INDONESIA Law and Practice Contributed by: Agus Ahadi Deradjat, Gustaaf Reerink and Adri Dharma, ABNR Counsellors at Law
the employer and the employees, but it should not be less than the minimum wage stipulated in the appli - cable laws and regulations (the minimum wage varies between provinces). Further, incentives, bonuses or reimbursement must be based on an agreement between the employer and employees, as well as on the employers’ policy. Employers are obliged to enrol their employees in the social security programme administered by the Social Security Agency ( Badan Penyelenggara Jaminan Sosial (BPJS)) for Manpower and the BPJS for Health. The Manpower Law recognises a mandatory religious holiday allowance of one month’s wages for employ - ees with 12 months of consecutive service. For those with service periods of one to 12 months, the allow - ance is paid pro rata. The allowance must be paid at least seven days before the religious holiday. The normal working hours are seven hours per day and 40 hours per week, for six working days per week, or eight hours per day and 40 hours per week for five working days per week. Flexible working arrange - ments are possible subject to agreement between the parties. Overtime can only be performed on the order of an employer and with the consent of the employee. For overtime work, employees are entitled to receive over - time wages, the amount of which shall be calculated using the overtime wages formula stipulated under the prevailing law and regulations. Employees are entitled to paid annual leave of at least 12 days upon completion of 12 consecutive months of service. They are also entitled to special paid leave (sick leave, maternity leave, leave for marriage, etc). In the event of termination of a permanent employee (including due to an employee reaching the specified pension age), the employer is obliged to pay a sev - erance package, which comprises (i) severance pay, (ii) service appreciation pay and (iii) compensation for entitlements. The calculation of (i) to (iii) must be performed using the formulas stipulated under Government Regulation
No 35 of 2021 on Fixed-Term Employment Agree - ments, Outsourcing, Work and Rest Hours, and Ter - mination of Employment (“GR 35”) at a minimum. The amounts will vary depending on the reason for termi - nation, length of service, latest salary, fixed allowance and balance of annual leave. The employer may opt to use its own formula, as regulated in the employment agreement, CR or CLA, provided that it is more ben - eficial to the employee than that stipulated in GR 35. In the event of early termination of a fixed-term employee, the employer must compensate them in an amount equivalent to the remaining salary of the employee until expiry of the fixed-term employment agreement. In addition, in the event of expiration of a fixed-term employment agreement for any reason, the employer is also obligated to pay compensation as per GR 35, which will be calculated in proportion to the employee’s period of service. The latter compen - sation is not applicable to foreign employees. In the event of the acquisition or a change of control of a company, the employment relationship between the acquired company and the employees will automati - cally continue unless they are terminated. Termina - tion may be initiated by the company or requested by employees only if their employment terms and condi - tions change and they do not wish to continue the employment, in which case the employees are entitled to the applicable severance package. 10.3 Employment Protection If an employer enters into a merger, consolidation, acquisition or spin-off, this corporate action will not necessarily affect the employment relationship between the employer and the employee. However, if – in connection with a corporate action – an employee is not willing to continue the employment or vice ver - sa, the employer can terminate the employee. In the event of this type of termination, the employee shall be entitled to receive a severance package calculat - ed using the formulas stipulated under the prevailing manpower laws and regulations. In accordance with GR 35, if an employer wishes to terminate an employee, it must serve written notice on the employee of its intention, and the reason(s) for termination, at least 14 business days before the
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