Armand Yapsunto Muharamsyah & Partners (AYMP)

1

GENERAL PRINCIPLES

Forums For Adjudicating Employment Disputes

There are 4 (four) types of industrial disputes i.e. disputes of right, disputes of interest, disputes over termination, and disputes among labour unions.

The dispute between an employee and employer shall first be resolved through bipartite negotiation. If there is no consensus reached in the bipartite negotiation, any of the parties may submit a request to the relevant manpower services (the authorized institution in manpower under the laws, whether in province region level, or city/regency level), so the dispute can be resolved by conciliation (for the dispute of interest, dispute over termination and dispute among union labours) with third party registered in the list of manpower services as conciliator as agreed by the parties, or by arbitration (for the dispute of interest and dispute among union labours). If no agreement is reached by the parties for settlement through conciliation (including to appoint the conciliator) or arbitration, the dispute shall be resolved by mediation, which manpower services official shall act as the mediator. If the dispute cannot be resolved through conciliation or mediation, the disputes shall be settled through the Industrial Relation Tribunal (Pengadilan Hubungan Industrial). If the parties choose the settlement by arbitration, the arbitration will result in a final and binding award to the parties.

The industrial relation tribunal has the authority to adjudicate all industrial disputes, while the arbitration only covers the settlement of (i) disputes of interest, and (ii) disputes among the labour unions (based on agreement between the parties). There are legal remedies in the form of cessation and civil request to the Supreme Court regarding disputes of right and disputes over termination.


The Main Sources Of Employment Law

The main sources of employment law include (i) Law No. 13 Year 2003 concerning Manpower (“Manpower Law”) which govern the working relationship between the employer and the employee, which has been amended by Law No. 11 Year 2020 concerning Job Creation Law (“Job Creation Law”) which govern amendment of several laws in to accommodate investment in Indonesia (ii) Law No. 21 Year 2000 concerning Labour Union (“Labour Union Law”) which govern the incorporation, right and obligation of a labour union, (iii) Law No. 2 Year 2004 concerning the Settlement of Industrial Relation Dispute which govern the settlement of industrial disputes; (iv) Law No. 40 Year 2004 concerning National Social Security System (“Social Security Law”) which govern national security system in Indonesia including social security for labour; and (v) Law No. 18 Year 2017 concerning Protection of Indonesian Migrant Worker (“Migrant Worker Law”) which provide requirements, procedures, labour rights and protection in the placement of Indonesian workers abroad.

Please note that there are several provisions in the Manpower Law which have been annulled by Constitutional Court Judgment.


National Law And Employees Working For Foreign Companies

The Manpower Law will apply to all national employees who work either for a local company or a foreign company in Indonesia as a mandatory rule.


National Law And Employees Of National Companies Working In Another Jurisdiction

Any placement of Indonesian employees abroad shall be made in full compliance of the Migrant Worker Law, including the fulfilment of the rights of the employees under the Migrant Worker Law, and the fulfilment of requirement for the written working agreement. National Companies shall comply with the Manpower Law, however, the use of law in other jurisdiction is permitted, as long it will not contradict with the Manpower Law or provide more benefits to the employees compared with the benefits provided under Manpower Law.


Data privacy

There is no regulation under Indonesian manpower laws which provide specific regulation concerning Data Privacy of the employees. However, the regulation of data privacy is included in the “Information and Electronic Transaction Law”, and the specific law for the protection of the data privacy is in progress to be issued, which in principle, a party must obtain an approval from the owner of the data if the party intends to use the data.

2

HIRING THE EMPLOYEE

Legal Requirements As To The Form Of Agreement

The working agreement can be made in writing or verbally. However, there are several working agreements that should be made in writing as required by the relevant regulation, such as a definite period of employment, agreement between the employees and the outsourcing company, and cross country interwork (antar kerja antar negara).


Mandatory Requirements
  • Trial Period

    • The probation period is limited to 3 (three) months and can only be applied to an indefinite period of employment. The probationary period shall be clearly stipulated in a working agreement, or where there is no working agreement the employee has been informed verbally and it has been stipulated in an assignment letter. During the probation period, the employer may terminate the employee, by providing 7 (seven) days prior notice and without obligation to pay the “Termination Compensation” (consisting of severance pay, long service pay, rights compensation and/or separation pay) provided that the termination clause for the probationary period has been agreed upon by both parties beforehand.

  • Hours Of Work

    • Subject to certain business sector and works, the maximum hour of work is 40 (forty) hours in a week. The arrangement could be 7 (seven) hours in a day for 6 (six) workdays in a week or 8 (eight) hours a day for 5 workdays in a week.

    There is limitation for overtime which is no later than 4 (four) hours in a day or 18 (eighteen) hours in a week. Please note that the employer is prohibited from employing female employees under 18 (eighteen) years old for night shifts (from 23.00 P.M until 07.00 A.M). The same also applies to pregnant employees whose obstetrician has provided a recommendation or statement that the night shift would be harmful to her safety and health. There are also several regional regulations that prohibit women from being employed on night shifts, except in specific kinds of work such as nurseries.

    Pursuant to Ministry of Manpower and Transmigration Regulation No. 102/MEN/ VI/2004 regarding Overtime Working and Overtime Working Payment (“Minister Regulation 102/2004”), an employee who is responsible as a decision maker, planner, executor of the company to running its business, is not eligible for overtime payment due to the nature of the position.

  • Special Rules For Part-time Work

    • There are no specific rules for part-time work. There are only 2 types of working agreement under Indonesian law: (1) indefinite period working agreement; and (2) definite period working agreement. Definite period working agreement is limited only for temporary work, which are: (i) works that the completion can be estimated (which shall be a short period); (ii) seasonal work; (iii) work which related with new product, new activity, or additional product which still on trial; (iv) one-time job: or (v) work which is temporary in nature.

  • Earnings

    • There is a minimum wage that shall be fulfilled by the employer to its employee, including during the probation period. The minimum wage is determined by the Governor of each province in Indonesia, and will be evaluated annually. Thus, the minimum wage will vary depending on the province. The minimum wage applies only for the employees who work less than a year for the relevant employer. The employer shall arrange the scale and structure of wage that shall be shown to the authorized institution, and submit a statement letter that the scale and structure of wage has been determined by the employer. Such scale and structure of wage shall be shown by the employer to the employee subject to the relevant position of such employee. The wage of the employees who work more than a year for the relevant employer shall refer to the scale and structure of wage determined by the employer.

  • Holidays/Rest Periods

    • The employee is entitled to a minimum period of 12 (twelve) workdays of rest per year after working for 1 (one) year consecutively. The long rest can be provided in accordance with the employment contract and/or company regulation or collective labour agreement. The employer may apply different entitlements to rest periods depending on the position of the relevant employee, subject to the minimum rest period as mentioned before.

  • Minimum/Maximum Age

    • The minimum age is 18 (eighteen) years old. However there is an exemption for aged 13 (thirteen) years old to 15 (fifteen) years old limited only for light work to the extent that the job does not disrupt any physical, mental and social developments, which shall be in full compliance with specific requirements such as: has been permitted by their parents (or guardians) subject to working agreement signed between employer and parents (or guardians), maximum 3 (three) working hours, and other specific rules and regulations in relation thereto. The maximum age will depend on the employer’s policy which shall be stipulated in the company regulation and/or collective labour agreement.

  • Illness/Disability

    • The Manpower Law provides non-discrimination regulation in which all workers shall have the equal rights and opportunities to find a job including equal treatment to persons with disabilities. The employer is obliged to provide protection to the said employee, including to provide accessibility, working tools and safety equipment in accordance with the type and severity of their disability.

  • Location Of Work/Mobility

    • The location of work shall be specified in the working agreement or verbally for the unwritten working agreement, and/or company regulation or collective labour agreement. Mobility clauses shall be stated in the written working agreement, and/or company regulation or collective labour agreement.

  • Pension Plans

    • The employer is obliged to register the employee for the labour social security system in accordance with Social Security Law, in which the pension security is included as part of labour social security. The pension security contribution is 3% (three percent) of the total salary (basic wage and fixed allowances) in monthly basis, in which from such of the 3% (three percent), the 2% (two percent) shall be paid by the employer and the remaining 1% (one percent) shall be paid by the employee to the Social Security Provider Agency (Badan Penyelenggara Jaminan Sosial Tenaga Kerja – “BPJS”). The employee has the rights to request his/her pension security from the BPJS when the pension age has been reached (notwithstanding he/she is still working), which pursuant to the implementation regulations of the Social Security Law, it has been determined that the pension age is 57 (fifty-seven) years old. If the employment is terminated due to pension, the employer shall pay specific Termination Compensation as in accordance with the law, however, the employer contribution in the pension security can be calculated as part of the Termination Compensation.

    Other than pension security, there is also old age security which is also part of the labour social security. The old age social security contribution is 5.7% (five-point seven percent) of the total salary in monthly basis, in which 3.7% (three point seven percent) shall be paid by the employer, and the remaining 2% (two percent) shall be paid by the employee.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)

    • There are specific regulations for pregnancy and maternity, but there are no specific regulations for paternity and adoption. However, the employee is entitled to be absent from work because of getting married, attending a marital ceremony of their children, having their children circumcised or baptized, or because the employee’s wife gives birth to a baby, or suffers miscarriage, or because the spouse, children-in-law, parents or parenting-law of the employee or a member of the employee’s household passes away.

    Female employees are entitled to a 1,5 (one and a half) months period of rest before and after giving birth, based on the time calculation by the obstetrician or doctor. This maternity leave may be extended with the recommendation from a doctor or obstetrician. In addition, the employer is obliged to provide proper opportunities to female employees whose babies still need breastfeeding, to breast-feed their babies during working hours.

  • Compulsory Terms

    • The working agreement in writing should include (i) the name, address, and business type of the company (employer), (ii) name, gender, age, and address of the employee, (iii) position and scope of work, (iv) location of work, (v) salary and method of payment, (vi) the work requirements including the rights and obligations of the employer and the employee, (vii) commencement and the period of the working agreement, and (viii) date and place of the working agreement made and undersigned by the parties.

    Any fees, costs, and matters related to the making of the working agreement shall be borne by the employer.

    The working agreement is irrevocable. and cannot be amended unless agreed to by both parties.

    The working agreement should not contravene with prevailing company regulations, collective labour agreements, laws and regulations. Otherwise, the provisions in the working agreement will be void and the provisions in the prevailing regulations will be applied.

  • Non-Compulsory Terms

    • The parties are free to include any other terms and conditions to the working agreement, to the extent that it will not contravene and/or violate the prevailing laws and regulations.


Types Of Agreement

There are 2 (two) types of working agreement which are an indefinite period working agreement (“Indefinite Working Agreement”) and a definite period working agreement (“Definite Working Agreement”). The probation period is up to a maximum of 3 (three) months and is only applicable to Indefinite Working Agreements (see “probation period” above”).

A Definite Period Working Agreement is limited only for temporary work, which are: (i) works that the completion can be estimated (which shall be a short period); (ii) seasonal work; (iii) work which related with new product, new activity, or additional product which still on trial; (iv) one-time job: or (v) work which is temporary in nature. The maximum period for a Definite Working Agreement is limited to 5 (five) years (including any of its extension and/or renewal).


Secrecy/Confidentiality

There are rules applicable to secrecy and/or confidentiality in employment relationships. The employee shall protect the trade secrets of the employer (company) during and/or after the employment relationship. The employer may include a non-solicitation and/or non-competition clause in the working agreement (see “Restrictive Future Activities below”). In general, the Indonesian Penal Code has categorized disclosure of any restricted information by the employee as a criminal action with a maximum 9 (nine) months’ imprisonment. There are also several specific laws governing the disclosure of restricted information.


Ownership of Inventions/Other Intellectual Property (IP) Rights

The person who creates inventions or other intellectual property (IP) rights is the owner of the said invention or IP rights even though such inventions or other intellectual property (IP) rights were found during working hours, unless agreed otherwise in an agreement made between the employer and the employee.


Pre-Employment Considerations

There are no specific regulations under Indonesian law regarding pre-employment including related requirements which shall be met by the applicants or related to background of the applicants. The employer may set their own requirements, provided that the requirements do not practice discrimination. However, it is allowed for the employer to require the applicant to submit the “SKCK” (statement letter of criminal record issued by the police department) which provides information on whether the applicant has a criminal record or not.

In respect of “Pre-Employment”, the government recently issued new regulation which provides pre-employment facility by the issuance of the “Pre-Employment Card”. The Pre-Employment Card can be requested by any unemployment. The holder of the Pre-Employment Card is entitled to receive a certain amount of financial assistance to attend training which is held by certain training institutions in accordance with the laws and regulations.


Hiring Non-Nationals

Foreign employees can only be employed for certain positions and periods of time. The employer is obliged to submit the plan to use foreign employees’ services (Rencana penggunaan Tenaga Kerja Asing – “RPTKA”). The employer is also obliged to pay compensation in using the foreign employees. After the required documents have been submitted for obtainment of RPTKA, and the compensation in using the foreign employees services has been paid by the employer, the authorized minister or other appointed officials shall issue the ratification of RPTKA. The ratification of RPTKA is used to obtain working visa and temporary stay permit. The working visa will be issued through Indonesian government representative in the origin country of the foreign employee, while the temporary stay permit will be provided to the foreign employees on the counter in specific international port or airport when the foreign employees enter the territory of Republic of Indonesia. The obligation to obtain the RPTKA as above will not apply for the foreign employees who work: (i) as a director or commissioner with certain shareholding in an Indonesian company as the employer; (ii) as diplomatic officials or counsellors at the embassy; and (iii) required by the employer due to emergency, vocation, in the technology-based start-up company, business travel, and research for a specific period.

Furthermore, the employer shall appoint a national employee as an accompanying working partner for the foreign employees. The purpose is for transferring of technologies and expertise, however, such regulations will not be applied for foreign employees in specific positions such as director of the company, or other positions, or specific work pursuant to the laws and regulations.

Violation upon the said provisions above would be subjected to a fine in accordance with the laws and regulations which shall be paid by the employer.

The foreign employee is prohibited to be placed in a position that deals with personnel and/or occupy certain positions. An individual employer is prohibited to employ foreign employees.


Hiring Specified Categories Of Individuals

In specific industries such as insurance, construction and other industries which are specifically regulated under various laws and regulations, certain positions shall be equipped with specific certification in accordance with the laws. This also applies to foreign employees, in which documents related to the specific competency of the employee shall be submitted in the obtaining of RPTKA’s ratification.

In addition, as elaborated above in “Hiring Non-Nationals”, foreign employees in the technology-based start-up company is exempted in the obtaining of RPTKA requirement.

Furthermore, there are restrictions on the type of work that could be undertaken by certain employees, specifically for children employees (please refer to our elaboration in “Minimum/Maximum Age”, that children can be employed with specific conditions and requirements), such as: i) Jobs relating to machinery, aeroplanes, installation, and other equipment; ii) harmful working environments (physically, biological, and chemical harm); iii) buildings, roads, bridge construction; iv) traditional loading with loads over 12 kg for boys, and over 10 kg for girls; and iv) with working hours between 18.00 P.M to 6 A.M; etc, (whilst, for female employees please see “Hours of Work”).


Outsourcing And/Or Sub-Contracting/Temporary Agency Work

Outsourcing can only be conducted by the outsourcing company with a specific license issued by the government. The outsourcing employees shall be hired whether by indefinite period working agreement or definite period working agreement. If the employee is hired by the definite period working agreement, the working agreement shall include the protection clause in the changes of the outsourcing company while the job in the user company remains available. If the protection clause is not provided, the outsourcing company shall be liable for the fulfilment of any employee’s rights.

3

MAINTAINING THE EMPLOYEE RELATIONSHIP

Changes To The Contract

An annulment and/or amendment of a working agreement only can be done upon the consent from the employer and the employee.


Change In Ownership Of The Business

In the event that change of ownership of the business is due to merger, amalgamation or separation of the Company, the employer may terminate the employment with obligation to pay the Termination Compensation if the employee chooses to discontinue working in the employer. If the change in ownership is due to acquisition, either the (new) employer or the employee may choose to continue or discontinue the employment relationship. In this case, the employee is entitled to be provided with Termination Compensation in the amount as regulated under the Job Creation Law and its implementation regulation.


Social Security Contributions

The employer shall pay social contribution for the mandatory labour social security consisting of: (1) health social security (“JKN”); (2) work accident social security (“JKK”); (3) death social security (“JKM”); (4) old age social security (“JHT”); (5) pension social security (“JP”) and (6) loss job security (“JKP”). The social contribution of the JKN is 5% (five percent) of the total salary on a monthly basis, of which 4% (four percent) shall be paid by the employer and the remaining 1% (one percent) shall be paid by the employee. JKK and JKM shall be fully paid by the employer, while social contribution of JHT and JP the contribution shall be paid by both employer and employee (please refer to our elaboration in “Pension Plans”), and social contribution of the JKP shall also be paid by Indonesian central government other than shall be paid by the employer by reallocation of some percentage from employer’s social contribution in the JKK and JKM, in which 0.14% (zero point fourteen percent) of employer’s obligation to pay social contribution for JKK will be allocated for JKP, and 0,1% (zero point one percent) of employer’s obligation to pay social contribution for JKM will be allocated for JKP.


Accidents At Work

The employer is required to provide safety and health protection for their employees. Occupational safety and health efforts are intended to provide a guarantee of safety and increase the level of health of the employees by preventing occupational accidents and disease, controlling hazards in the workplace, health promotion, medical care and rehabilitation. Pursuant to that matter, the employer is obliged to provide occupational safety and health management which shall be integrated with the company management system.

In addition, the employee shall also be entitled for compensation provided by BPJS in accordance with the work accident social security (“JKK”), and be entitled for Termination Compensation in respect of employment termination due to work accident resulting the employee is not able to work for consecutive 12 (twelve) months.


Discipline And Grievance

Discipline and grievance will be subjected to the provisions under the valid company regulation or collective Labour Agreement. The Manpower Law only regulates regarding warning letters consisting of 1st warning letter, 2nd warning letter and 3rd warning letter which shall be valid for maximum 6 (six) months for a violation conducted by the employee. However, the employer may issue 2nd warning letter or 3rd warning letter directly subject to the level of violation conducted by the employee pursuant to the company regulation or collective labour agreement. The employer may terminate the employee due to the violation of company regulations or of the collective labour agreement in case of any violation by the employee within the validity period of the 3rd warning letter.

By the issuance of Job Creation Law which amends the Manpower law, the employer may also terminate the employee for his/her violation without the issuance of any warning letter for the violation which is urgent in nature.


Harassment/Discrimination/Equal pay

Employees have the right to have the same opportunity to get a job and to receive equal treatment without any discrimination by the employer. Please note that Indonesia Manpower Law provides laws and human rights protection towards all employees for an equal chance of working, free of discrimination either inside or outside the working environment.

Harassment or discrimination by the employee can be subjected to disciplinary sanction if it is regulated under the company regulation or collective labour agreement, while for the harassment conducted by the employer, the employee may request for employment termination with rights to receive the Termination Compensation in accordance with the laws.

In respect of the equal pay, please refer to the elaboration of the scale and structure of wages in “Earnings” as above.


Compulsory Training Obligations

There are no compulsory training obligations to be conducted by the employer. However, the employer is responsible for the improvement and/or development of the employee’s competence through training, while the employer who employs a foreign worker has an obligation to educate and train its Indonesian citizenship employees who assist such foreign workers in the transfer of technologies and expertise from the said foreign worker in accordance to qualification of the said foreign worker position.


Offsetting Earnings

The offsetting of earnings can be conducted by the employer if regulated in the working agreement and/or collective working agreement and/or by the prior consent of the employee.


Payments For Maternity And Disability Leave

Cost of maternity is covered by JKN social security (please refer to the elaboration in “Social Security Contribution”) to a certain amount in accordance with the laws and regulations. In practice, most companies also provides additional health insurance in which the cost of maternity is also covered to a certain amount pursuant to the insurance policy. In the case of maternity, the employer is prohibited from terminating the employee. Any termination conducted on the grounds of pregnancy will be declared null and void and the employer is obliged to re-employ the employee.

The termination on the grounds of disability is only allowed if the employee is unable to perform his/her work within more than 12 (twelve) consecutive months, in which during such period, the employer is remain be liable to pay the wage of the employee. After the period of 12 (twelve) months, the employer may terminate the employment, or the employee may request for termination of employment. Termination based on this condition entitles the employee to receive higher Termination Compensation in which the severance pay is doubled.


Compulsory Insurance

In accordance with the Social Security Law, the employer is obligated to register its employee, including foreign employee, in the labour social security program which includes: (1) health social security (“JKN”); (2) work accident social security (“JKK”); (3) death social security (“JKM”); (4) old age social security (“JHT”); (5) pension social security (“JP”) and (6) loss job security (“JKP”).


Absence For Military Or Public Service Duties

There is no regulation relating to military or public service duties since there are no recognised mandatory military courses or public service duties in Indonesia.


Works Councils or Trade Unions

Works Councils or Trade Unions are known as the labour union (serikat pekerja). Pursuant to Labour Union Law, the labour union can be established by at least 10 (ten) employees and shall possess its own articles of association and bylaws.

A labour union can perform a number of different roles and functions.


Employees’ Right To Strike

Employees are entitled to conduct a strike as result of a failed negotiation between the employer and the employees. The strike shall be performed in a legally, orderly and peacefully manner in accordance with the prevailing laws. Employees shall not be prevented to use their rights to strike and thus several protections are granted to employees on strike.


Employees On Strike

In the event the strike is illegally performed, the employer may take temporary action by (i) prohibiting employees on strike from being present at locations where production processes normally take place, or (ii) prohibiting employees on strike from being present at the employer’s premises.

In contrast, if the strike is legally performed, then the employer is prohibited from (i) replacing striking employees with other employees from outside the company, or (ii) imposing sanctions on or taking retaliatory actions in whatever form against striking employees and officials of labor unions during and after the strike is performed by them. Pursuant to Manpower and Transmigration Minister Decree No. 232/2003, it is stated that in the event of an illegal strike, the employee on strike can be deemed as having resigned if there is no response after the employer has properly summoned the employee twice in writing within 7 (seven) days.


Employers’ Responsibility For Actions Of Their Employees

The employer is responsible for the acts and any damage caused by their employees and/or other persons appointed to represent their affairs, except when such an action is conducted outside the employment’s course.

4

FIRING THE EMPLOYEE

Procedures For Terminating the Agreement

The employer is encouraged to do their best to prevent the termination of the employment relationship. However, if termination is inevitable then the employer shall notify to the relevant employee and/or the labour union if the employee is a member of the labour union, by the issuance of “Termination Notice”, which shall be provided within at least 14 (fourteen) days prior the termination. In case of termination during the probationary period, the Termination Notice shall be provided within at least 7 (seven) days prior the termination.

If there is no objection from the employee regarding the termination, the termination shall be reported to the relevant minister or manpower services.

The employee’s objection to termination shall be provided within at least 7 (seven) days after the Termination Notice is received. The dispute between the employee and the employer in this matter shall first be resolved by bipartite negotiation. If there is no consensus reached in the bipartite negotiation, the dispute shall be settled by dispute settlement mechanism pursuant to the laws and regulations (please refer to elaboration in “Forums For Adjudicating Employment Disputes” as above).


Instant Dismissal

The termination without the procedure of Termination Notice as elaborated above is allowed only in a termination due to employee’s violation which is urgent in nature as in accordance with the company regulation, or collective labour agreement, and/or working agreement.


Employee's Resignation

The employment relationship may be terminated by the employee’s resignation. Unless agreed otherwise by the parties, the resignation shall be submitted at least 30 (days) prior to the effective date of the resignation and cannot be proposed by the employee if the employee is being bound by commitment to return for the training provided.

In addition, an employee with an indefinite period working agreement is only entitled to rights compensation (uang penggantian hak) and the separation pay (uang pisah – which amount shall be regulated under the working agreement, and/or company regulation, or collective labour agreement), while for an employee with a definite period working agreement will only be entitled for certain compensation as regulated under the laws and regulations. However, based on the Manpower Law, any party who terminates the definite period working agreement prior to its expiration shall pay compensation in the amount of salary for the remaining period of the working agreement. Therefore, the resignation of the employee will cause the employee to pay the compensation to the employer.


Termination On Notice

Termination Notice is the standard procedure in termination (please refer to elaboration in “Procedures For Terminating the Agreement”).


Termination By Reason Of The Employee's Age

The employer may terminate the employment for the employee who has reached the pension age as pursuant to the employment agreement, and/or company regulation, or collective labour agreement. There is no specific pension age regulated under the laws and regulations, however, there is a regulation which determined the specific pension age to be entitled for pension social security i.e. 57 (fifty seven) years old (please refer to elaboration in “Pension Plans” as above). This is commonly used by most companies as the standard pension age to be regulated in their company regulation.


Automatic Termination In Cases Of Force Majeure

There is no automatic termination due to force majeure. However, the employer may terminate the employment due to force majeure, in which the termination shall be carried out through the Termination Notice procedure (as elaborated in “Procedures for Terminating the Agreement”). The employer shall pay for Termination Compensation in the termination due to force majeure, where the Termination Compensation differs between force majeure that causes the company to close, and force majeure that does not cause the company to close.

However, the issuance of Job Creation Law which amends the Manpower Law does not eliminate the confusion over the force majeure issue within the meaning of the Manpower Law, since there is still no definition of force majeure in the Manpower Law. Therefore, it is necessary to arrange the definition of force majeure in the employment agreement, and/or company regulation or collective labour agreement.


Collective Dismissals

Collective dismissal is not specifically mentioned, or regulated under the laws and regulations, however, there are grounds of termination which can lead to collective dismissal such as termination due to efficiency, corporate actions, etc. The procedure of termination and the rights of the employee is no different than the ordinary termination.


Termination By Parties’ Agreement

The termination can be made by parties’ agreement. There are no specific regulations for the termination by parties’ agreement, therefore the termination agreement shall be executed by the parties, and rights of the employee in regard to Termination Compensation shall be specifically arranged in such a termination agreement. It is advisable that the termination agreement shall also be followed with a resignation letter submitted by the employee so the termination can be categorized as termination in grounds of resignation.


Directors Or Other Senior Officers

Except for the expatriate who is appointed as a director, in which the manpower regulation regarding foreign employee shall apply, the director who has been appointed through general meeting of shareholders pursuant to the provisions under Indonesian company law shall not be considered as an employee under the Manpower Law.

Meanwhile for the senior officers, there are no specific regulations regarding senior officers, other than that it can arranged in the employment agreement, and/or the company regulation, or collective labour agreement, that an employee with a certain level or above has no rights for any overtime fee in accordance with the laws.


Special Rules For Categories Of Employee

Special rules for several categories of employees have been stipulated in many various regulations such as: specific working hours and rest period for the employee in energy and mineral resources business sector in certain areas; specific protection, requirements and rights including working hours for the seafarer; employer obligation for women labourers who work during 23.00 to 07.00; and other special rules for specific categories of employees.


Specific Rules For Companies in Financial Difficulties

The Job Creation Law which amends the Manpower Law provides the right of the employer to terminate the employee due to financial difficulties such as: (1) Termination in grounds of efficiency: the Job Creation Law provides the right of the employer to terminate the employee as preventive action of the employer to avoid the losses of the employer, which is different to the previous Manpower Law wherein the employer may only terminate the employee due to losses of the company; (2) Termination on grounds of Suspension of Debt Payment Procedure: this new inclusion in the manpower regulations means that the employer may terminate the employee in circumstances that the employer is under the suspension of debt payment procedure, notwithstanding that such procedure is carried out not because of the employer’s losses; also (3) Termination on grounds of Force Majeure: in which Job Creation Law at least provides more specific regulation related to the termination on grounds of force majeure.

However, the procedure on termination (as elaborated in “Procedures for Terminating the Agreement”) remains applicable and it does not diminish the obligation of the employer to pay the Termination Compensation to the employees. Notwithstanding the foregoing, the Job Creation Law has reduced the coefficient of the severance pay as part of the Termination Compensation.


Restricting Future Activities

There are no regulations under specific manpower laws and regulations. The provisions such as “non-competition” clause and “non-solicitation clause” shall be regulated under the employment agreement between employee and the employer.


Whistleblower Laws

There are no regulations regarding whistleblower stipulated under Indonesian manpower laws and regulations.


Special Rules For Garden Leave

Garden Leave is not regulated under Indonesian manpower laws and regulations.


Severance Payments

Under Indonesian manpower laws and regulations, the severance payment is part of the Termination Compensation consisting of: severance pay, long service pay, rights compensation and separation pay. The component of Termination Compensation will depend on the grounds of termination, e.g. for the termination on grounds of resignation, the employee is only entitled to separation pay and rights compensation.

The amount of severance pay and long service pay will depend on the years of service for the relevant employer which will be calculated in accordance with the laws and regulations, while rights compensation is amount of monies as compensation of annual leaves that have not been taken yet, cost of return to the place of labour where the labour has been hired, and other costs subject to the provisions under the employment agreement, company regulation or collective labour agreement, and the separation pay shall be determined in the company regulation or collective labour agreement.

The coefficient of severance pay and long service pay shall also depend on the grounds of termination, consisting of: no severance pay, 0.5 times of severance pay, 0.75 times of severance pay, 1 time of severance pay, 1.75 times of severance pay (for termination in grounds of pension), and 2 times of severance pay (for termination on the grounds of death of the employee and on the grounds of illness or disability for more than 12 (twelve) months).

The Termination Compensation as elaborated above is not applicable to the employee with a definite period working agreement, which will be granted specific compensation pursuant to the laws and regulations. It should be noted that such compensation is not applicable to foreign employees.


Special Tax Provisions And Severance Payments

There are no special tax provisions for the salary and Termination Compensation. The salary and the Termination Compensation provided to the employee are subject to income tax.


Allowances Payable To Employees After Termination

Other than the Termination Compensation, there are no other employer’s obligations to the employees after termination, unless otherwise stipulated under the employment agreement.


Time Limits For Claims Following Termination

Previously, an employee whose employment is terminated without the decision from the institute for the settlement of industrial relation disputes and disagrees with such termination, may file a lawsuit with the institute for the settlement of industrial relation disputes within a period of no later than 1 (one) year from the date on which their employment relationship is terminated. Subsequently, the Constitutional Court has annulled the time limitation, and therefore there is no time limit for claims toward the termination of an employee by the employer.

5

GENERAL

Specific Matters Which Are Important Or Unique To This Jurisdiction

In cases where the employee is detained due to allegation of criminal action, the employer is not liable to pay the wage of the employee, however, the employer is obligated to provide aid to the employee’s family pursuant to the laws and regulations within maximum 6 (six) months since the employee has been detained. If during the 6 (six) months period the employee has been found as guilty by the court, or if after 6 (six) months the employee is still being detained, the employer is entitled to terminate the employment, by providing the Termination Notice in which the employee will be entitled for some component of the Termination Compensation. If the during the 6 (six) months period the employee has been found as not guilty by the court, the employer shall accept the employee back to work.



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Renaldy M. Warokka
Armand Yapsunto Muharamsyah & Partners (AYMP)
Indonesia


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© 2021, Armand Yapsunto Muharamsyah & Partners (AYMP). All rights reserved by Armand Yapsunto Muharamsyah & Partners (AYMP) as author and the owner of the copyright in this chapter. Armand Yapsunto Muharamsyah & Partners (AYMP) has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021