Employee exits in Indonesia create different obligations depending on whether the employee resigns, is terminated by the employer, reaches the end of a fixed-term contract, or leaves under a mutual agreement. The exit route affects compensation, final payroll, tax, BPJS and, for foreign employees, immigration requirements.
What Must an Employer Do When an Employee Resigns?
An employee who voluntarily resigns must submit a written resignation at least 30 days before the resignation date, must not be bound by an official service commitment, and must continue working until the resignation date.
A qualifying resignation does not give the employee the statutory severance package that can apply to employer-initiated termination. However, the employee may still be entitled to compensation for certain outstanding rights and separation pay (uang pisah) if this is provided for in the employment agreement, company regulations, or collective labor agreement.
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A resignation must also be voluntary. An employer should not classify an employer-initiated departure as a resignation simply because the employee has signed a resignation document.
How Is Employer-Initiated Termination Different?
Termination must follow the applicable grounds and procedures under Indonesian labor rules. The reason for termination affects the employee’s entitlement to severance pay, long-service pay, and compensation for outstanding rights.
The amount can differ according to the reason for termination and length of service.
What Happens When a Fixed-Term Contract Ends?
Employees working under a Fixed-Term Employment Agreement (PKWT) are subject to different compensation rules.
When a PKWT reaches its agreed end date, the employer generally owes statutory PKWT compensation based on the employee’s period of service.
If either party ends the PKWT before its agreed expiry date, the employer must still pay PKWT compensation based on the period the employee has already worked. A separate payment obligation can also arise for the party ending the contract early, based on wages for the remaining contract period.
Can the Employer and Employee Agree to Separate?
An employer and employee can agree on the terms for ending the employment relationship instead of continuing a disputed termination process.
If bipartite negotiations result in a settlement, the parties record it in a written perjanjian bersama, which must be registered with the Industrial Relations Court (PHI). Registration allows either party to seek enforcement through the court if the agreement is not followed.
The agreement can set the termination date, compensation, outstanding employee rights, and any obligations that must be completed before the employment relationship ends.
What Must Be Included in Final Payroll?
Final payroll depends on how the employment relationship ends. The employer must calculate salary through the final working date together with any compensation, outstanding rights, or other payments due under the applicable employment terms and Indonesian labor rules.
For a permanent employee, the month in which employment ends is the employee’s final tax period. The employer must recalculate PPh 21 using the applicable annual calculation and account for PPh 21 already withheld during the year.
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The employer must also provide the required PPh 21 withholding certificate to the departing employee.
When Should BPJS Be Updated?
An employee’s departure also affects the company’s BPJS Health and BPJS Employment registrations.
The employer should update the employee’s status with the relevant BPJS programs and ensure contributions are handled correctly through the employee’s applicable final participation period.
What Additional Steps Apply to Foreign Employees?
The employer should review the employee’s Limited Stay Permit (ITAS/KITAS) and the Foreign Manpower Utilization Plan (RPTKA) when the employment relationship ends.
Where the foreign employee will leave Indonesia after employment ends, the employer should complete the applicable immigration process for ending the employee’s stay permit and departure from Indonesia. Different steps may apply where the foreign national remains in Indonesia under another valid immigration status.
What Happens If the Employee Disputes the Exit?
An industrial relations dispute generally begins with negotiations between the employer and employee or their representatives.
Offboarding a foreign employee? MAP can coordinate the employment and immigration steps at info@mapresourcesindonesia.com
If the parties cannot reach an agreement, the dispute can proceed through the applicable industrial relations dispute process, which can include mediation through the local manpower authority. An unresolved termination dispute can ultimately be brought before the Industrial Relations Court.
If the reason for the exit or the amount paid is disputed, written resignation or termination records, payroll calculations, notices, and settlement agreements can be used to support the employer’s position.
Manage Employee Separations With MAP Resources Indonesia
MAP Resources Indonesia assists foreign-owned companies with employee offboarding, final payroll, PPh 21, BPJS administration, and employment compliance in Indonesia. Contact us at info@mapresourcesindonesia.com for support.
