In this paper, we deal with the provisions of severance payment in Indonesian labor law. Such a Indonesian regulation of severance payment is one of the typical cases which are shown the excessive rigidity of labor regulation. While per capita income of Indonesia is about a fourth of neighboring countries's, the cost of paying for firing an employee is 3 times more than the average cost of other neighboring countries'. The related provisions regulating the employment contract termination including the severance payment are described in detail from Art. 158 to Art.172 in the Basic Manpower Law, other countries describe simply a few provisions related the severance payment. This rigid provisions may become the major reasons to increase the unemployment rate as well as the serious barriers to prevent foreigners' investment from flowing into Indonesia.