Jakarta, CNBC Indonesia - A businessman has revealed one of the\nreasons behind the exodus or relocation of numerous companies to foreign\ncountries, particularly other ASEAN nations. The factor in question is\nthe size of severance payments.<\/p>\n
Deputy Chairman of the Indonesian Chamber of Commerce and Industry\n(KADIN) for Labour Affairs, Subchan Gatot, stated that severance\npayments in Indonesia are the highest compared to Vietnam and\nCambodia.<\/p>\n
\u201cRegarding the relocation of industries from Indonesia to Vietnam and\nCambodia, nominally, Indonesia\u2019s wage levels are relatively competitive\ncompared to other ASEAN countries, but that is not the only factor\ninvestors consider. They also look at the total cost relationship, which\nis deemed uncompetitive due to the high severance obligations that far\nexceed those in competing countries. This is how industrial relocation\nfrom Indonesia to Vietnam and Cambodia occurs,\u201d said Subchan during his\npresentation at a hearing with Commission IX of the Indonesian House of\nRepresentatives (DPR RI) on the Labour Employment Bill (RUU\nKetenagakerjaan), Tuesday (14\/4\/2026).<\/p>\n
Subchan detailed the amount of severance that must be paid to workers\nwith one year of service, which is one month\u2019s salary. In contrast, in\nVietnam and Cambodia, the severance for workers with one year of service\nis half a month\u2019s salary.<\/p>\n
\u201cThis also creates considerable pressure on companies, where the\ntotal severance for workers in Indonesia with an average of one year of\nservice is one month\u2019s salary. Whereas in Vietnam and Cambodia, it is\n0.5 months\u2019 salary,\u201d he continued.<\/p>\n
He added that the potential severance in Indonesia can reach 19\nmonths\u2019 salary for workers with 10 years of service. In Vietnam, it only\nreaches 5 months\u2019 salary for 10 years of service.<\/p>\n
Additionally, the cost of termination of employment (PHK) in\nIndonesia is also considered high, reaching more than 240% higher than\nin Vietnam and Cambodia.<\/p>\n
\u201cThis disparity makes companies want to relocate their factories out\nof Indonesia. Indeed, our severance is still quite high, so the burden\nborne by businessmen in Indonesia, when viewed in comparison, it is\nunderstandable that some of them expand abroad, especially to Vietnam\nand Cambodia,\u201d he explained.<\/p>\n
Furthermore, another issue lies in the mismatch between the minimum\nwage and the real capacity of industry. Indonesia\u2019s minimum wage is\nrecorded at around US$334.60, higher than Vietnam\u2019s US$204. However, the\naverage payment capacity of the manufacturing sector in Indonesia is\nonly around US$188.31.<\/p>\n
In contrast, in Vietnam, the average real wage is actually above the\nminimum wage, at around US$342. This condition makes many\nlabour-intensive companies in Indonesia struggle to meet minimum wage\nrequirements.<\/p>\n
\u201cMost minimum wages cannot be met by labour-intensive companies,\u201d he\nsaid.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/businessman-reveals-surge-in-indonesian-factories-relocating-to-vietnam-due-to-severance-pay-1776167456", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }