INDONESIA Law and Practice Contributed by: Indra Setiawan, Ridzky Firmansyah Amin, Marintan Panjaitan and Tifanny Natalia, ABNR Counsellors at Law
7. Termination 7.1 Grounds for Termination
6.3 Collective Bargaining Agreements Indonesian employment law recognises collective bargaining agreements as instruments for collective bargaining between one or several registered labour unions and one or several employers or employer organisations. Collective labour agreements are valid for two years from execution and extendable for one year. Collective labour agreements must be registered with the manpower agency with jurisdiction over the employer’s work location. Collective bargaining agreements contain the rights and obligations of the employer, labour union and employees, but in more detail. As a general rule, the quality and quantity of the conditions of employment stipulated in the collective labour agreements must not be less beneficial than those regulated under the prevailing laws and regulations. Although there are some instances where bargaining takes place at the industry level, the majority of bar - gaining over collective bargaining agreements takes place within companies. Additionally, despite the similarities, collective bar - gaining agreements must be differentiated from an employee handbook. A collective bargaining agree - ment is drafted and agreed upon based on nego - tiations between the employer and the registered labour union(s). In contrast, the employee handbook is drafted by the employer, taking into account sug - gestions from employee/labour union representatives, and further approved by the manpower agency with jurisdiction over the employer’s work location. Similar to collective bargaining agreements, the employee handbook stipulates the general rights and obligations of the employer and the employee. A company may maintain only one of these work rules at a time. Collective bargaining agreements will be prepared if there are any labour union(s) in the com - pany that qualify the minimum requirement to initi - ate a collective bargaining agreement negotiation. An employee handbook must be prepared if the company employs at least 10 employees.
In principle, the prevailing Indonesian laws discour - age termination of employment. Employers, employ - ees, labour unions, and the Indonesian Government are required to make every possible effort to avoid it. If termination seems inevitable despite all of these efforts, it must be effected by following the rules and procedures prescribed in the Indonesian employment law. Employment termination may not be carried out uni - laterally by an employer without stating a reason that has been specified in the prevailing manpower law and regulations, employee handbook, collective labour agreement, or the employment agreement. Consequently, to unilaterally terminate an employee, the employer must be able to identify suitable grounds for termination and prepare sufficient/appropriate jus - tification. The reason for termination of employment must be clearly stated in the written notice for termina - tion (see 7.2 Notice Periods ). Employment termination may be initiated by either the employer or the employee for reasons related to an individual employee or for business-related reasons. For Reasons Related to an Individual Employee Employment may be terminated in the following cir - cumstances: • at the request of the employee because the employer: (a) assaulted, violently insulted or threatened the employee; (b) persuaded or ordered the employee to act in contravention of the law; (c) did not pay the employee’s salary on time for three consecutive months or more; (d) did not perform its obligations to the employee as agreed; (e) ordered the employee to work outside the agreed scope of work; or (f) assigned work that endangered the life, safety, health or morality of the employee, outside the agreed scope of work;
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