JAKARTA – (Bloomberg) Indonesia will ask insurance companies to bid for the right to provide severance pay cover for workers in the country, where the cost of firing staff is the second highest in Asia.
'We want to invite insurance companies that are credible, have a wide network to participate in providing severance-pay insurance so our workers become comfortable,' Vice-president Jusuf Kalla said in Jakarta on Saturday. 'We will ask for premium that's competitive.'
Indonesia plans to adopt China's model for protecting workers by requiring companies to join insurance plans to cover severance pay, Manpower Minister Erman Suparno said on Dec 11. The insurance will ensure payment to workers who get laid off.
'Employers will have to pay the premium so they will be free from the requirement to give severance pay when they fire workers,' Mr Suparno said.
In China, severance pay is a month's salary for every year of work. In Indonesia, companies have to pay 32 months of wages, the most after Sri Lanka, to fire workers employed for 20 years or more. Jakarta expects to have a severance pay insurance system in place three months from now.
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