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Legal Updates | Terminating an Employment Relationship in Indonesia

Under Law No. 13 of 2003 regarding Labor (the “Labor Law”) and other prevailing labour laws and regulations, employment-at-will and termination upon simple notice are not recognized in Indonesia. Employment terminations must follow the procedures under the Labor Law and Law No. 2 of 2004 regarding Industrial Relations Dispute Settlement (“Law No. 2”).

Before terminating an employment relationship, the parties (employee, employer and, if applicable, a labour union) are required to meet in an attempt to reach an amicable termination settlement. This meeting is known as bipartite negotiation. Such negotiations should be completed within 30 days, and minutes of each negotiation must be drafted and signed by all parties.

If a settlement is reached, a Mutual Termination Agreement should be executed and then registered at the relevant labour court. A settlement that is documented as a resignation does not require registration.

If the negotiations fail, the employer or employee may file the dispute with the relevant office of the Ministry of Manpower (“MOM”), along with supporting documents to show that bipartite negotiations have been attempted. A manpower official will ask both parties whether the dispute should be resolved through non-binding conciliation with private conciliators, mediation with a MOM mediator, or arbitration. The parties should respond within seven days, and if they do not, the dispute automatically will go to mediation.

If the non-binding written recommendation of the mediator is rejected, then the matter must be brought by either party to the labour court.


Termination of an employment relationship by the employer, subject to the approval of the labour court, is possible:

  • For “ordinary” cause (i.e., violation of the employment contract, company regulation, or collective labour agreement) after three warning letters;
  • For “serious” cause, including theft, providing false information harmful to the company, dangerous or immoral conduct, etc. (although this ground has been complicated by a decision of the Constitutional Court);
  • In the context of a merger, closure, force majeure, bankruptcy, illness, the death of the employee, extended absence, etc.

Termination of an employee is not permitted in the following circumstances:

  • Not being able to work due to illness, based on a doctor's recommendation, for a period of up to 12 consecutive months;
  • Not being able to work while fulfilling an obligation to the State pursuant to prevailing laws and regulations;
  • Performing mandatory religious services;
  • Getting married;
  • Childbirth, miscarriage, or nursing a baby;
  • Establishing a workers/labour union, becoming a member or part of the management of a workers/labour union, or conducting union activities outside office hours or during office hours with the agreement of the employer, or pursuant to the provisions of the employment agreement, company regulation, or CLA;
  • Reporting the employer to the competent authorities citing the commission of a crime;
  • Due to ideology, religion, political inclination, tribe, race, group, gender, physical condition, or marital status;
  • Becoming permanently disabled, injured by a work accident, or sick due to working conditions for an indeterminate period as confirmed by a doctor’s certificate.

SSEK - 31st July 2018

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Indonesia Snapshot

Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)