Severance pay is a compensation for an employee when the employer decides to lay off the employee. In Indonesia, under article 156 of the manpower law, termination of the employment relationship gives rise to termination payment that include severance pay and/or long service pay. If a company decides to terminate the employee who has been working for an employer for a several year, it would be costly to the company.
Planning in advance would have the effect of ensuring that the company do not bear the burden of a sudden increase in cost and especially in time of financial crisis. Coupled with our capabilities of providing a higher returns, the cost to terminate an employee would be greatly reduced.
This would not restrain the company of any form of restructuring during this period.