The government changed a number of provisions governing Termination of Employment (Pemutusan Hubungan Kerja "PHK") in Law No. 13 of 2003 regarding Manpower ("Manpower Law") through Law No. 11 of 2020 regarding Job Creation ("Job Creation Law"). The Manpower Law defines PHK as the termination of an employment relationship because of a certain thing which results in the ending of rights and obligations of both the worker and the employer.
One provision the Job Creation Law retains is that employers must make efforts to avoid the occurrence of a termination. However it should be noted that previously the Manpower Law was stricter, stating that the employer must take all efforts to avoid the occurrence of a termination. Under the Job Creation Law, Article 151 paragraph (1) instead states that efforts need to be made.
Paragraph (2) of this article provides that if termination is unavoidable, the worker and/or the workers union must be notified of the intent and the reason for the termination. Previously, it required the employer and the workers union (or with the worker in the event that the relevant worker is not a member of the union) to discuss the intent and reason for the termination.
Furthermore, under the amended Manpower Law, if after having been informed of the termination, the worker does not accept the reason for this termination, then bipartite negotiation between the employer and the worker and/or the workers union shall be conducted. If these negotiations fail to reach an agreement, then the termination shall be done through the an industrial relations dispute settlement agency.
Through the Job Creation Law, companies no longer need to apply for a written application for termination of employment to the industrial relations dispute settlement agency because Article 152 of the Manpower Law has been abolished.
To note, Article 152 of the Manpower Law previously stated that a written application for a termination shall be submitted to the industrial relations dispute settlement agency along with the reasons on which it is based. Furthermore, the determination of the application for dismissal can only be given by the industrial relations dispute settlement agency if it turns out that the intention to terminate the employment relationship has been negotiated, but the negotiations do not result in an agreement.
It should be noted that the amended Manpower Law provides that companies are exempt from the obligation to notify the worker and/or the workers union in the following circumstances:
- The worker willingly resigns;
- The worker and the employer's employment relationship has come to an end due to the expiration of the employment agreement:
- The worker has reached retirement age in accordance with the employment agreements, company regulations or collective labor agreement; or
- The worker has passed away.
The Job Creation Law also limits workers' access to industrial relations dispute agencies. This is stated through the erasure of Article 171 of the Manpower Law.
Previously, Article 171 stated that if a worker who was termination without a stipulation of an authorized industrial relations dispute settlement agency, and the worker/labourer in question could not accept the termination of employment, the worker/labourer could file a lawsuit with the industrial relations dispute settlement agency in not later than 1 year from the date of termination of employment.
In addition, the government loosens the reasons for terminations through introducing additional reasons for terminations, in employment agreements, company regulations or collective labor agreements. This is stated in Article 154A of the Manpower Law which was added by the Job Creation Law.
Through the Job Creation Law, the government also removed the opportunity for workers to apply for terminations for certain reasons. Article 169, which has been deleted, stated that workers can apply for termination to the industrial relations dispute settlement agency, for example, if the company abuses, Insults or threatens the worker.
Regarding severance pay, the Job Creation Law also erases at least 5 articles regarding severance pay. As a result, workers are threatened not to receive severance pay when resigning, experience layoffs for certain reasons, and die.
First, Article 81 point 51 of the Job Creation Law erases the provisions of Article 162 of the Manpower Law which contains rules for reimbursement of severance pay for workers who resign.
Second, Article 81 point 52 of the Job Creation Law erases article 163 of the Manpower Law related to the provision of severance pay in the event of a layoff due to a change in status, merger, consolidation, or change in company ownership.
Third, article 81 point 53 of the Job Creation Law erases article 164 of the Manpower Act which regulates the provision of severance pay in the event of layoffs due to the company experiencing continuous losses for 2 years or due to force majeure.
Fourth, article 81 point 54 of the Job Creation Law erases article 165 of the Manpower Act regarding the provision of severance pay in the event of layoffs due to the bankruptcy of the company.
Fifth, article 81 point 55 of the Job Creation Law erases article 166 of the Manpower Law concerning the provision of severance pay to heirs if a worker dies.
Originally published 12 Apr 2022
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