Jun

22

Compensation Payment on the Change of Employment Agreement in Indonesia

The implementation of the Job Creation Law (“Omnibus Law”), which was enacted in 2020, has made a significant change to the law and regulation in Indonesia, including the Company Law, Investment Law in Indonesia, and the Indonesian Labor Law. The Job Creation Law makes it easier to attract foreign investment to Indonesia. Following to the Job Creation Law, the Government of the Republic of Indonesia has enacted Government Regulation No. 35 of 2021 on Fixed Term Employment, Outsourcing, Working Hours and Rest Times and Termination (“GR 35/2021”).

According to article 15 of GR 35/2021, it has been stipulated that for a Fixed Term Employment Contract (“PKWT”), the Employee is eligible to received compensation payment when the employment agreement has been ended. This provision has led a question for the Employer who intends to continue hiring the employee from the fixed term to an Indefinite Term Period Employment Contract. Since the fixed term contract shall be ended prior to renewing the contract on indefinite term basis, most employers wonder if they must pay the compensation payment as provided under the Article 15 of GR 35/2021.

Pursuant to that question, Article 15 GR 35/2021 stipulates the following:

  1. Employers shall be required to provide compensation money to Workers/Laborers whose employment relationship is based on PKWT.
  2. The provision of compensation money shall be made upon the expiration of the PKWT.
  3. The compensation money as referred to in paragraph (1) shall be provided for Workers/Laborers who have worked for no less than 1 (one) month continuously.
  4. In case the PKWT is extended, the compensation money shall be provided upon the expiration of the PKWT period before the extension, and for the period of PKWT extension the next compensation money shall be provided after the extension of the PKWT period is expired or completed.
  5. The compensation money shall not apply to foreign workers who are employed by the employer in an employment relationship based on PKWT.

Therefore, every PKWT worker who has worked for at least one month continuously, whose PKWT period has ended (expired or extended), is entitled to get compensation money from the company. In conclusion, the compensation money is given every time the PKWT period ends, including in the event of a PKWT extension, where the compensation money must be paid by the company before the extension is carried out. After the PKWT extension expires, the employee is entitled to receive compensation money for the extension of the PKWT.

How Schinder can Help

Schinder Law Firm is a leading corporate law firm in Indonesia, practicing Indonesian Company Law, Indonesian Investment Law and Indonesian Employment Law. Our team of corporate lawyers in Indonesia and investment lawyers has forged a reputation for assisting various clients across the globe. As Indonesian business lawyers, we have extensive experience providing legal consultancy services. In the employment law practice area, we have been entrusted by a dozen multinational companies to represent them in various employment disputes and have been appointed as a permanent legal consultant to help them deal with daily legal matters.

Shall you have any inquiries related to this article, please feel free to contact us at info@schinderlawfirm.com.

Author: Budhi Satya Makmur

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Dear valued Visitor,

Data is a valuable currency in this new world. In the midst of digital transformation, the Indonesian government has taken the final decision to pass the Pelindungan Data Pribadi (PDP) Bill by September 2022. The PDP Law applies to all businesses established in Indonesia and puts the consumer in control. The task of complying with this regulation falls upon businesses.

The PDP Law affects a variety of business operations, including how your sales team prospect and how marketing initiatives are managed. Businesses have had to reassess their business procedures, applications, and forms. Additionally, all businesses that work with personal data should designate a Data Protection Officer (DPO) or data controller to oversee PDP compliance.

In line with this spirit, it gives us great pleasure to announce and share with all our esteemed clients and business associates that Schinder Law Firm is prepared to assist your company to understand the impacts of the Personal Data Protection Law (PDPL) and take the required measures to comply with the law. Our Privacy, Data Protection, and Cybersecurity practice group is a pioneer in providing data privacy law services in Indonesia. Personal data protection services include but are not limited to:

  • Assessing the existing systems, processes, and controls, etc.
  • Providing provide gap assessment on the existing systems, processes, and controls, etc.
  • Developing and ensuring contracts and agreements comply with the PDP Law
  • Developing policies, best practices, and procedures
  • Advising on the security of personal data and managing data breaches
  • Acting as the Data Protection Officer (DPO) and advising upon the appointment, role, and responsibilities of a data protection officer
  • Advising on cross-border transfers of personal data
  • Carrying out data protection impact assessments and data protection audits
  • Recommending other necessary corrective actions in order to comply with the PDP Law
  • Training on the PDP Law tailored to clients’ businesses

We look forward to many more opportunities in the year ahead with your continued support and trust. For consultation, please send us a WhatsApp or Email.

Warmest regards,
Naz Schinder
Managing Partner

Keep Up with the New Law in Indonesia: Personal Data Protection

  • Assessing the existing systems, processes and controls, etc.
  • Providing provide gap assessment on the existing systems, processes and controls, etc.
  • Developing and ensuring contracts and agreements comply with the PDPL.
  • Developing policies, best practices and procedures.
  • Advising on security of personal data and managing data breaches.
  • Acting as the Data Protection Officer (DPO) and advising upon the appointment, role and responsibilities of a data protection officer.
  • Advising on cross-border transfers of personal data.
  • Carrying out data protection impact assessments and data protection audits.
  • Recommending other necessary corrective actions in order to comply with the PDPL.
  • Training on the PDPL tailored to clients’ businesses.
Privacy, Data Protection and Cyber Security
We help our clients to understand the impact of the Personal Data Protection Law (PDPL) on their companies and take the required measures to comply with the law.