0.5 Severance Pay Multiplier Scrapped: Will Workers Made Redundant Receive More Compensation? A Calculation Example

Jakarta – Changes to employment regulations bring important news for workers facing termination of employment (PHK). One area of particular concern is severance pay, especially following the removal of the 0.5 multiplier under the new Employment Protection Law.

The change could increase severance payments for workers in certain circumstances compared with the previous rules. However, it does not mean that every worker made redundant will automatically receive twice as much severance.

The final amount will still depend on length of service, wages, the reason for termination and the formula to be set out in further regulations. How is it calculated? Here is an explanation, compiled by Viva on Friday (9 October 2026.

1. Understand the basis for severance pay

Severance calculations begin with the basic entitlement determined by an employee’s length of service. The longer the period of service, the greater the number of months’ wages that may be used as the basis for the calculation.

Under the previous rules, for example, an employee who had worked for four years or more but less than five years was entitled to basic severance pay equivalent to five months’ wages. That figure was then used as the basis before being multiplied by a factor determined by the reason for termination.

2. The 0.5 multiplier is scrapped

A significant change in the new Employment Protection Law is the removal of the 0.5 multiplier, which could previously be applied in certain circumstances. Under the change, the lowest multiplier is one. This means workers whose previous calculation was half their basic severance entitlement could potentially receive more. However, the change should not be interpreted as meaning that all workers will automatically receive twice as much severance.

3. The simple formula is the severance basis multiplied by the multiplier

To understand the change, consider this simplified formula:

Severance pay = basic severance entitlement × multiplier

The basic severance entitlement is determined by length of service and wages. The multiplier, meanwhile, depends on the applicable termination provisions. Under the new rules, the minimum multiplier is one following the removal of the 0.5 multiplier.

4. Calculation example for a salary of Rp7 million

Suppose an employee earns Rp7 million a month and has worked for four years. Under the previous calculation structure, that period of service gives a basic severance entitlement of five months’ wages.