Severance pay in Indonesia — uang pesangon — is one of the more complex termination obligations in Southeast Asia, made up of three separate components rather than a single formula. Combined with a termination-reason multiplier, the final payout can vary significantly depending on tenure, salary, and why the employment ended. This is governed by the Job Creation Law (UU Cipta Kerja No. 11/2020) and its implementing regulation PP 35/2021.
This guide breaks down all three components and shows how they combine into a final severance calculation.
- Indonesian severance pay has three components: Uang Pesangon (UP, base severance by tenure), Uang Penghargaan Masa Kerja (UPMK, long-service award), and Uang Penggantian Hak (UPH, unused leave and other contractual rights).
- UP caps at 9 months’ salary for employees with 8+ years of service; UPMK caps at 10 months’ salary for employees with 24+ years of service.
- A termination-reason multiplier applies on top of UP: 1.0x for business efficiency reasons, 0.5x for company losses, 1.75x for retirement, and 2.0x for employee death.
- The salary base includes basic wage plus fixed allowances; overtime, bonuses, and commissions are excluded.
Component 1: Uang Pesangon (UP) — Base Severance by Tenure
Component 2: Uang Penghargaan Masa Kerja (UPMK) — Long-Service Award
UPMK only applies once an employee has at least 3 years of service, rewarding long tenure on top of the base UP.
Component 3: Uang Penggantian Hak (UPH)
UPH covers unused annual leave, relocation costs (if applicable), and other contractual entitlements owed at separation. It’s calculated separately from UP and UPMK and is owed regardless of the termination reason.
The Termination-Reason Multiplier
The UP amount (not UPMK) is multiplied by a factor that depends on why the employment ended:
Putting It Together: A Worked Example
An employee with 7 years of service earning Rp 10,000,000/month, terminated for business efficiency reasons: UP = 8 months × Rp 10,000,000 × 1.0 = Rp 80,000,000. UPMK = 3 months × Rp 10,000,000 = Rp 30,000,000. Total before UPH = Rp 110,000,000. UPH (unused leave, etc.) is calculated and added separately on top.
Common Mistakes Employers Make
The most frequent error is applying the termination-reason multiplier to UPMK as well as UP, when it only applies to UP. A second mistake is using the wrong salary base — including variable pay like overtime or bonuses, which inflates the calculation. A third is forgetting UPH entirely, treating UP and UPMK as the complete severance package when unused leave and other entitlements are a legally separate, additional obligation.
Don’t want to calculate pesangon yourself?
Asiacruit handles terminations and severance (pesangon, UPMK, UPH) correctly and compliantly for every Indonesia hire — whether you have a PT PMA or not.
Book a Demo →Frequently Asked Questions
Uang Pesangon (UP, base severance based on tenure), Uang Penghargaan Masa Kerja (UPMK, a long-service award for employees with 3+ years of tenure), and Uang Penggantian Hak (UPH, unused leave and other contractual entitlements).
UP caps at 9 months’ salary (8+ years of service) and UPMK caps at 10 months’ salary (24+ years of service) — 19 months combined before the termination-reason multiplier and UPH, which vary by circumstance.
Yes. A multiplier applies to the UP component: 1.0x for business efficiency reasons, 0.5x for company losses, 1.75x for retirement, and 2.0x for employee death.
Yes. An EOR like Asiacruit calculates UP, UPMK, and UPH correctly based on tenure, salary, and termination reason, and ensures the final payout is compliant with PP 35/2021.