

The new labour law bundles severance-pay increases with broader employment reforms. Reuters' reporting identifies the severance provisions as the headline element of the package, with employers and workers both watching the final statute closely.

What severance changes are in the law?

The Reuters headline identifies the severance increase as the central feature of the new framework but does not specify the multiplier or formula now in force. Indonesian severance pay has historically been calculated as a multiple of monthly wages tied to years of service, with higher amounts for workers closer to retirement.

Practitioners should await the formal publication of the statute to confirm exact figures. The previous Labour Law (Law No. 13 of 2003) governed severance calculations for two decades, and the new framework represents the most significant revision in that period. The replacement of that law carries implications for pending litigation, existing employment contracts, and pre-termination procedures.

The statutory formula has long distinguished between "severance pay" (uang pesangon) and "long-service money" (uang penghargaan masa kerja), with the new framework now adjusting both categories.

What does the ruling change for practitioners?

For employers operating in Indonesia, the law raises the cost of redundancy and termination. Companies will face higher mandatory payments when they release workers, particularly long-tenured employees whose severance scales by years of service.

HR teams and in-house counsel should:

• Audit severance liabilities under existing employment contracts
• Model the cost impact on termination procedures
• Track implementing regulations from the Ministry of Manpower
• Review collective labour agreements for any formula overrides

Sectors with high turnover or large contract-workforce footprints — including manufacturing, retail, and plantations — face the largest cost adjustment. Companies running shared-service centres in Jakarta, Surabaya, and Bali should reassess headcount budgets immediately.

What comes next?

The bill requires presidential signature before taking effect as binding law. After enactment, the Ministry of Manpower typically issues implementing regulations clarifying calculation methods, notice periods, and procedural requirements. Until those regulations appear, the precise scope of the new severance formula remains uncertain.

The severance provisions sit within a wider labour package that includes reforms to outsourcing rules, contract-worker status, and dispute resolution procedures. Practitioners should monitor for the full legislative text once it becomes available.

For multinational employers with Indonesian operations, the change increases the importance of regional workforce planning. Local counsel familiar with Indonesian Manpower Ministry practice will need to update client briefings on termination costs and procedural steps. Cross-border HR teams should flag the new law to headquarters finance functions for budget recalibration. Litigation teams handling wrongful-termination claims should also reassess reserve calculations in pending matters.