Indonesia Scraps Plans To Cut Severance Pay in New Bill to Improve Investment Climate

“The severance payment scheme will stay as the existing, which is 32 times (of wages). Of the 32 times, 23 times will be borne by the employer and 9 times by the government,” Firman Soebagyo, a lawmaker from Golkar Party – a member of the ruling coalition – told the committee in a meeting broadcast on national television.

Indonesia’s current rules on severance pay are among the most generous in the world and business say they deter formal hiring due to the expense of sacking underperforming employees.

A source who has been involved in drafting the bill told Reuters in February that it planned to cut maximum severance payments to 19 times monthly salary.

The proposals are included in so-called “omnibus” bills that President Joko Widodo has prioritised in his efforts to cut red tape and create jobs. The bills club together changes in unrelated legislation to allow parliament voting in a single swoop to speed reforms.