Severance Pay Compliance in Indonesia
This paper contributes new evidence from two large household surveys on the compliance of firms with severance pay regulations in Indonesia, and the extent to which changes in severance pay regulations could affect employment rigidity. Compliance a...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20120104133244 http://hdl.handle.net/10986/3218 |
| Summary: | This paper contributes new evidence from
two large household surveys on the compliance of firms with
severance pay regulations in Indonesia, and the extent to
which changes in severance pay regulations could affect
employment rigidity. Compliance appears to be low, as only
one-third of workers entitled to severance pay report
receiving it, and on average workers only collect 40 percent
of the payment due to them. Eligible female and low-wage
workers are least likely to report receiving payments.
Widespread non-compliance is consistent with trends in
employment rigidity, which remained essentially unchanged
following the large increases in severance mandated by the
2003 law. These results suggest that workers may benefit
from a compromise that relaxes severance pay regulations
while improving enforcement of severance pay statutes, and
possibly establishing a system of unemployment benefits. |
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