For foreign employers operating in Indonesia, resignation and termination are not interchangeable ways of ending employment.
A resignation is initiated by the employee, while a termination is initiated by the employer and can trigger different procedures and compensation depending on the reason for termination. Mutual separation and the expiry of a fixed-term employment agreement follow different rules.
When an Employee Resigns
Under Government Regulation No. 35 of 2021, an employee resigning voluntarily must generally submit a written resignation request at least 30 days before the resignation date, have no outstanding service obligation to the company, and continue working until the resignation takes effect.
An employee who resigns voluntarily and meets these requirements does not normally receive the same severance and long-service pay that may arise from an employer-initiated termination. The employee remains entitled to compensation for applicable outstanding rights and may also receive separation pay where this is provided for in the employment agreement, company regulation, or collective labor agreement.
Reviewing an employee resignation? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com
A resignation should reflect a decision made by the employee. If the employee later challenges whether the resignation was voluntary, the evidence showing how the resignation occurred may become important.
When the Employer Terminates Employment
A termination occurs when the employer takes the action that ends the employment relationship.
The employer must have a legal basis for the termination and follow the applicable procedure. If the employee rejects the termination, the employer cannot simply treat the employment relationship as ended. The termination must go through the industrial relations dispute process before it can be completed.
The reason for termination matters because Indonesian employment rules do not apply one compensation formula to every termination. Redundancy, company closure, misconduct, prolonged illness, retirement, and other statutory grounds can produce different entitlements.
Depending on the termination ground, an employee may be entitled to some combination of severance pay, long-service pay, and compensation for outstanding rights. The reason for termination determines which payments apply and how they are calculated. Under the current legal position, the severance amounts in the statutory table operate as minimum amounts.
The employer should identify the legal basis for the termination before calculating the employee’s final payment.
Using Mutual Separation to End Employment
An employer and employee may also agree on the terms for ending their employment relationship rather than relying solely on a unilateral termination.
For support with an agreed employee separation, email MAP Resources Indonesia at info@mapresourcesindonesia.com
Where an industrial relations dispute is resolved through bipartite negotiations, the parties can record the settlement in a Perjanjian Bersama, or collective agreement. The agreement can be registered with the Industrial Relations Court and enforced through the court if a party does not comply.
The agreement should accurately record what has been settled rather than using a resignation document to describe an employer-initiated or negotiated exit.
Fixed-Term Contracts Follow Different Rules
A fixed-term employment agreement (PKWT) creates different payment consequences from an indefinite-term employment relationship.
Under Government Regulation No. 35 of 2021, when a PKWT ends, the employer generally owes statutory PKWT compensation based on the employee’s period of service. For 12 months of continuous service, the compensation is generally equal to one month’s wages, with shorter or longer service calculated proportionately.
Different rules apply if either party ends the PKWT before its agreed expiry. Indonesia’s Manpower Law can require the party ending the contract early to pay the other party an amount equal to the employee’s wages for the remaining contract period.
The remaining-contract payment and statutory PKWT compensation are separate obligations. Where an employer ends a PKWT early, and both rules apply, the employer can owe compensation based on the employee’s completed service as well as payment for the remaining contract period.
Terminating Foreign Employees
When a foreign employee’s employment ends, the employer may need to coordinate the termination with changes or cancellation procedures for the employee’s work authorization and immigration status.
The required steps depend on the permits and immigration documents held by the employee and should be completed so that the employee does not remain sponsored or authorized based on employment that has ended.
What Happens When an Exit Is Disputed
Under Law No. 2 of 2004 on Industrial Relations Dispute Settlement, the parties must generally first attempt to resolve an employment dispute through bipartite negotiations.
If no agreement is reached, the dispute can proceed through the applicable dispute-resolution process, including mediation through the local manpower authority and, where applicable, proceedings before the Industrial Relations Court.
For a disputed termination, the termination can only be completed once the industrial relations dispute process results in a final and binding decision.
If the exit is challenged, the written record can determine whether it is treated as a resignation, termination, or agreed separation.
Managing Employee Exits with MAP Resources Indonesia
MAP Resources Indonesia supports foreign employers in determining the appropriate exit route and the employment consequences that follow. Contact MAP Resources Indonesia at info@mapresourcesindonesia.com.
