Comparative Guides

Welcome to Mondaq Comparative Guides - your comparative global Q&A guide.

Our Comparative Guides provide an overview of some of the key points of law and practice and allow you to compare regulatory environments and laws across multiple jurisdictions.

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4. Results: Answers
Labour and Employment
5.
Dismissals and terminations
5.1
Must a valid reason be given to lawfully terminate an employment contract?
Indonesia

Answer ... A basic principle of Indonesian labour law is that the dismissal of an employee should be prevented and in some cases prohibited. Fundamentally, the relevant authorities must initially approve every termination of employment. Exceptions to this rule include termination during the probationary period and the voluntary resignation of the employee.

Employers do not have the power to unilaterally terminate any employee in any circumstance. Employers can either:

  • suspend employees on full salary and go through the mandatory non-binding mediation process with the Ministry of Manpower and Transmigration, followed by a labour court trial to obtain approval for the proposed terminations; or
  • successfully negotiate and settle a separation benefits package with employees and execute a mutual termination agreement – the only cost-effective alternative.

For more information about this answer please contact: Fahrul S. Yusuf from SSEK Indonesian Legal Consultants
5.2
Is a minimum notice period required?
Indonesia

Answer ... In order to terminate any employment relationship, a company must follow a stringent set of requirements. These requirements mandate that before terminating the relationship, the company must provide guidance to an employee who is performing unsatisfactorily and give him or her various warnings. As part of this guidance, the company may issue an oral or written warning giving the employee a period of six months to improve, unless the employment agreement, company regulation or collective labour agreement provides for a different timeframe. If the employee’s performance does not improve, the company must issue at least two additional warnings before proceeding to terminate the employment relationship. If the employee still fails to perform satisfactorily after the third warning letter, the company may apply for permission to terminate the employment relationship.

For more information about this answer please contact: Fahrul S. Yusuf from SSEK Indonesian Legal Consultants
5.3
What rights do employees have when arguing unfair dismissal?
Indonesia

Answer ... Article 153 of the Labour Law provides that an employer is prohibited from terminating an employment relationship because:

  • the employee is unable to work due to illness for a period not exceeding 12 consecutive months, based on a doctor’s statement;
  • the employee is prevented from working because he or she is fulfilling state duties in accordance with the prevailing laws and regulations;
  • the employee is performing religious rites prescribed by his or her religion;
  • the employee marries;
  • a female employee is pregnant, is on maternity leave, miscarries or is nursing her baby;
  • the employee has a blood and/or marital relationship with another employee in the same company, except where this is regulated in the employment agreement, company regulation or collective labour agreement;
  • the employee establishes or becomes a member or executive of a labour union or conducts labour union activities outside of working hours or during working hours, subject to agreement with the employer or pursuant to the provisions in the employment agreement, company regulation or collective labour agreement;
  • the employee reports the employer to the authorities for a criminal act committed by the employer;
  • the employee has a certain ideology, religion, political leaning, ethnic group, skin colour, gender, physical condition or marital status; or
  • the employee is permanently disabled or injured in a work accident or is injured due to the employment relationship where, based on a doctor’s statement, the recovery period required cannot be predicted.

For more information about this answer please contact: Fahrul S. Yusuf from SSEK Indonesian Legal Consultants
5.4
What rights, if any, are there to statutory severance pay?
Indonesia

Answer ... Article 156 of the Labour Law provides the following calculation of the minimum statutory termination benefits:

Severance pay:

Completed years of service Benefit
Less than 1 year 1 month’s wages
1 year or more, but fewer than 2 years 2 months’ wages
2 years or more, but fewer than 3 years 3 months’ wages
3 years or more, but fewer than 4 years 4 months’ wages
4 years or more, but fewer than 5 years 5 months’ wages
5 years or more, but fewer than 6 years 6 months’ wages
6 years or more, but fewer than 7 years 7 months’ wages
7 years or more, but fewer than 8 years 8 months’ wages
8 years or more 9 months’ wages

Service pay:

Completed years of service Benefit
3 years or more, but fewer than 6 years 2 months’ wages
6 years or more, but fewer than 9 years 3 months’ wages
9 years or more, but fewer than 12 years 4 months’ wages
12 years or more, but fewer than 15 years 5 months’ wages
15 years or more, but fewer than 18 years 6 months’ wages
18 years or more, but fewer than 21 years 7 months’ wages
21 years or more, but fewer than 24 years 8 months’ wages
24 years or more 10 months’ wages

Other compensation payable to the employee:

  • Compensation for annual leave to which the employee is entitled, but which has not been taken and which has not been forfeited;
  • Compensation for housing, medical and hospitalisation fees (which is deemed to be 15% of the severance pay and/or service pay to which the employee is entitled);
  • Any costs or expenses incurred in returning the employee and his or her family to the place where he or she was recruited, as applicable; and
  • Any other compensation agreed to in the employment agreement, company regulation or collective labour agreement.

For more information about this answer please contact: Fahrul S. Yusuf from SSEK Indonesian Legal Consultants
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Topic
Labour and Employment