INDONESIA LAW AND PRACTICE Contributed by: Agus Ahadi Deradjat (Agung), Gustaaf Reerink, Adri Dharma, Karina Widyaputri and Ilma Sulistyani, ABNR Counsellors at Law
Employers are generally required to provide at least 14 calendar days’ notice prior to termina - tion, except in cases where: • the employee resigns voluntarily; • the employment contract expires; • the employee reaches retirement age; or • the employee passes away. Under the Indonesian Labour Law, the legally recognised grounds for termination include the following. Corporate Actions & Business Conditions • merger, consolidation, or division of the com - pany, where either party refuses to continue the employment relationship; • acquisition resulting in changes to employ - ment terms, which the employee rejects; • efficiency measures due to actual or potential losses; • company closure due to continuous losses over two years; • force majeure leading to closure or discontin - ued operations; • suspension of payment (with or without losses); and • bankruptcy. Employee-Initiated or Legal Grounds • voluntary resignation; • termination requested by the employee due to employer misconduct; or • termination based on an industrial relations court ruling confirming no employer wrongdo - ing. Employee Conduct & Absence • Absence without notice for five consecutive working days despite two written summons - es.
• Violation of employment terms (employment contract, employee handbook, or collective labour agreement) after three written warn - ings. • Serious misconduct as defined in the employ - ment contract, employee handbook, or col - lective labour agreement. Detention & Criminal Cases • Detention for more than six months, regard - less of whether the employer suffers losses. • Conviction in court before six months, with or without employer losses. Health & Retirement • Inability to work for more than 12 months due to illness or work-related disability. • Retirement. • Death of the employee. Terminated employees are entitled to compen - sation, which varies depending on the type of employment. Permanent employees are gener - ally entitled to severance packages, while fixed- term employees receive compensation at the end of their contract. The amount is calculated based on factors such as the reason for termi - nation and length of service, in accordance with GR 35/2021. Employers and employees may also mutu - ally agree to end the employment relationship through a Mutual Employment Termination Agreement, which must be documented in writ - ing. While Indonesian law does not specifically reg - ulate collective redundancies or mass termina - tions, such actions are permitted provided they comply with the applicable legal procedures and ensure that all affected employees receive their statutory entitlements. All terminations – wheth -
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