-
Andi Refandi
Andi serves as a Senior Account Executive on Emerhub’s global team.
Having trouble with terminating an employee in Indonesia?
It’s important to follow local laws to avoid legal issues.
This guide will make it easier by explaining everything you need to know about employee termination, including compensation and common scenarios.
Employment Termination Regulations in Indonesia
First, you must follow Government Regulation No. 35 of 2021 when letting an employee go. This regulation explains when and how you can terminate employment and the compensation required. Learn more about Indonesian Manpower Law.
Termination can happen for many reasons—restructuring, misconduct, or more. You must know the compensation requirements when terminating your employee.
| Severance Pay | Compensation based on the employee’s years of service. |
| Reward for Service (UPMK) | Additional compensation for long-term employees. |
| Compensation Pay for Rights (UPH) | Pay for unused leave, unreimbursed travel expenses, and other entitlements. |
1. Severance Pay
Employees are entitled to severance pay based on their years of service. The longer an employee has worked for your company, the higher their severance pay will be.
This compensation helps ease the transition for employees who are let go due to circumstances beyond their control, such as company restructuring or downsizing.
2. Reward for Service (UPMK)
Long-term employees receive additional compensation known as Reward for Service (UPMK). This is a way to recognize and reward your employees for their loyalty and long-term commitment to your company.
The amount varies based on the duration of their service, providing an extra financial cushion as they move on to new opportunities.
3. Compensation Pay for Rights (UPH)
Employees are also entitled to Compensation Pay for Rights (UPH), which covers various entitlements. Here are three main compensation pays you must adhere to:
- Pay for unused leave: You must pay for any leave that your employees haven’t taken.
- Unreimbursed travel expenses: You must cover any travel costs that your employees haven’t been reimbursed for.
- Other entitlements: This can include any other benefits or rights that were promised in the employment contract but not yet fulfilled.
Common Termination Scenarios
- Company Mergers or Acquisitions: Employees are usually entitled to severance pay and service rewards.
- Company Losses or Closure: Employees receive severance pay and service rewards, though the amounts may vary based on the reason for closure.
- Force Majeure (Unforeseeable Events): Compensation depends on whether the company closes or continues operating.
- Employee Misconduct: Severance pay may be reduced or waived based on the severity of the misconduct.
- Resignation or Retirement: Employees receive compensation for their rights but may not receive severance pay.
Invalid Reasons for Termination
Avoid terminating employment for invalid reasons such as:
- Absence due to illness (up to 12 months).
- Fulfilling state obligations.
- Performing religious worship.
- Marriage.
- Reporting employer crimes.
- Discrimination based on belief, religion, political orientation, ethnicity, color, race, sex, physical condition, or marital status.
Partner with EMERHUB in Indonesia
Emerhub is here to help you navigate these regulations with ease.
Whether you need assistance with employment contracts, compliance audits, or HR consulting, we’ve got you covered.
Contact us today via the link below to ensure your business operations in Indonesia are smooth, compliant, and dispute-free.
