Severance Pay Compliance in Indonesia

Brusentsev, Vera ; Newhouse, David ; Vroman, Wayne

关键词: AGE GROUPS;    AGED;    AVERAGE WAGES;    BUSINESS FAILURE;    COMPENSATION PACKAGE;   

DOI  :  10.1596/1813-9450-5933
RP-ID  :  WPS5933

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper contributes new evidence fromtwo large household surveys on the compliance of firms withseverance pay regulations in Indonesia, and the extent towhich changes in severance pay regulations could affectemployment rigidity. Compliance appears to be low, as onlyone-third of workers entitled to severance pay reportreceiving it, and on average workers only collect 40 percentof the payment due to them. Eligible female and low-wageworkers are least likely to report receiving payments.Widespread non-compliance is consistent with trends inemployment rigidity, which remained essentially unchangedfollowing the large increases in severance mandated by the2003 law. These results suggest that workers may benefitfrom a compromise that relaxes severance pay regulationswhile improving enforcement of severance pay statutes, andpossibly establishing a system of unemployment benefits.