Jun

02

Omnibus Law Employment Sector: Employment Termination Procedure

Following Law No. 11 of 2020 on Job Creation (“Omnibus Law”), the Indonesian government has enacted a number of regulations in Omnibus Law. One of the enacted regulations is Government Regulation No. 35 of 2021 on the Fixed-Term Contract, Outsourcing, Work and Resting Hours and Termination of Employment (“GR 35”).

The GR 35 provide procedures for terminating employment. Article 36 of GR 35 states that the termination of employment can happen for the following reasons:

  1. merger, consolidation, takeover, or separation of the company;
  2. efficiency;
  3. company closure;
  4. company closure due to force majeure event;
  5. when the company is in a state of postponement of debt payment obligations;
  6. bankruptcy;
  7. when there is an application for termination of employment submitted by the employee;
  8. court decision;
  9. employee resignation;
  10. the employee is absent for 5 (five) working days or more consecutively;
  11. when the employee violates the provisions stipulated under the employment agreement or the company regulations;
  12. when the employee cannot perform the obligation for 6 (six) months as a result of being detained by a relevant authority for allegedly committing a criminal act;
  13. prolonged illness of employee;
  14. retirement; or
  15. death of employee.
Notice of Termination Procedure

Shall the Employer be willing to terminate its Employee due to the aforementioned reasons, the employer must first notify the employee in writing, setting out the reasons for termination, and the termination payments and entitlements at least 14 business days before the date of termination[1]. If the employee was in the probation period, the notification shall be made at least 7 business days before the date of termination.[2]

If the employee has no objection to the termination, then the employer shall notify the Ministry of Manpower[3]. If, however, the employee objects to the termination, they must provide, in writing, the reasons for this within 7 business days from receiving the termination notice[4].

Any disagreements related to termination should be discussed between the parties. If this fails, then the matter can be brought to the local employment office for mediation, and if this fails, to the Industrial Relations Court[5].



Compensation Payment

GR 35 provides that with any termination of employment by the Employer, the Employer shall pay compensation payment. Article 40 to 57 of GR 35 has a regulation that in the event that Employment Termination occurred, the employer is required to pay the Severance Pay and/or the Recognition Pay, and the Compensation depends on the  reason, which are as follows:

No. Reason of Termination Employee’s right
1. The company is conducting a merger, consolidation, or spin-off and the employee is not willing to continue the employment relationship or the employer is not willing to accept the employee. a.     1 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
2. The employer’s company is being acquired. a.     1 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
3. The company is being acquired but the employee refuses to continue the employment due to changes to the terms of employment. a.     0.5 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
4. Efficiency due to losses. a.     0.5 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
5. Efficiency to prevent further loses a.     1 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
6. The company closing down due to losses for 2 years. a.     0.5 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
7. The company closing down not due to losses. a.     1 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
8. The company closing down due to force majeure event. a.     0.5 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
9. There is force majeure event, but the company is not closing down. a.     0.75 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
10. The company is undergoing a delay of payment due to losses it has suffered. a.     0.5 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
11. The company is undergoing a delay of payment but not due to losses it has suffered. a.     1 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
12. The company has been declared bankrupt. a.     0.5 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
13. The employee has submitted an application to terminate the employment relationship. a.     1 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
14. A decision has been issued by the dispute settlement agency (Industrial Relations Court) declaring that the employer is not guilty of the violation alleged by the employee, and the employer has decided to terminate the employment relationship. a.     Compensation; and
b.     Separation Pay based on employment agreement or company regulation.
15. Voluntary resignation by the employee. a.     Compensation; and
b.     Separation Pay based on employment agreement or company regulation.
16. The employee has been absent for five or more business days without serving written notice supported by valid evidence. a.     Compensation; and
b.     Separation Pay based on employment agreement or company regulation.
17. The employee has violated the employment agreement, company regulations, or collective labor agreement. a.     0.5 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation
18. The employee is terminated for urgent reasons. a.     Compensation; and
b.     Separation Pay based on employment agreement or company regulation.
19. The employee is unable to work for six months because of being detained for an alleged crime that has caused the company to suffer a loss. a.     Compensation; and
b.     Separation Pay based on employment agreement or company regulation.
20. The employee is unable to work for six months because the employee has been detained due to an alleged crime that has not caused the company to suffer a loss. a.     1 x the term of Recognition Pay; and
b.     Compensation.
21. A court has convicted the employee of a proven o crime that has caused the company to suffer a loss before the six months’ period of detainment has lapsed. a.     Compensation; and
b.     Separation Pay based on employment agreement or company regulation
22. A court has convicted the employee of a crime that has not caused the company to suffer a loss before the six months’ period of detainment has lapsed. a.     1 x the term of Recognition Pay; and
b.     Compensation
23. The employee is suffering from a prolonged illness or disability due to an occupational accident and is unable to work after more than 12 months. a.     2 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
24. The employee retires. a.     1.75 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.
25. The employee passes away. a.     2 x Severance Pay;
b.     1 x the term of Recognition Pay; and
c.      Compensation.

From our experience, disagreements between employers and employees on employment termination are frequently, specifically with regards to calculating compensation and severance payment. Thus, having a legal advisor to assist with employment termination issues is strongly advised.

How Schinder can help

Our team of lawyers has extensive experience assisting dozens of companies in different employment termination and employment dispute situations, which we have been managed to resolve to our client’s satisfaction. Should you need any further information about GR 35 or need our assistance related to the employment termination, please feel free to write to us at info@schinderlawfirm.com.

[1] Article 37 par. 3 GR 35
[2] Article 37 par. 4 GR 35
[3] Art. 38 of GR 35
[4] Art. 39 par.1 of GR 35
[5] Art. 39 par. 2 and 3 of GR 35

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