Disputes within the realm of labor can lead to the termination of employment (PHK). Before carrying out the PHK, specific procedures must be adhered to. Termination of employment entails responsibilities for employers, including the provision of compensation to employees. However, it is essential to note that compensation does not always involve severance pay.

The Regulation in Indonesia which regulate the Termination Of Employment is as follows:

1. Government Regulation in Lieu of Law Number 2 of 2022 (PERPPU 2/2022)
2. Government Regulation No. 35/2021 (PP 35/2021)

Here are several reasons elucidating why PHK does not invariably entail the obligation for employers to provide severance pay:

1. The consequence of a commercial dispute court. In accordance with Article 49, termination of employment may occur if a court decision declares that the employer did not commit the alleged actions as accused by the worker, or if the termination request submitted by the worker is rejected by the court. In such cases, the worker is entitled to receive compensation in the form of UPH and Uang Pisah.
2. Resignation without pressure in accordance with the procedure. Article 50 states that workers who resign voluntarily and meet the requirements as referred to in Article 36 letter I shall not receive severance pay. The compensation they are entitled to receive is only UPH and Uang Pisah.
3. Worker's absence from duties for 5 days or more and has been called twice in succession. Workers who are categorized as absent from work for 5 consecutive working days or more without a valid written explanation supported by valid evidence and have been duly and written warned by the employer twice, as mandated by Article 51, are entitled only to UPH and Uang Pisah.
4. Urgent Violations Fourthly, Article 52 paragraph (2) stipulates that employers may terminate the employment of workers due to urgent violations committed by the workers. These urgent violations must be specified in the employment agreement, company regulations, or collective labor agreement. Workers are entitled to receive compensation in the form of UPH and Uang Pisah.
5. Worker detained and unable to perform duties. Severance pay is also not provided to workers who experience termination of employment due to the inability to perform their duties for 6 months as a result of being detained by the competent authority due to alleged criminal acts as stipulated in Article 36 letter l, which caused losses to the company. Similarly, if the worker is convicted before the end of the 6-month detention period, severance pay will not be granted. The compensation received by the worker only includes UPH and Uang Pisah.

However, compensation in the form of service appreciation pay (UPMK) and compensation for rights shall (UPH) be provided to workers who are detained by the competent authority, resulting in their inability to perform their duties for a period of 6 months, due to alleged criminal acts that do not harm the company, as regulated in Article 54 paragraph (2). This compensation also applies to workers who are convicted by the court before the end of the 6-month detention period for committing criminal acts that do not harm the company.

Worker detained and found not guilty. According to Article 54 paragraph (3), the worker shall be reinstated if the criminal court issues a verdict of acquittal before the end of the 6-month detention period, stating that the worker is not guilty of committing the criminal act.

If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of many corporate law firms in Indonesia that has handled numerous similar matters, with many experienced and professional corporate and civil lawyers in its arsenal, making it one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.

Author: Budhi Satya Makmur