Andi Haswidi, Jakarta – Disappointed by the final draft of a severance pay regulation, the Indonesian Chamber of Commerce and Industry (Kadin) said it wanted to maintain the current arrangement in the Labor Law.

"Kadin and the government had agreed upon a maximum severance pay equivalent of five times an employee's salary," Kadin chairman Mohammad Hidayat told The Jakarta Post on Thursday.

"But they suddenly scrapped that from the draft and provided no exact limit," Hidayat said.

The government, he said, would create more uncertainty if it proceeded with the draft. "We would rather go back to using the arrangement under Article 156 of the Labor Law," he said.

Representing domestic and foreign employers, Kadin has been in a constant battle with labor unions since July over a draft deal on severance pay, which would replace an article of the Labor Law.

The current Labor Law demands a maximum severance pay equivalent of nine times an employee's regular salary, a condition that at times has led companies to neglect severance payments, especially if they have gone bankrupt.

Indonesian Employers Association chairman Sofyan Wanandi said the government had disregarded previous agreements, including the funding amounts allocated to insurance firms for severance pay.

"Not only do we have to set aside funds, we must also pay the firms administering the severance pay," Sofyan said.

"That is already an added cost for us which can cripple our cash flow. We would rather go back to managing the severance pay internally."

Employers have agreed to allocate funds worth 3 percent of an employee's salary per month, while labor unions have pushed for a minimum of 8 percent. "With this kind of draft, we would prefer to lobby the government to drop it and go back to using the Labor Law," Sofyan said.

Indonesian Prosperity Trade Union (KSBSI) president Rekson Silaban criticized the employers' stance on the issue.

"I think there has been a misinterpretation here. There is no such thing as going back to the Labor Law. The upcoming severance regulation is an extension of the law," Rekson said.

He said unions would support the draft as long as the government let employers pay the severance fund administrator.

On Wednesday, Manpower and Transmigration Minister Erman Suparno told Kontan daily the draft would soon be signed by the President. "All is well in the process, the state secretary is currently finalizing the legal procedure," he said.

The existing Labor Law is at the top of the government's investment climate reform agenda, which aims to improve Indonesia's global competitiveness.

The deliberation of a new labor bill at the House of Representatives was brought to an end when labor unions staged the country's largest labor rally to-date in April 2006, which involved an estimated 50,000 workers.

Kadin and political analysts have predicted the process will likely recommence after the 2009 election because "it would be political suicide to push forward now".