INDONESIA Law and Practice Contributed by: Indra Setiawan, Ridzky Firmansyah Amin, Marintan Panjaitan and Tifanny Natalia, ABNR Counsellors at Law
• mediation at the local office of the manpower agency or conciliation by a private conciliator; and • if necessary, court proceedings at the Industrial Relations Court, and, ultimately, at the Supreme Court. In the event of rejection, the employment relationship will continue until the parties reach a mutual settle - ment or the issuance of a final and binding court deci - sion declaring employment termination. Consequent - ly, the employer must continue paying the employee’s salary until the employment termination date, and the employee must continue to perform their work obliga - tion, unless the employee’s suspension is in place. Employees are entitled to a severance package upon termination, comprising severance pay, service appreciation pay and compensation of entitlements. The amount in the severance package depends on the employee’s length of service and the reason for termination. The standard computation to calculate the severance package is stipulated in Article 40 of Government Regulation No 35 of 2021 on Fixed-Term Employment Agreements, Outsourcing, Work and Rest Hours, and Termination of Employment (GR No 35/2021). This standard computation of the severance package is then increased by the multiplier specified for each reason for termination. Employees may be suspended on full pay during the termination process. Based on Decision 168, which provides further clari - fication on how the provisions of the employment law shall be interpreted, the amount of the severance package payable by the employer shall be, at a mini - mum, in accordance with the relevant provisions of the employment law; by extension, the provisions of GR No 35/2021. The Indonesian employment law and GR No 35/2021 do not regulate the size of the severance package payable under mutual termination. Therefore, the amount paid is subject to mutual agreement between the employer and the employee. In a META, both par - ties may also waive the notice requirement, and the employer will make a payment in lieu of notice. For the termination of a contract employee before the expiry of the contract, the contract employee will not
be entitled to a severance package. The employer, however, shall provide compensation in an amount equal to the amount of salary the employee would have received until expiry of the contract’s term, unless the termination is for reasons that may cause termination of the agreement as specified in the employment agreement, employee handbook or col - lective labour agreement. In addition, specifically for an Indonesian contract employee, the employer must also pay compensation at the end of employment, calculated according to the formula stipulated in GR No 35/2021. External advice/authorisation is not required before an employer terminates an employee or serves writ - ten notice. However, the employer must report the termination to the Ministry of Manpower or the man - power agency with jurisdiction over the employee’s work location. In the event of mutual termination, the META must be registered with the relevant Industrial Relations Court. 7.3 Dismissal for (Serious) Cause Indonesian employment law recognises termination of employment for a serious violation (gross mis - conduct). Unlike regular employment termination, termination for gross misconduct does not require a minimum notice period; thus, the termination can be effective immediately upon issuance of the notice of termination. Employees terminated for gross miscon - duct will not be entitled to severance pay or service appreciation pay. Instead, they will be entitled to com - pensation of entitlements and separation pay in the amount regulated under the employment agreement, employee handbook or collective labour agreement. The notice of termination for gross misconduct can be challenged or objected to by the employee; if chal - lenged or objected to, the employment relationship will continue until both parties reach a mutual settle - ment or a final and binding court decision is issued declaring the termination of employment. As a result, the employer must continue to pay the employee’s salary until the employment termination date, and the employee must continue to fulfil their work obliga - tions, unless the employee is under suspension.
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