Laid Off? Here Are the Rights Workers Are Entitled to — Not Just Severance Pay

Many may not yet be aware that workers affected by Termination of Employment (PHK) have a number of rights that must be fulfilled by the company, in accordance with prevailing laws and regulations. PHK is defined as the end of an employment relationship due to certain conditions, which causes the rights and obligations between the worker and the employer to also end.

These provisions are regulated in several regulations, starting from Law Number 13 of 2003 concerning Manpower, Law Number 6 of 2023 concerning Job Creation, Government Regulation Number 35 of 2021 concerning Fixed-Term Employment Agreements, Outsourcing, Working Time and Rest Time, and Termination of Employment, to Constitutional Court Decision Number 168/PUU-XXI/2023.

Under the latest rules, companies are not permitted to carry out unilateral PHK without clear grounds. The government has established a number of reasons that companies can use to terminate employment relationships, including efficiency measures due to company losses, efficiency to prevent greater losses, business closure due to deteriorating financial conditions, company bankruptcy or being in the process of Suspension of Debt Payment Obligations (PKPU), and worker disciplinary violations that have gone through coaching and warning mechanisms.

Specifically for PHK due to efficiency reasons resulting from losses, the company is required to have adequate evidence, either through internal or external audits. Without such proof, the PHK decision could be challenged and declared legally invalid.

Even though the employment relationship ends, workers are still entitled to receive compensation in accordance with applicable regulations. This right consists of three main components: severance pay (uang pesangon), long-service pay (uang penghargaan masa kerja), and compensation for entitlements (uang penggantian hak).

Severance pay is provided as compensation for the end of the employment relationship, and its amount is determined based on the worker’s length of service. Meanwhile, long-service pay is given as a form of appreciation for the loyalty of workers who have served for a certain period. Compensation for entitlements includes various rights that have not been fulfilled at the time the employment relationship ends, such as unused annual leave, worker transport costs, and other rights stipulated in the employment agreement, company regulations, or collective labour agreement (PKB).

The amount of compensation a worker receives may differ depending on the reason for the PHK. For PHK due to efficiency because the company is experiencing losses, the worker is entitled to severance pay at 0.5 times the stipulated rate, long-service pay at one times the stipulated rate, and compensation for entitlements according to the rules. Meanwhile, if the efficiency measure is taken to prevent greater losses, the worker is entitled to severance pay at one times the stipulated rate, long-service pay at one times the stipulated rate, and compensation for entitlements according to the rules.

Constitutional Court Decision Number 168/PUU-XXI/2023 affirms that the amount of severance pay stipulated in the regulations is a minimum limit. Companies may still provide greater compensation through internal policies or agreements set out in the collective labour agreement (PKB).

In addition to compensation from the company, workers affected by PHK also receive protection through the Job Loss Insurance (Jaminan Kehilangan Pekerjaan/JKP) programme. The government last updated the JKP rules through Government Regulation Number 6 of 2025, which remains in effect until 2026. Under this rule, JKP benefits have been increased to 60% of wages for six months, with a maximum wage calculation limit of Rp5 million. Meanwhile, the JKP programme contribution has been reduced to 0.36% of wages, down from the previous 0.46%.

The government has also extended the deadline for submitting JKP claims to six months from the date of PHK. However, the right to these benefits will be forfeited if the worker does not submit a claim within that period, has returned to work, or has passed away. JKP protection is still provided even if the company that carried out the PHK closes its business or goes bankrupt, as long as it meets the requirements set by BPJS Ketenagakerjaan.

Nevertheless, the government emphasises that PHK must be a last resort or ultimum remedium. Before making such a decision, companies are encouraged to take various alternative steps, such as reducing working hours, limiting overtime, temporarily furloughing workers, not renewing expiring contracts, and offering early retirement programmes.

If a dispute arises regarding the PHK, the resolution is carried out in stages, starting from bipartite negotiations, mediation or conciliation, to the Industrial Relations Court (PHI). In this process, both the company and the worker have obligations that must be fulfilled in accordance with applicable legal provisions. Therefore, understanding workers’ rights when affected by PHK is crucial so that the termination process proceeds according to the rules and does not lead to disputes in the future.