Mahfud denies that the Job Creation Act eliminates severance pay … The facts? All pages

JAKARTA, KOMPAS.com – The Coordinating Minister for Political, Legal and Security Affairs (Menko Polhukam) Mahfud MD said that severance pay for workers who are victims of dismissal (PHK) remains in the Employment Creation Act (UU).

He expressed this statement at the same time refuting the information circulating in the public about the absence of a severance pay in the Employment Creation Law.

“There are various deceptions. For example, there is no severance pay, that is not true. Severance pay exists,” Mahfud MD said at a press conference broadcast by Kompas TV on Thursday (8/10/2020).

In addition, he also denied that the Employment Creation Law facilitated dismissals.

Also read: This is the reason why the government reduces the maximum value of severance pay

According to Mahfud, companies that plan to make redundancies must pay if the employment contact has not ended.

He also stated that the Employment Creation Law was born from the government’s response after receiving complaints from citizens and workers.

“The Employment Creation Law was created to respond to complaints from the public, workers that the government is slow in handling the business licensing process, regulations overlap,” he said.

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Kompas.com traced Mahfud MD’s statement back to Law Number 13 of 2003 pertaining to labor.

Also read: See the calculation of the last severance pay in the Employment Creation Law

In the Labor Law, the maximum amount of severance pay that workers can receive is 32 times their salary.

The law explains that for a period of work of eight years or more, the amount of compensation earned is the salary of nine months.

In addition, workers with more than 24 years of service will receive ten months of compensation salary for the work.

In addition, there is another clause that explains, if a worker suffers dismissal for efficiency, he is entitled to severance pay with a value twice the predetermined value.

Also read: In the job creation bill, termination of employment is the responsibility of the employer and the government

As an example, a person with a salary according to the DKI Jakarta Provincial Minimum Wage (UMP) amounting to 4.2 million IDR experiences a Termination of Employment (PHK) after 8 years and 4 months.

This is because the company where you work experiences efficiency. So when referring to the Labor Law, the amount of compensation earned is nine months’ salary.

Then, because the worker in question has been fired due to his efficiency, the amount of severance pay is multiplied by two, which is equivalent to 18 months of salary. Workers will also receive tenure awards.

For a period of work of six years but less than nine years, the amount of work time awarded is the salary of three months.

Therefore, the amount of severance pay to be pocketed will be 21 times the salary, or Rs 88.2 million.

Also read: Workers union refuses to reduce termination of layoffs in job creation bill

Meanwhile, in the Employment Creation Law, the article relating to compensation for additional dismissal received by workers if the company performs efficiently is eliminated.

The government and DPR agreed to change the maximum severance pay workers receive to 25 times the salary consisting of 19 times the workers’ monthly salary and 6 times the Job Loss Guarantee (JKP).

This means that Mahfud MD’s statement is correct that the Job Creation Act does not reduce severance pay for laid off workers. However, the statement is incomplete.

Workers laid off under the Employment Creation Law will continue to receive severance pay, but the value is reduced compared to the previous legal framework, namely the Labor Law.