Termination of employment is one of the most sensitive and contentious aspects of labor law in Indonesia. Employers must navigate a complex regulatory framework to ensure compliance with statutory obligations and avoid costly disputes. At Schinder Law Firm, we have successfully represented both domestic and multinational clients in various labor disputes, ensuring fair outcomes and risk mitigation.

1. Legal Framework for Termination in Indonesia
   Indonesian labour law, primarily governed by Law No. 13 of 2003 on Manpower (as amended by Law No. 11 of 2020 on Job Creation, or the “Omnibus Law”), and further regulated by Government Regulation No. 35 of 2021, sets strict rules regarding termination.

   Employers must demonstrate “just cause” for termination, which may include:

• • Redundancy due to efficiency measures or corporate restructuring
  • Misconduct or violation of company regulations
  • Resignation, retirement, or prolonged illness
  • Mutual agreement between employer and employee

Any termination outside of these grounds may be considered unlawful, exposing the employer to legal sanctions and reinstatement orders.

2. Mandatory Severance Entitlements
   Upon termination, employers are generally required to pay the following components:

• • Severance Pay (Uang Pesangon) – Based on years of service.
  • Long Service Pay (Uang Penghargaan Masa Kerja) – For employees with more than three years of service.
  • Compensation Pay (Uang Penggantian Hak) – Covers unused leave, relocation costs, housing, and medical allowances.

In certain cases, such as termination due to misconduct (e.g., criminal acts), entitlements may be reduced or forfeited, depending on court findings.

3. Dispute Resolution Channels
   Labour disputes can be resolved through:

• • Bipartite negotiations between employer and employee.
  • Mediation or conciliation through the local manpower office.
  • Industrial Relations Court (PHI) if no agreement is reached.

Our firm has a strong track record of success in all stages of this process, often resolving matters amicably before they escalate to court.

4. Schinder Law Firm: Proven Success in Labour Disputes
   Over the past 3 years, Schinder Law Firm has handled dozens of employment-related cases with a resolution rate of 100% in favour of our clients. Some recent notable case include:

• • EV Battery Industry Company (2024, 2025): Negotiated out-of-court mutual terminations, avoiding litigation and preserving company reputation.
  • Drilling & Seismic Service Company (2024, 2023): Negotiated out-of-court mutual terminations, avoiding litigation and preserving company reputation.
  • Steam Coal Power Plant Operation and Management Company (2023): Negotiated out-of-court mutual terminations for 200 staff following a project termination, avoiding litigation and preserving company reputation.

5. Best Practices for Employers
   To minimize legal risk and maintain healthy labour relations, we recommend:

• • Clear employment contracts that define rights, obligations, and internal rules.
  • Proper documentation of employee performance, violations, and HR procedures.
  • Compliance audits to ensure alignment with current labor laws and regulations.
  • Legal consultation prior to initiating termination or restructuring measures.

If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of the leading corporate law firms in Indonesia, with extensive experience handling similar matters. Our team of professional corporate and civil lawyers makes us one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.

Author:
Budhi Satya Makmur