Companies that are in urgent need of cost reductions are now receiving inquiries about reviewing their wage systems with a view to calculating retirement benefits. In Indonesia, where retirement allowances are said to be higher than in other countries, it would have a big impact to consider ways to pay as much as possible so that they are not included in retirement allowance calculations, including provisions for retirement allowances.

[Standards for calculating retirement benefits]

Retirement allowance is calculated based on the monthly fixed wage Upah Tetap. Fixed monthly wage refers to the fixed amount of wages received every month and consists of the basic salary Upah Pokok and the fixed allowance Tunjangan Tetap. The basic salary must account for 75% or more of the fixed monthly wage, and it is impossible to have no basic salary. Moreover, the company attracts a lot of attention from employees, so there is almost no consideration of reducing costs by reducing the basic salary.
On the other hand, a fixed amount allowance is an allowance that is paid as a fixed amount every month and is not affected by attendance, performance, etc. Some companies are considering whether this fixed allowance, which accounts for up to 25% of the monthly fixed wage, can be changed into a different form and not included in retirement benefit calculations. Extreme measures such as eliminating allowances are rarely taken, and there are several ways to change the payment method so that monthly payments are not affected, but they are not included in retirement allowance calculations.

[All sorts of countermeasures]

If you change the method of setting an amount per day instead of a fixed monthly amount and paying only for the number of days you work, it will become a non-fixed amount allowance and will not be included in the standards for calculating retirement benefits. However, it seems a bit far-fetched to link job allowances for taking on the responsibilities of a specific position, family allowances to support dependents, housing allowances to help with housing costs, etc. to attendance, considering the meaning of allowances, and may cause employees to distrust the company.
On the other hand, if it is paid in kind, it is not part of the wage, but is considered a facilitas, so it is not included in the calculation criteria for retirement benefits. For example, you can change the transportation allowance paid to those in specific positions or above to a rental car, or prepare company housing instead of a housing allowance, but on the other hand, you need to take into consideration the administrative costs and effort that come with providing something in-kind, and depending on the situation, the payment in-kind may be subject to income tax, so you need to carefully check the conditions.
In an extremely extreme example, some companies set a certain period before retirement as a ``handover period'' and remove positions within the organization in order to focus on the handover, thereby stopping the payment of executive allowances, transportation allowances, and housing allowances associated with specific positions. Retirement benefits are calculated based on wages on the day of retirement, so if payments are stopped before retirement, it will not be reflected in the calculation of retirement benefits. However, this measure will have a particularly large impact on employees in high-ranking positions who were paid large allowances, and it will make them uncomfortable before they retire, so there is a possibility that dissatisfaction with the company will explode. A company culture that does not value employees who have worked for a long time until retirement will have an impact on other employees, so while costs may be reduced, this may lead to a deterioration of labor-management relations, which are based on mutual trust and respect, so consideration must be given.