Layoffs must be carried out according to the procedures outlined in Government Regulation No. 35 of 2021. Employers are required to attempt negotiations with the employee and offer compensation packages, including severance pay, long-service pay, and compensation for rights such as untaken leave.
Non-compete clauses are not explicitly regulated under Indonesian law, but they may be included in employment contracts. However, their enforceability depends on the specific terms, reasonableness of the restrictions, and the protection of the employee’s rights to earn a livelihood.
If a company needs to terminate employees due to economic difficulties, it must follow the procedures outlined in Government Regulation No. 35 of 2021. This includes attempting to negotiate mutual agreements, paying severance packages, and ensuring compliance with the labor law before proceeding with termination.
The Industrial Relations Court is responsible for resolving employment disputes that cannot be settled through bipartite negotiations, mediation, or tripartite through Local Manpower Institution. This court handles disputes related to termination, wages, collective labor agreements, and etc.
Severance pay is calculated based on the employee’s length of service and the reason for termination. The formula includes severance pay, service appreciation pays (if applicable), and compensation for untaken leave or other rights as per Government Regulation No. 35 of 2021.
Minimum wages are set by the government and vary by region. Employers must ensure that wages paid to employees are at least equal to the regionally established minimum wage. Failure to comply can result in sanctions and penalties.
Employees are entitled to 12 days of paid annual leave after completing one year of continuous service with the same employer. This entitlement is separate from public holidays and must be provided in compliance with company regulations or employment contracts.
The standard working hours in Indonesia are 40 hours per week, with either 7 hours per day for 6 days a week or 8 hours per day for 5 days a week. Overtime is allowed, but it should not exceed 4 hours per day or 18 hours per week, and overtime pay must be provided as per Government Regulation No. 35 of 2021.
Employees who are terminated are entitled to severance pay, long-service pay (if applicable), compensation rights, and other benefits as mandated by Government Regulation No. 35 of 2021. The amount depends on the reason for termination and the employee’s length of service.
