Severance Risk Post-Omnibus Law & Constitutional Court Ruling: Formula and Financial Impact
Executive Summary
Indonesia’s Omnibus Law and Constitutional Court decision (MK 91/2020) changed the severance calculation for permanent employees (PKWTT).
These changes affect contingent liability and company valuation for internal assessment and M&A transactions.
This page presents the new formula, numeric examples, pre vs post comparison table, and sensitivity analysis.
1. Severance Formula Before & After Omnibus Law
Pre-Omnibus Law:
Severance = Monthly Wage × Years of Service × Previous Factor
Post-Omnibus Law + MK 91/2020:
Severance = Monthly Wage × Years of Service × New Factor + Long Service Award (UPMK)
2. Comparison Table
| Years of Service |
Pre-Omnibus |
Post-Omnibus |
| 1 year |
1 × 1 × 1 = 1 month wage |
1 × 1.5 + 0.5 = 2 months wage |
| 3 years |
3 × 1 = 3 months wage |
3 × 1.5 + 0.5 = 5 months wage |
| 5 years |
5 × 1 = 5 months wage |
5 × 1.5 + 0.5 = 8 months wage |
3. Numeric Example
Assumptions: 50 employees, average monthly wage IDR 8,000,000, 3 years tenure
Pre-Omnibus = 3 × 1 × 8,000,000 = IDR 24,000,000
Post-Omnibus = 3 × 1.5 × 8,000,000 + 0.5 × 8,000,000 = IDR 40,000,000
Total exposure for 50 employees:
Pre-Omnibus = 50 × 24,000,000 = IDR 1,200,000,000
Post-Omnibus = 50 × 40,000,000 = IDR 2,000,000,000
4. Sensitivity Analysis
- · 100 employees = IDR 4,000,000,000
- · 500 employees = IDR 20,000,000,000
- · 1000 employees = IDR 40,000,000,000
5. Implications for Valuation
Assuming annual EBITDA = IDR 15,000,000,000:
Impact 50 employees = 2,000,000,000 / 15,000,000,000 ≈ 13.3%
Valuation impact (EBITDA multiple 6x) = 2,000,000,000 × 6 = IDR 12,000,000,000