The Most Asked Questions About the Termination of Employment in Indonesia

Under the Indonesian labour law, termination of employment in Indonesia can be initiated by the employer through dismissal or by the employee through resignation. When the termination is at the initiative of the employer, it may be caused by several reasons, but in general, it is because of misconduct or poor performance of the employee.

However, termination of employment in Indonesia these days is highly related to the coronavirus situation, also known as the COVID-19 crisis in Indonesia.

Gojek, for example, has terminated its 430 employees from Go-Life and Go-Food Festival due to low market demand in June 2020. Other leading tech companies that have also terminated many of their employees are Traveloka, Agoda, and Bukalapak, not to mention giant companies such as PT Fast Food Indonesia Tbk (KFC) and PT Ramayana Lestari Sentosa Tbk (Ramayana).

The labor law in Indonesia tends to protect employees more than employers. Therefore, it is extremely important that business owners in Indonesia familiarise themselves with the latest laws and adopt the correct termination procedures.

This article provides you with all the necessary questions and answers pertaining to employee termination in Indonesia.

Questions and Answers

What is the labor law that I should refer to regarding termination of employment in Indonesia?

Indonesian Law No. 13 of 2003 regarding Labour Employment is the one you should refer to for employee termination. The termination procedure must be done in accordance with Labour Law and Law No. 2 of 2004 regarding Industrial Relations Dispute Settlement.

How long is the notice period should be given to terminate an employment contract?

Under the mentioned labor law, a 30-day notice period must be provided for employment termination.

How many types of employee termination are there?

There are two types of employee termination:

• Termination without cause
• Termination with cause

What is the difference between the two types of termination?

The difference is as follows:

• Termination without cause
  The employee is terminated due to the company’s merger, bankruptcy, or re-organization.

• Termination with cause
  The employee is terminated because of
  Misconduct or violation of the employment contract
  Not able to work for more than six months due to legal disputes
  Being absent from work for more than five consecutive working days without proper reasons and adequate evidence

What are the termination compensations in Indonesia?

Termination compensations are used to settle employment terminations. They can be divided into four types:

• Severance pay
• Long service pay
• Compensation rights pay
• Separation pay

Can you briefly explain what are severance pay, long service pay, compensation rights pay, and separation pay?

• Severance pay: compensation to employees due to employment termination
• Long service pay: compensation to employees as a reward for their years of service
• Compensation rights pay: compensation to employees for their unused annual leave, maternity leave, travel expenses to their workplace, medical, housing, etc.
• Separation pay: compensation to employees as a voluntarily reward for their services

Are all employees entitled to termination compensations?

There are two types of employment contracts: definite term and indefinite term.
In an indefinite employment contract, employees are entitled to severance pay, long service pay and compensation rights pay.

In a definite employment contract, employees are also entitled to any termination compensations as stated in the agreement.

In what circumstances that the termination of an employee is prohibited?

Employee termination is not permitted in the following situations:

• Unable to work due to sickness or illness for up to 12 consecutive months
• Unable to work due to obligations to law and regulations
• Getting married
• Performing compulsory religious services
• Childbirth, nursing a baby, or miscarriage
• Establishing a labor union and/or conduct union activities outside working hours
• Reporting employers to authorities of crimes
• Marital status, political views, religion, race, gender, physical appearance, and condition, etc.
• Disabled or injured due to work accident

How can Cekindo help with the termination of employment in Indonesia?

Cekindo can assist you with consultation on the best options to terminate employees, payroll and severance calculation as well as complete HR services such as drafting an employee termination contract and preparing a legal notification letter.

Get in touch with us today to know more about our services by filling in the form below. Or visit our offices in Jakarta, Bali, and Semarang.