Indonesia’s New Manpower Regime: Termination Of Employment Underneath Omnibus Regulation And Its Implementing Laws – Employment and HR
Indonesia:
Indonesia’s new personnel regime: termination of employment under the Omnibus Act and its implementing regulations
September 01, 2021
Nusantara Legal Partnership
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In connection with the adoption of Law No. 11 of 2020 on Job Creation (“Law 11/2020” or
“Buffy Law”). We will now deal with the most important changes to the employment regime, in particular with regard to the termination of the employment relationship in accordance with the new implementing provisions of the Omnibus Act. (Note: Our earlier publication on the FAQ on the new personnel regime can be found here).
This article addresses the following matters relating to changes to the employment termination provisions: (i) termination procedures for permanent employees and (ii) severance payments after the Omnibus Act comes into force.
Legal framework: In writing this article, we will refer to the following laws and regulations:
- Law No. 13 of 2003 on Labor Law, as last amended by Law 11/2020 (“Amended Law 13/2003”); and
- State regulation (“GR”) No. 35 of 2021 on fixed-term employment, outsourcing, working and rest times and dismissal (“GR35 / 2021”).
(collectively referred to as “Staff Regulations”)
Procedure for terminating a permanent employee: In general, termination of employment within the framework of the employment relationship is carried out through 2 (two) systems: (i) voluntary termination by the employee or (ii) termination by the employer for certain reasons.
The employer must notify the employee and / or the union (if he is a member of a union) of any such termination, including the reasons for termination, in writing at least 14 (fourteen) working days prior to the termination date, or 7 (seven) working days if the employee is in the probationary period is located.
Notwithstanding the foregoing, the company can waive the obligation to notify if the employee has committed an urgent violation of the employment contract, the factory rules. committed
(“CR”), or collective agreement
(“CLA”) (Art. 52 (3) of GR 35/2021).
If the employee accepts the dismissal, the employer can notify the competent employment office of the dismissal. Otherwise, the employee of the termination must submit a letter of rejection no later than 7 (seven) working days.
If the employee refuses to give notice, the employee and employer must negotiate on both sides. If no consensus is reached, both parties conduct the termination procedure through the dispute settlement procedure (ie, Mediation and legal proceedings) at the labor court.
Compensation for fixed-term employees: GR 35/2021 provides that employees with fixed-term contracts are entitled to a compensation payment after the termination of their employment contract. Below you will find the formula for calculating the compensation in accordance with Art. 16 (1) of GR 35/2021:
| Maintenance interval | compensation |
| None | |
| > 1 month but | (Length of service / 12) x (1 monthly salary + fixed deposit) |
| 12 months | 1 monthly salary + fixed deposit |
| > 12 months | (Length of service / 12) x (1 monthly salary + fixed deposit) |
The above compensation payment will be paid after the initial period of a fixed-term contract has expired before its extension and after the conclusion of any extension of this fixed-term contract.
Compensation for permanent employees: In the event of such termination, the employer pays the terminated employee a severance payment that includes (i) severance pay, (ii) service and (iii) compensation (if applicable). (Note: The severance payment is different from the above-mentioned compensation for fixed-term employees. In this context, the compensation consists of: (i) remaining annual vacation, (ii) repatriation costs of the employee and (iii) other compensation, as in the employment contract, CR or CLA established.)
Calculation of severance payments and salaries: The applicable personnel regulations regulate the entitlement to severance payments and salaries based on the employee’s length of service as follows:
| severance pay | Service pay | ||
| Maintenance interval | Monthly income | Maintenance interval | Monthly income |
| 1 | 3-6 years | 2 | |
| 1-2 years | 2 | 6-9 years | 3 |
| 2-3 years | 3 | 9-12 years | 4th |
| 3-4 years | 4th | 12-15 years | 5 |
| 4-5 years | 5 | 15-18 years | 6th |
| 5-6 years | 6th | 18-21 years | 7th |
| 6-7 years | 7th | 21-24 years | 8th |
| 7-8 years | 8th | > 24 years | 10 |
| > 8 years | 9 | ||
Compensation claim of the employee based on the reason for termination: GR 35/2021 also specifies the formula for calculating the compensation claim based on the reason for termination. The following is a tabular comparison of the employee’s severance payment entitlements based on the grounds for termination before the Omnibus Act and GR 35/2021.
| Reason for termination | Before the omnibus law | Amended Law 13/2003 and GR 35/2021 |
| Company merger and consolidation |
|
|
| Company spin-off | Not available |
|
| Takeover of the company |
|
When the company initiates termination:
|
|
When the company initiates termination:
|
||
| Business efficiency |
Efficiency that leads to company closure:
|
Because of company loss:
|
|
To avoid business losses:
|
||
| Company closure |
Due to business losses for 2 consecutive years
|
Due to a business loss for 2 years (either consecutive or not)
|
|
Without corporate losses or force majeure
|
Without corporate losses
|
|
|
Due to force majeure
|
Due to force majeure
|
|
| Force majeure without business closure | Not available |
|
| Suspension of the company’s payment obligations due to losses |
Not available |
Due to corporate losses
|
|
Without corporate losses
|
||
| Corporate bankruptcy |
|
|
| Application by the employee based on a measure taken by the employer |
|
|
| Decision of the company following a decision by the IRC that the company did not lead the accused of the employee (see point above) | Not available |
|
| Voluntary resignation of the employee |
|
|
| Absence of the employee for at least 5 consecutive days |
|
|
| Employee violation of employment contract, CR or CLA (after 3 warnings) |
|
|
|
Employees who commit criminal acts |
Employee is guilty according to final and binding court decision
|
Criminal acts that cause business damage A. If the employee is unable to work due to a detention of> 6 months
B. If the employee is guilty of a final judicial decision
|
|
Criminal acts that do not cause company damage A. If the employee is unable to work due to a detention of> 6 months
B. If the employee is guilty of a final judicial decision
|
||
| Longer illness of the employee (> 12 consecutive months) due to an accident at work |
|
|
| retirement |
|
|
| Death of the employee |
|
|
Exemption from severance pay for micro and small businesses: According to the new Regime / Omnibusgesetz, micro and small businesses are exempt from the obligation to pay severance pay according to the formula in GR 35/2021. The severance payment for micro and small businesses is paid on the basis of the agreement between the respective employer and the terminated employee (Art. 59 GR 35/2021).
The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.
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