Separation pay is often a confusing topic for both employees and companies. Many workers wonder, “Am I entitled to separation pay if I resign?” or “How is separation pay calculated when I get laid off?” This article will explain what separation pay is, how it differs from severance pay, and how to calculate it according to Indonesia’s labor laws.
What Is Separation Pay?
Separation pay is compensation provided by a company to employees who voluntarily resign or are terminated under specific conditions. It serves as a form of appreciation for the employee’s service. Unlike severance pay, separation pay is not always mandatory—it depends on the employment contract, company regulations, or internal human resources (human capital management) policy.
Legal Basis of Separation Pay
According to the Omnibus Law (Law No. 11/2020) and Government Regulation No. 35/2021, if an employee voluntarily resigns, the company is not obligated to provide severance pay, but may offer separation pay if it’s stipulated in the employment contract, company regulation, or collective labor agreement.
In the case of layoffs, companies are generally required to pay:
- Severance Pay
- Long Service Award (UPMK)
- Compensation for Rights (UPH)
- Separation Pay, under certain conditions or internal policies
Who Is Entitled to Separation Pay?
Employees may be entitled to separation pay under the following conditions:
- Voluntary resignation with a certain length of service (commonly over one year)
- Termination due to non-fault reasons like company efficiency
- Company policies that provide such compensation
However, employees terminated due to serious misconduct are generally not eligible.
How to Calculate Separation Pay
There is no government-mandated formula for separation pay—it depends heavily on company policy. However, a common formula used by many companies in Indonesia is:
Basic Formula:
Separation Pay = (Monthly base salary) x (Years of service)
Example:
- Base salary: IDR 5,000,000/month
- Years of service: 3
- Company policy: 1 month of salary per year of service
Separation Pay = 3 x IDR 5,000,000 = IDR 15,000,000
If your company applies this policy, you would receive IDR 15 million as separation pay.
Note that not all companies use this approach. Multinational firms, executive search agencies, or headhunter companies that implement more structured human capital management practices often offer more competitive separation packages to protect their employer branding.
Read more: June Spotlight: What’s Happening in the HR World?
Tips for Negotiating or Resigning
- Check your employment contract or collective agreement: See if separation pay is mentioned.
- Talk to your HR team or management: Ask for a clear explanation of your entitlements.
- Resign according to procedure: Usually, a minimum 30-day notice is required to remain eligible.
- Keep written records: Including resignation letters, emails, and any separation offer documents.
The Role of Executive Search Agencies and Human Capital Management
In today’s professional world, companies that work with executive search agencies or headhunters like HRnetRimbun tend to have clearer and more structured policies for managing employee exits. A well-organized human capital management system ensures that offboarding processes are fair and compliant with regulations—separation pay included.
This approach not only fosters healthy employer-employee relationships but also strengthens the company’s image as a professional and responsible employer, which is crucial for retaining top talent and attracting qualified candidates.
Conclusion
Separation pay is a token of appreciation for an employee’s dedication and service, although not always mandatory. Understanding this concept benefits both employees and companies in navigating job transitions more peacefully and professionally.
If your company is developing or reviewing HR policies and wants to ensure a professional offboarding process, HRnetRimbun is here to help. Our services range from human capital strategy consulting to sourcing top-tier talent through our executive search solutions.
Contact HRnetRimbun today for expert support in employee management and recruitment strategies!
