Indonesia Denies Danantara Appointed to Manage Severance Reserve Fund as Implementing Rules Remain Pending

JAKARTA, Investortrust.id — Indonesia's Ministry of Manpower (Kemenaker) has denied circulating claims that the government has appointed sovereign investment agency Daya Anagata Nusantara (Danantara) to manage the nation's newly mandated severance reserve fund, emphasizing that implementing rules for the policy have yet to be finalized.

Indah Anggoro Putri, Director General of Industrial Relations Development and Labor Social Security (PHI-JSK) at the Ministry of Manpower, said Sunday (15/11/2026) that viral social media posts claiming employers are already obligated to remit severance reserves to Danantara are false. She added that neither Danantara nor the ministry itself has been designated as the fund's administrator.

"Information stating that employers are now required to deposit severance reserve funds into Danantara is untrue. Up to now, there has been no government decision regarding the institution that will manage the severance reserve fund," Indah said in a statement in Jakarta.

The clarification comes as businesses and labor unions closely watch how the government will operationalize the severance reserve mandate introduced under Article 253 of Law No. 27 of 2026 on Labor Protection—a landmark piece of legislation designed to safeguard laid-off workers against corporate defaults while balancing business sustainability.

Implementing Regulations and Governance Still Pending

According to Indah, the severance reserve provisions in Law No. 27 of 2026 require detailed implementing regulations before taking effect, leaving core technical and institutional frameworks unresolved.

She explained that the drafting process will begin with public consultations involving employers, labor unions, and other stakeholders to ensure the final framework balances worker protections with business continuity.

"Regulations regarding the severance reserve fund need to be discussed comprehensively with stakeholders. We want to ensure that the implementing rules are drafted by taking into account the interests of workers as well as the sustainability of the business world," Indah said.

Future regulations are expected to define the fund's management mechanisms, corporate governance, funding sources, administrative entity, and accountability standards. Until those rules are enacted through formal legislative procedures, Indah urged employers and workers to disregard unverified claims and rely solely on official government announcements.

"Thus, various reports regarding the party that will manage the fund, including mentions of Danantara or the Ministry of Manpower as the administrator, do not yet have a formal government designation basis," she said, pledging that policy formulation will remain transparent and accountable.

Origins in Labor Bill Negotiations and Bankruptcy Risks

The severance reserve scheme emerged as a centerpiece compromise during earlier negotiations over the Labor Bill between the Indonesian Employers Association (Apindo) and the Grand Coalition of Indonesian Labor Struggle (KBPBI). During parliamentary working committee discussions in August 2026—when employers and unions reported reaching consensus on roughly 70% of the draft bill—both sides backed a state-supervised reserve mechanism to guarantee severance payouts across manufacturing and service sectors.

Labor leaders pushed for upfront reserve contributions to prevent workers from being left empty-handed when distressed companies shut down or foreign owners abruptly exit the country.

"I will take an example, for instance, many companies close down. Many rogue companies—there are foreign investors who flee and abandon their businesses once they have obtained maximum profit. And eventually they go bankrupt and abandon their responsibilities, leaving thousands of workers without severance pay," said Andi Gani Nena Wea, President of the Confederation of All Indonesian Workers' Unions (KSPSI) and Presidium member of KBPBI, during the August 2026 deliberations.

Employer Concerns Over Steep Severance Costs

While supporting clearer financial mechanisms, business groups have continued to flag the heavy cost of Indonesia's severance structure as a structural drag on corporate competitiveness.

In a September 2026 labor policy forum in Jakarta, Apindo's Head of Employment Affairs Bob Azam argued that Indonesian severance rules conflate short-term unemployment support with long-term retirement benefits, driving payouts to levels far above international norms.

"Apparently, the conclusion is that we are confused about what is severance and what is a pension. So severance becomes like someone going into retirement—that is why I ask, how much is the severance? It can reach 19 months' salary, or 25 months' salary," Bob said, noting that severance in most countries functions as a six-to-12-month transition allowance.

Bob warned that prohibitive severance liabilities often paralyze struggling firms, causing management to delay necessary workforce rationalizations until the business collapses entirely—at which point creditors and court-appointed curators seize remaining assets, complicating worker claims.

"Large severance makes companies afraid to rationalize or lay off workers even when the company is already on the verge of bankruptcy. So they think, 'Just let it go bankrupt,'" Bob said. "Once it goes bankrupt, everything depends on the curator, and all of its assets are already held by the banks."