Employment

Labor Law in Indonesia

Table of Contents
1.

Introduction.................................................................................................................................... 1

2.

Law No. 13 of 2003 on Labor........................................................................................................ 1

3.

Salary and Allowances................................................................................................................... 3

4.

Employment of Foreigners ............................................................................................................ 6

5.

Social Security ............................................................................................................................... 6

6.

Termination of Employment .......................................................................................................... 8

7.

Termination Payments ................................................................................................................... 9

8.

Outsourcing.................................................................................................................................. 10

9.

Taxation ....................................................................................................................................... 11

Attachment A ........................................................................................................................................ 13
Attachment B ........................................................................................................................................ 14

Labor Law in Indonesia

1.

Introduction

The sources of labor law in Indonesia are widely dispersed among a number of national laws and
regulations, presidential decrees, ministerial decrees and circular letters. Some of these sources are
relatively recent, while others are quite old, some even issued in the colonial period.
In general, these laws and regulations are applicable to all "employees", regardless of their position
(i.e. whether they are managerial or non-managerial employees) or their status (i.e. whether they are
indefinite (permanent) or definite (fixed term) period employees). However, there are some
provisions that exempt certain groups of employees from receiving certain benefits e.g. employees in
managerial positions are not entitled to overtime.

2.

Law No. 13 of 2003 on Labor

In an effort to synthesize the diverse body of laws and regulations on the protection of employees, the
Indonesian Government enacted Law No. 13 of 2003 on 25 March 2003 ("Labor Law"). The Labor
Law contained a significant number of new provisions and also combined a large portion of the
various labor laws and regulations into a single main law.

2.1

General Principles under the Labor Law

The Labor Law sets out general principles and requirements in relation to labor and employment
matters, including among other things:

employment agreements, Company Regulations and Collective Labor Agreements;

the protection of certain groups of employees, such as disabled employees, children and
women;

discrimination;

working hours (including overtime);

health and safety;

wages (including the principle of a minimum wage);

paid leave e.g. annual leave, maternity leave, religious leave, etc;

welfare facilities e.g. worker cooperatives;

principles of the industrial relationship e.g. the obligation to establish a bipartite forum,
Company Regulations and the negotiation of Collective Labor Agreements;

outsourcing (both "outsourcing of work" and "outsourcing of labor");

strikes and lock outs; and

termination of employment.

The Labor Law also includes sanctions for non-compliance with certain requirements. Sanctions are
administrative and criminal.

Hadiputranto, Hadinoto & Partners

2.2

Types of Employment under the Labor Law

The Labor Law refers to 2 main types of employment:

indefinite period (i.e. permanent)

definite period (i.e. fixed term)

The type of employment covered in these 2 main categories is determined based on the type of work
i.e. whether it is permanent or temporary in nature or whether the work can be completed within a
certain period.
The Labor Law does not distinguish between the structure of salary and benefits of employees hired
under these 2 types of employment. Generally, a definite period employee is entitled to the same
benefits as an indefinite period employee. However, the structure of the termination package
applicable to each type of employment is quite different. See section 7 for further details on the
requirements for termination of employment in Indonesia and the structure of statutory termination
payments.
Further differences between the 2 types of employment are explained below.
(a)

Indefinite Period Employment

Indefinite period employment is the employment of an employee for an indefinite period. An
employer may impose a probationary period of a maximum of 3 months. During this
probationary period, provided that the probationary period was agreed in writing an employer
may terminate the employment without notice and without the obligation to pay a termination
package. Otherwise, unless an employee agrees to a "mutual termination", the reason for an
employer to terminate an indefinite period employee must be a reason set out in the Labor law
(and there are not many).

(b)

Definite Period Employment

Definite period employment is the employment of an employee for a certain (or fixed) period
of time. An employment agreement for a definite period can only be made for certain work
which as to the type and characteristic or the work activities concerned will be completed
within a certain time period, i.e. work that:

is completed once and for all, or is of a temporary nature;

is completed in a short period of time (3 years at most);

is considered to be of a seasonal nature, or to be repeated (e.g. seasonal harvesting);

and

is related to a new product, new activities, or supplemental products that are still
experimental or in the exploration stage.

An employer can not impose a probationary period on a definite period employee.

As a general rule, the maximum validity of an initial definite period employment agreement is
2 years. This period can be extended once for up to 1 year. Subsequently, it is possible to
renew a definite period employment agreement once for up to 2 years, but only after a break
in employment for at least 30 calendar days.

Hadiputranto, Hadinoto & Partners

Labor Law in Indonesia

As further regulated in Decree of the Minister of Manpower No. Kep-100/Men/VI/2004

regarding the Implementing Regulation on the Definite Period Employment Agreement
("Decree 100"), the maximum validity of an initial definite period employment agreement
and the possibility for its extension and renewal also depends on the type of work. The
following table summarizes the types of work and the relevant maximum validity of an initial
definite period employment agreement and its extension and renewal.

Initial
Contract
Period

Type of Work

Extension

Renewal

Permitted
Yes/No

Max.
Period

Permitted
Yes/No

Max.
Period

Completed
once and for all
or temporary
nature

3 years or
earlier based on
completion of
the work
specified in the
agreement

No.

Yes, but only

once and after
a break of 30
calendar days

2 years

Seasonal

Depends on the
weather or
season or
order/target.

Not
specified

No

2 years

Yes

1 year

No

Related to a
new product,
new activities,
or supplemental
products that
are still
experimental or
in the
exploration
stage.

Daily Workers
A daily worker is also categorized as a definite period employee. Under Decree 100, the
employment of a daily worker is defined as the employment of a worker to perform a certain
job, the volume of which and the period within which the job is to be performed can be
changed from time to time. A daily worker receives his/her wage based on daily presence at
the job site. The work must be completed in a relatively short period of time (3 months at the
most) with a maximum of 20 working days per month. A daily worker is not bound by the
general working hours applicable at an employer.

3.

Salary and Allowances

3.1

Definition of Salary

The Labor Law defines "salary" as compensation in the form of money received by an employee from
an employer, determined and paid in accordance with the employment contract or applicable laws and

Hadiputranto, Hadinoto & Partners

regulations. Salary may also include allowances for the employee and his/her family for certain work
and/or services that have been or will be performed.

3.2

Components of Salary

The Labor Law does not specifically set out the components of salary - it merely states that if the
components of salary consist of "basic salary" and "fixed allowance" the amount of the basic salary
must be at least 75% of the total salary.
The Labor Law refers to a "fixed allowance" as a payment to an employee made regularly which is
unrelated to the employees attendance at work or performance. An example is a monthly housing
allowance.
Under regulations issued prior to the Labor Law a "non-fixed allowance" was defined as an irregular
payment made to the employee and family that need not be directly related to the job, nor paid along
with the basic salary. An example is a daily transport or meal allowance which is only paid if the
employee works.
Except THR (see below), employers are not obliged to pay employees allowances under the Labor
Law.
Depending on the type of payment concerned, the determination of the components of salary might
differ for different types of calculations e.g. the components of salary used to calculate a termination
payment could be different from those used to calculate overtime pay.
The components of "salary" that are used to calculate a termination payment, THR and social security
contributions are:

basic salary; and

fixed allowances.

3.3

Salary Structure and Grade

The Labor Law requires employers to determine the salary structure and grade of individual
employees based on their position within the employer, their years of service, education and
competency. The Labor Law does not state that the details of the salary structure and pay scale of an
employer must be made available to all employees.

3.4

Minimum Wage

Each provincial level government annually issues a minimum wage that is applicable in the province.
In some provinces, there may also be a sectoral minimum wage, (i.e. the minimum wage applicable in
certain industry sectors) and city minimum wage (i.e. the minimum wage applicable in certain cities
within the province). Neither the sectoral minimum wage nor the city minimum wage should be
lower than the applicable provincial minimum wage.

3.5

Religious Festivity Allowance ("THR")

THR is a mandatory payment that must be made by an employer to all employees in relation to the
major religious holiday celebrated by the employee. There is no exception for foreign employees.

Hadiputranto, Hadinoto & Partners

Labor Law in Indonesia

Under Minister of Manpower Regulation No. Per-04/Men/1994, THR must be paid no later than 7
days before the relevant religious holiday. For the religions the religious celebration is:

Christian and Catholic - Christmas

Muslim - Idul Fitri (end of Ramadhan)
Hindu - Seclusion Day
Buddhist - Waisak

The amount of THR for an employee who has worked for 12 consecutive months is equal to 1
months salary (as mentioned above "salary" means basic salary plus fixed allowances). For an
employee with a service period of less than 12 months but more than 3 months, the amount of THR is
pro-rated according to the employee's actual months of service with the employer.
Employees with less than 3 months service with an employer are not entitled to the THR.

3.6

Salary Deductions

Under Government Regulation No. 8 of 1981 on Wage Protection ("Regulation 8"), salary deductions
by an employer for third parties are only allowed if there is a specific power of attorney from the
employee authorizing such deductions. This rule is not applicable to salary deductions in relation to
payments that employees must make to the State e.g. contributions to the mandatory social security
programs and salary deductions for the purpose of income tax.
Under Regulation 8, a debt owing by an employee to an employer can be deducted by the employer
from the employee's salary. However, Regulation 8 limits the amount that can be deducted from the
employees salary to a maximum of 50% of the salary that the employee should receive. If the
employee is paid his/her salary on monthly basis, the deduction can only be for up to 50% of the
employees monthly salary.
In relation to deductions from a termination payment, Circular Letter of the Minister of Manpower
and Transmigration No. SE-01/MEN/1982 on the Implementing Guidelines of Regulation 8 states that
it is possible to deduct any amount owed by an employee from the employee's termination payment.
Unlike Regulation 8, Circular Letter 1 is silent on there being any limit on the amount that can deduct
from an employee's termination payment.

3.7

Salary During Absence Due to Illness

The Labor Law provides that an employee who is ill is not obliged to work. Indonesia does not have
a concept of a certain number of sick days per year similar to that found in other countries. Instead an
employee's salary may be deducted if an employee is absent due to illness as follows:

first 4 months of illness

100%

second 4 months of illness

75%

third 4 months of illness

50%

each subsequent month of illness

(until termination of employment)

25%

An employer may terminate an employee who has been continuously sick for 12 months.

Hadiputranto, Hadinoto & Partners

4.

Employment of Foreigners

4.1

Requirement to Obtain a Work Permit

To employ a foreigner an employer must obtain a permit (commonly referred to as an "IMTA") from
the Minister of Employment.

4.2

Requirement to Obtain the Foreign Worker Manpower

Utilization Plan ("RPTKA")

An employer who intends to employ foreigners must first obtain an RPTKA. An RPTKA is
essentially an employers plan in relation to the utilization of foreign workers for certain positions in
the employer. The plan should include the number of foreign workers, the period of work and the
plan to replace the foreign workers with Indonesian employees.
Initial RPTKA applications must be submitted to the Ministry of Employment for approval. Renewals
may be submitted to a local office of the Ministry of Employment depending on the location of work.
The reason for requiring employers to obtain a RPTKA is that foreigners can only be employed in
certain positions and for a certain period of time.

4.3

Appointing a Counterpart

Except for foreigners who hold the position of a Director or Commissioner of a company or a Chief
Representative of a representative office, an employer must appoint 1 Indonesian worker as a
counterpart to the foreigner.

4.4

Ratios

The number of foreigners an employer in Indonesia is able to employ depends on a variety of factors
e.g. the type of employer (i.e. whether it is a company or a representative office), the industry, the
size of employer, the number of Indonesian employees etc.
In relation to the number of Indonesian employees required for each foreigner, the Ministry of
Employment applies "ratios". Such ratios are based on current unwritten policy which changes from
time to time.

5.

Social Security

5.1

Social Security in Indonesia

Law No. 24 of 2011 on Social Security Organizing Agencies ("BPJS Law") amended various social
security programs that were previously known as "Jamsostek".
The BPJS Law sets out the general principles on social security for all citizens in Indonesia. Under the
BPJS Law, everybody (including foreigners working in Indonesia for at least 6 months) must be
enrolled in the social security program that is administered by the relevant Social Security Organizing
Agency (Badan Penyelenggara Jaminan Sosial "or BPJS").

Hadiputranto, Hadinoto & Partners

Labor Law in Indonesia

There are 2 BPJS agencies:

(a)

"BPJS Manpower" which administers the Occupational Accident Security, Death Security,
Old Age Security and Pension programs; and

(b)

"BPJS Health" which administers the Health Security Program.

5.2

BPJS Manpower

BPJS Manpower consists of 4 programs:

(a)

Occupational Accident Security Program (Jaminan Kecelakaan Kerja or JKK);

(b)

Death Security Program (Jaminan Kematian or JK);

(c)

Old Age Security Program (Jaminan Hari Tua or JHT); and

(d)

Pension Program (which is scheduled to commence in 2029).

Under Jamsostek there were also 4 programs i.e. JKK, JK, JHT and a Health Care Security Program
(Jaminan Pemeliharaan Kesehatan or "JPK"). JKK, JK and JHT were mandatory, however, JPK was
optional if the employer provided an equivalent health care program. However, this is no longer the
case. Under the BPJS Law, the "Health Security Program" is now mandatory and is administered by
BPJS Health (see below).
In addition, under Jamsostek if a foreigner was already covered by a social security program in their
home country which provided similar social security programs to Jamsostek, the employer was not
obliged to enrol the foreigner in Jamsostek. As mentioned above, under the BPJS Law foreigners
working in Indonesia for at least 6 months must be enrolled in BPJS Manpower and BPJS Health.

5.3

BPJS Manpower Contributions

BPJS Manpower contributions are calculated based on a certain percentage of the employees salary
as follows:
(a)

JKK
The percentage depends on the industry of the employer, but ranges from 0.24% to 1.74%.
This contribution is fully paid by the employer.

(b)

JK
The contribution is 0.3% of the employees monthly salary and is paid by the employer.

(c)

JHT
The contribution is 5.7% of the employees monthly salary. 3.7% of this contribution is paid
by the employer and 2% is paid by the employee (deducted from employees salary but paid
by the employer to BPJS Manpower);

An employee should be covered by the BPJS Manpower for the above programs from the 1st day
he/she joins the employer.

Hadiputranto, Hadinoto & Partners

5.4

BPJS Health

Presidential Regulation No. 12 of 2013 on Health Security as amended by Presidential Regulation No.
111 of 2013 on Amendment to Presidential Regulation No. 12 of 2013 on Health Security ("Health
Security Regulations") are the implementing regulations for the health care program which is
administered by BPJS Health.
All Indonesians citizens are required to become members of BPJS Health and all foreigners who have
been working in Indonesia for at least 6 months must be enrolled in BPJS Health. Unlike Jamsostek,
there is no exception for the enrolment of foreigners.

5.5

BPJS Health Contributions

There are different contribution rates for each type of members, i.e.:
No.
(a)

(b)

Type of Members

Contribution Rate

Civil servants and employees of

state-owned enterprises ("BUMN")

3% to be paid by the State/BUMN

2% to be paid by the employee

Private sector employees

4% to be paid by the employer

(c)

Non-wage recipients and nonemployees

0.05% to be paid by the employee (note that

effective 1 July 2015, this will be increased to
become 1%)

Class 1: Rp.59,500 per month/per person;

Class 2: Rp.42,500 per month/per person; or

Class 3: Rp.25,500 per month/per person

The relevant individual can choose the Class they

wish to be on.

6.

Termination of Employment

Termination of employment in Indonesia is governed by the Labor Law and Law No. 2 of 2004 on the
Settlement of Industrial Relations Disputes.
A principle under the Labor Law is that employers, employee, labor unions and the Government are
obliged to make every effort to avoid termination of employment. Efforts in this regard include
positive actions aimed at avoiding termination of employment, such as scheduling working hours,
taking cost-efficiency measures, altering working methods and providing developmental programs to
employees.
There is no unilateral right of termination of employment in Indonesia similar to that found in other
countries. Instead, subject to certain very limited exceptions, the general rule is that employers must
first obtain a favorable decision on the termination of employment from the Industrial Relations Court
("IR Court") or the Supreme Court (if a decision of the IR Court is appealed by one or both of the
parties).

Hadiputranto, Hadinoto & Partners

Labor Law in Indonesia

The exceptions to having to obtain a prior court order to terminate is not applicable if the termination
is:

during the probation period of the employee (as long as the probation period is in writing);

due to the employee's voluntary resignation, with no indication of any pressure/intimidation

from the employer;

due to the expiry of the employees employment agreement for a definite period;

due to the employee reaching the retirement age as stipulated under the employment
agreement, Company Regulations or Collective Labor Agreement, or other laws and
regulations;

due to the employee's death; or

due to criminal proceedings resulting in the employee being unable to work for 6 consecutive
months.

If an employee agrees to a "mutual termination" and enters into a joint agreement with the employer
that is registered with the IR Court, a prior court order is not required. Registration of a joint
agreement with the IR Court is an administrative process and not an approval process.

7.

Termination Payments

7.1

Structure of Termination Payments

The termination payment depends on whether an employee is employed under a definite period
employment agreement or an indefinite period employment agreement.
(a)

Indefinite Period Employees

The termination payment paid to an indefinite period employees consists of 3 components:

severance pay;
long service pay; and
compensation of rights.

Attachment A sets out details of these 3 components.

In addition to the 3 components, the Labor Law introduced a new element called "separation
pay" (uang pisah). Separation payment applies to termination of employment due to the
resignation of an employee and termination due to an employee's absence without leave for 5
consecutive working days or more. The Labor Law provides that the amount of the
"separation pay" is as stipulated under the employment agreement, the Company Regulations
or Collective Labor Agreement.
In addition, "separation pay" is only to be paid to employees whose duties and functions do
not "directly represent" the employer's interests. The Labor Law is not clear on who is
included in this category of employees. However, it is generally assumed that an employee
whose duties and functions directly represent the employers interests refers, at a minimum, to

Hadiputranto, Hadinoto & Partners

the members of the Board of Directors of a company. Some officials of the Ministry of
Employment have interpreted this provision to mean "managerial level employees" as well
(e.g., HR managers, finance managers etc).
(b)

Definite Period Employees

An employee employed under a definite period employment agreement and terminated before
the contract period expires is not entitled to a termination payment that consists of severance
pay, long service pay and compensation of rights. Instead, a party that terminates a definite
period employment agreement before its expiry (i.e. employer and employee) is obliged to
pay to the other party compensation in the amount of the employees salary until the end of
the period of the definite period employment agreement.

7.2

Termination Payment Formula (For Indefinite Period

Employees)

Whether an employee is entitled to severance pay, long service pay, compensation of rights and
separation payment depends on the reason for the termination of employment. Attachment B sets out
a summary of the various reasons for termination (and the applicable statutory termination payment)
under the Labor Law.

8.

Outsourcing

8.1

Outsourcing in Indonesia

There are 2 types of outsourcing in Indonesia as follows:

outsourcing of work one company outsources part of the implementation of the work of the
company to another company

outsourcing of labor - one company supplies labor (i.e. workers) to another company

There is currently no exemption for affiliated entities to not have to comply with the requirements for
outsourcing.

8.2

Outsourcing of Work

There are numerous requirements for outsourcing of work in Indonesia. These are briefly summarized
as follows:
(a)

Flowchart
The relevant Industry Association of the employer needs to issue a Flowchart that sets out
what work can be outsourced and what work cannot be outsourced.

(b)

Description of Supporting Work

An entity wanting to outsource work to another entity (commonly referred to as the "Service
User") must submit a Description of Supporting Work ("DOSW") to the relevant office of the
Ministry of Employment. A DOSW sets out what work will be outsourced by the Service

10

Hadiputranto, Hadinoto & Partners

Labor Law in Indonesia

User. A copy of the Flowchart must be attached to the DOSW i.e. to show what work can be
outsourced by the Service User.
(c)

Proof of Report
If the DOSW is in order, the relevant office of the Ministry of Employment will issue a Proof
of Receipt.

(d)

Outsourcing Agreement
The Service User and the entity that will conduct the outsourced work (commonly referred to
as the "Service Provider") need to enter into an Outsourcing Agreement.

(e)

Proof of Registration
The Service Provider will need to register the Outsourcing Agreement with the relevant office
of the Ministry of Employment. Then the work can start.

(f)

Sanctions for Non-Compliance

If the requirements for outsourcing of work are not complied with the impact is that by law
the employees of the Service Provider conducting the work will be deemed to be employees
of the Service User.

8.3

Outsourcing of Labor

Outsourcing of labor is highly regulated and limited to 5 areas only:

(a)

cleaning services;

(b)

catering services for employees;

(c)

security services;

(d)

support services in the mining and oil sector; and

(e)

transportation services for employees.

In addition the company providing the labor must be a licensed labor supply company.
If the requirements for outsourcing of labor are not complied with the impact is that by law the
employees of the company that provides the labor will be deemed to be employees of the entity that
uses the labor.

9.

Taxation

Under the Indonesian Income Tax Law, an employer is obliged to withhold a certain amount of an
employees taxable income for the purpose of payment of the employee's income tax to the State.

Hadiputranto, Hadinoto & Partners

11

In Indonesia income tax is calculated based on the following progressive tax rates:
Taxable Income

Tax Rate

Up to Rp. 50,000,000

5%

Rp. 50,000,000 Rp. 250,000,000

15%

Rp. 250,000,000 Rp. 500,000,000

25%

Above Rp. 500,000,000

30%

A different tax rate applies for payments made to employees upon termination of employment. The
applicable tax rates for termination payments are:
Taxable Income

Tax Rate

Up to Rp. 50,000,000

Exempted

Rp. 50,000,000 Rp. 100,000,000

5%

Rp. 100,000,000 Rp. 500,000,000

15%

Above Rp. 500,000,000

25%

For further information, please contact:

Susie Beaumont :
Tel: +62 21 2960 8608
E-mail: susie.beaumont@bakernet.com
Alvira M. Wahjosoedibjo
Tel: +62 21 2960 8503
E-mail: alvira.m.wahjosoedibjo@bakernet.com

12

Hadiputranto, Hadinoto & Partners

Labor Law in Indonesia

Attachment A
Components of a Termination Payment
(indefinite period employees)
1.

Severance Pay (Article 156(2) of Law No. 13 of 2003)

2.

Long Service Pay (Article 156(3) of the Labor Law)

3.

1 month salary for a service period of less than 1 year;

2 months salary for a service period of 1 year but less than 2 years;
3 months salary for a service period of 2 years but less than 3 years;
4 months salary for a service period of 3 years but less than 4 years;
5 months salary for a service period of 4 years but less than 5 years;
6 months salary for a service period of 5 years but less than 6 years;
7 months salary for a service period of 6 years but less than 7 years;
8 months salary for a service period of 7 years but less than 8 years;
9 months salary for a service period of 8 years or more.

2 months salary for a service period of 3 years or more, but less than 6 years;
3 months salary for a service period of 6 years but less than 9 years;
4 months salary for a service period of 9 years but less than 12 years;
5 months salary for a service period of 12 years but less than 15 years;
6 months salary for a service period of 15 years but less than 18 years;
7 months salary for a service period of 18 years but less than 21 years;
8 months salary for a service period of 21 years but less than 24 years;
10 months salary for a service period of 24 years or more.

Compensation of Rights (Article 156(4) of the Labor Law)

compensation for annual leave to which the employee is entitled, but which is not
taken by the employee;
compensation for travel expenses or costs for the employee and his/her family to
return to the original location of hire;
compensation for housing and medical costs, which is 15% of the total amount of
severance pay and long service pay; and
other compensation as stipulated under the employment agreement, Company
Regulation or Collective Labor Agreement.

Components of Salary
The components of "salary" that are used to calculate a termination payment under the Labor Law
consist of:

current basic salary; and

fixed allowances (i.e. payments to the employee made regularly and not related to the
employee's attendance, or achievements within a certain job).

Hadiputranto, Hadinoto & Partners

13

Attachment B
Statutory Termination Payments (indefinite period employees)

No.
1.

2.

3.
4.

5.

6.

7.

8.

9.

14

2x

Long
Service
Pay
1x

Separation
Compensation
Pay ("Uang
of Rights
Pisah")
1x
None

2x

1x

1x

None

2x

1x

1x

None

2x

1x

1x

None

2x

1x

1x

None

1x

1x

1x

None

1x

1x

1x

None

1x

1x

1x

None

1x

1x

1x

None

Reason for Termination of

Employment

Severance
Pay

Change of employer's status,

merger or consolidation of
the employer, and the
employer does not wish to
continue the employment
relationship (Article 163(2))
Closure of the employer for
efficiency measures, not for
financial reasons or force
majeure (Article 164(2))
Employees death (Article
166)
Employee reaching pension
age, if the employer has not
enrolled the employee in a
pension plan (Article 167(5))
Employee termination where
the employee makes
allegations against the
employer which are proven
(Article 169(1) and (2))
Employee's violation of
employment agreement,
Company Regulations or
Collective Labor Agreement
(after 3 consecutive warning
letters) (Article 161(1) and
(3))
Change of employer's status,
ownership and merger or
consolidation of the
employer, and the employee
does not wish to continue the
employment relationship
(Article 163 (1))
Closure of the employer for
financial reasons or force
majeure (Article 164(1))
Bankruptcy of the employer
(Article 165)

Hadiputranto, Hadinoto & Partners

Labor Law in Indonesia

No.
10.

11.

12.

13.

None

Long
Service
Pay
1x

Separation
Compensation
Pay ("Uang
of Rights
Pisah")
1x
None

None

1x

1x

None

None

None

1x

None

None

1x

Yes, if the
employees
duties and
functions do
not directly
represent the
employers
interests. The
amount and
implementation
depends on the
provisions
under the
employment
agreement,
Company
Regulations or
Collective
Labor
Agreement.
Yes, if the
employees
duties and
functions do
not directly
represent the
employers
interests. The
amount and
implementation
depends on the
provisions
under the
employment
agreement,
Company
Regulations or
Collective
Labor
Agreement.

Reason for Termination of

Employment

Severance
Pay

Employee's inability to work

for 6 consecutive months
due to detention by the
authorities (Article 160(3)
and (6))
Employee found guilty by a
court within 6 months of
detention by the authorities
(Article 160(5) and (6))
Employee resignation
(Article 162(2))

Employee's absence without

leave (Article 168(3))

Hadiputranto, Hadinoto & Partners

15

No.
14.

15.

16.

None

Long
Service
Pay
None

Separation
Compensation
Pay ("Uang
of Rights
Pisah")
1x
None

None

None

1x

None

2x

2x

1x

None

Reason for Termination of

Employment

Severance
Pay

Employee reaching pension

age - if the employer enrolls
the employee in a pension
plan (Article 167(1))
Employee termination where
the employee makes
allegations against the
employer that are not proven
(Article 169(1) and (3))
Employee termination due to
his/her continuing illness
after a period of 12 months
(Article 172)

The components of salary used as the basis for the calculation of the termination payments consist of
the basic salary and fixed allowance, including the value of rations, if provided by the employer.

16

Hadiputranto, Hadinoto & Partners

www.hhp.co.id
Hadiputranto, Hadinoto & Partners
The Indonesia Stock Exchange Building
Tower II 21st Floor Sudirman Central
Business District
Jl. Jenderal Sudirman Kav. 52-53
Jakarta 12190, Indonesia
Tel: +62 21 2960 8888
Fax: +62 21 2960 8999

DISCLAIMER
It should be noted that the material in this book is designated to provide general information only. It is not offered as advice on
any particular matter, whether it be legal, procedural or other, and should not be taken as such. The authors expressly disclaim
all liability to any person in respect of the consequences of anything done or omitted to be done wholly or partly in reliance upon
the whole or any part of the contents of this book. No reader should act or refrain from acting on the basis of any matter contained
in it without seeking specific professional advice on the particular facts and circumstances at issue.
2015 Hadiputranto, Hadinoto & Partners. All rights reserved. Hadiputranto, Hadinoto & Partners is a member firm of
Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common
terminology used in professional service organizations, reference to a partner means a person who is a partner, or equivalent,
in such a law firm. Similarly, reference to an office means an office of any such law firm.
This may qualify as Attorney Advertising requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.