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 labour 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.
What is the labour 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 labour law, a 30-day notice period must be provided for an employment termination.
How many types of employee termination are there?
There are two types of employee termination:
What is the difference between the two types of termination?
The difference is as follows:
What are the termination compensations in Indonesia?
Termination compensations are used to settle employment terminations. They can be divided into four types:
Can you briefly explain what are severance pay, long service pay, compensation rights pay, and separation pay?
Are all employees entitled to termination compensations?
There are two types of employment contract: 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 not entitled to any of the termination compensations.
In what circumstances that the termination of an employee is prohibited?
Employee termination is not permitted in the following situations:
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.
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