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3. Drafting CR
a. Representative of employees may or may not provide any suggestion on a
draft company regulation and company may or may not accept any
suggestions. Any suggestions from representatives of employees and/or
labor union cannot be disputed;
b. Representative(s) of employees is voted on from each division in company;
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4. Validity
a. Valid for up to 2 years & must be renewed 30 days before expiry.
b. If the term of the existing CR has expired, the company can apply to the
local MOM office for an extension for up to 1 year.
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If the company wishes to amend the CR and the amendments are less
generous than the current CR, so long as they do not violate the prevailing
regulations, the amendments must be accepted by the labor union(s) and/or
representatives of the employees.
The company can submit the draft renewed CR with the amendments to the
local MOM office. Unlike under the previous regulation, the amendments do
not have to be accepted by representatives of the employees and/or labor
union(s) but should be submitted to them for recommendation.
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II. Collective Labor Agreement (CLA)
1. CLA is between the labor union and employer, effective as of the date of the
signing. The employer must respond to written requests from any registered
labor union.
2. 1 CLA per company, branches may adjust for local conditions, but their CLA
must be accepted by the employer and labor union(s).
3. Company Groups: a holding company must have 1 CLA and each subsidiary
company must also have 1 CLA.
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4. Conclusion and/or Legalization
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f. Negotiator team: up to 9 with full authority.
h. No consensus by the agreed time limit: report to the MOM office for
settlement under Law No. 2 of 2004.
k. Registered with the Dir Gen of Industrial Relations & Jamsostek for a
company in more than 1 province.
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5. Validity
The term of a CLA may be up to 2 years with an extension of 1 more year.
6. Statutory Minimum
a. the employers rights and obligations;
c. employment conditions;
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Highlighted issues to be included in Company
Regulation
a. Electronic communications, email/internet abuse, software copyright policies;
d. Code of Conduct
g. Political Activities
i. Demotion
l. Sexual Harassment
m. Infectious Diseases
n. Security Clearances
o. Medical Check-ups
q. Clear-desk Policy
r. Smoking
u. Redundancy
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III. Warning and Suspension
A. Warning Letter
1. The Manpower Law basically requires that employer serve a first,
second and third consecutive warning letter before terminating an
employee unless provided for otherwise in employment
agreement, CR or CLA.
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A.1 Highlighted Issues when Serving Warning
Letters
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A.2 Post Disciplinary Actions
1. Closely monitor of employees development or progress.
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A.3 Problems
The suspension notice must be in writing, with clear reasons and the employees
obligations while on suspension.
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IV. Termination
Procedure for Termination of Employment
Legal basis: Law No. 13 of 2003 on Manpower (Manpower Law) and Law No. 2
of 2004 on the Settlement of Industrial Relations Disputes (Law 2/2004)
The general principles of the termination of employment:
1. terminations should be prevented and are prohibited in some cases.
Termination should be for a reason deemed acceptable under the Manpower
Law;
2. termination procedures under Law No. 2 of 2004 must be followed;
3. the company/employer must first obtain approval from the Labour Court.
Unilateral termination of employment is not allowed unless the employer and
employee enter into a mutual termination agreement (MTA) which should
then be registered with the Labour Court. If a party does not perform, the
other party to the mutual termination agreement may apply to the Labour
Court for a writ of execution.
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Exceptions to the general principle of approval
being required to terminate an employment
relationship include the following:
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Termination of employment is prohibited for the
following:
1. activities of the employee in a labor union;
2. the employee reporting any illegal act committed by the employer to the
authorities;
3. the ideology, religion, race, gender, physical condition, marital status of the
employee;
4. the employee being ill continuously for less than 1 year as stated in a
physicians certificate;
5. the employee becoming permanently disabled or sick for work-related reasons
and the healing period is unpredictable;
6. the employee being on State duty;
7. the employee is required to carry out religious duties approved by the
authorities;
8. the employees marriage, pregnancy, birth or miscarriage for female workers;
9. for female workers, the feeding of their babies;
10. an employee is related to another employee by blood or by marriage.
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Types of Termination of Employment and
Changes to the Termination Provisions and its
Articles under the Manpower Law
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2. Termination for Major Mistakes (serious misconduct)
Article 158 and other relevant articles on serious misconduct were revoked by
the Constitutional Court in 2004. Employers can no longer immediately
terminate employees without approval from the Labor Court for serious
misconduct because Article 158 defines it as criminal conduct; therefore, a
court guilty verdict is required.
d. For redundancy (but Article 164 (3) on this matter was revoked by the
Constitutional Court Ruling in 2012).
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4. Other reasons for termination:
a. Force majeure;
e. Termination because the employee has been detained for more than 6
months for an alleged crime or has been found guilty by a criminal court.
When an employee is detained for allegations of criminal conducts, the
employer is under an obligation to provide financial aid to family members
of the employee in the following amount:
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(i) For employee with 1 family member, 25% of the employees salary
(ii) For employee with 2 family members, 35% of the employees salary
f. termination for being absent for 5 days without leave, without prior
notification, with proper summons having been served twice (2x) by the
employer;
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g. The employee terminates the employment due to the employer's:
i. abuse, severe insult or threat against the employee;
vi. forcing the employee to do work which is harmful to the employees life,
safety, health or decency while that type of work is not described in the
employment agreement.
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V. Termination Entitlements
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A. Calculation of Severance, Service Period
Recognition Payment and Compensation
Severance Pay
Service period less than 1 year 1-months salary
Service period 1 year or more but less than 2 years 2-months salary
Service period 2 years or more but less than 3 years 3-months salary
Service period 3 years or more but less than 4 years 4-months salary
Service period 4 years or more but less than 5 years 5-months salary
Service period 5 years or more but less than 6 years 6-months salary
Service period 6 years or more but less than 7 years 7-months salary
Service period 7 years or more but less than 8 years 8-months salary
Service period 3 years or more but less than 6 years 2-months salary
Service period 6 years or more but less than 9 years 3-months salary
Service period 9 years or more but less than 12 years 4-months salary
Service period 12 years or more but less than 15 years 5-months salary
Service period 15 years or more but less than 18 years 6-months salary
Service period 18 years or more but less than 21 years 7-months salary
Service period 21 years or more but less than 24 years 8-months salary
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Compensation:
a. Untaken annual leave not validly forfeited.
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Reason for Termination Manpower Law Entitlement
Provision
Serious mistake (revoked by the 158(3) + 156(4) COMP
Constitutional Court in 2004)
Serious mistake where Employees 158(4) + 156(4) SP AS PER EA,
duty/function does not directly CR OR CLA +
represent Employers interest COMP
(see above)
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Reason for Termination Manpower Law Entitlement
Provision
Voluntary resignation where 162(2) SP AS PER EA, CR OR CLA +
Employees duty/function COMP
does not directly represent
Employers interest
Change of status, ownership, 163(1) SEVE + LSRP + COMP
merger, consolidation, and
Employee terminates
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Reason for Termination Manpower Law Entitlement
Provision
Efficiency/redundancy/downsi 164(3) 2 X SEVE + LSRP + COMP
zing (revoked by the
Constitutional Court through
its ruling in 2012)
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Reason for Termination Manpower Law Entitlement
Provision
Employers actions guilty 169(2) 2 X SEVE + LSRP +
COMP
Employers actions not guilty 169(3) COMP
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B. Fixed term employment and early termination
as well as its potential disputes
Definition of FTC:
Employment agreement between the employee and the employer to establish an
employment relationship for a certain period or for certain work.
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Early Termination and its Potential Disputes
Termination of FTC:
If either party terminates the employment agreement before the end of its term,
the terminating party must provide compensation equal to the employees salary
until the expiry of the FTC.
The causes and procedure for early termination must be provided in the FTC, eg
the types of violations by the employee which will allow the employer to terminate
without providing compensation.
Recommendation:
It is suggested for employers to sign and register a MTA in the event of FTC
termination, unless for termination due to expiry of the FTC term.
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C. Redundancy vs Poor Performance
Constitutional Court Ruling No. 19/PUU-IX/2011 of 13 June 2012
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Redundancy is prohibited if the employer plans to outsource the work. Redundancy
is only acceptable if there is no longer any suitable position for the employee or no
work is available for the employee for reasons which can be supported.
In practice, termination for poor performance falls under "minor mistakes". The
assessment of poor performance must be objective, for example, according to the
annual performance review. Before termination, 3 warning letters must be served
and the employee should be moved to another position.
Before terminating for redundancy, the employer must try to improve efficiency.
Termination must be the last resort.
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Efficiency may be achieved through:
a. Reducing the fees and facilities higher-ranked employees such as managers
and directors receive;
b. Reducing shifts;
c. Limiting/eliminating overtime;
d. Reducing working hours and/or days by having employees work alternately
(eg. every other day);
e. Giving workers some days off;
f. Retiring those eligible.
At least two or three of the above will be sufficient. Other documents that need to
be prepared for evidentiary purposes before the manpower Agency and/or the
Court: the audited financial statements for the last 2 years consecutively and a
decision from General Meeting of Shareholders of a company as well as a
decision from board of directors regarding the redundancy plan. 39
D. Termination due to Retirement Age
If an employee reaches pensionable age, under Article 167 of the Manpower
Law, the employment relationship between him/her and the employer may be
terminated, with the following requirements:
If a career director is terminated due to retirement age, the severance pay will
be as regulated under Article 167 of the Manpower Law.
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VI. Settlement of Industrial Disputes Law No. 2 of
2004
Reference: Law No. 2 of 2004 concerning Settlement of Industrial Relations
Disputes (Law 2/2004)
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2. Disputes over interests;
a. membership
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B. Settlement Procedures
1. Bipartite negotiations (Articles 4-7)
Definition: meeting between employer or employer association(s) and
employee or labor union or between labor unions:
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f. Once signed, the collective agreement must be registered with the Labor
Court;
g. If either party does not comply with the collective agreement, the other party
can apply to the Labor Court for an order to comply;
h. If no consensus is reached, either party should register the dispute with the
relevant regional manpower office;
i. Either party can choose to settle the dispute through conciliation or arbitration
within 7 working days. Otherwise the relevant regional manpower office will
decide for the dispute to be settled by a mediator.
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2. Mediation (Article 8 -12)
Definition: The settlement of disputes over rights, interest, termination of
employment or between labor unions in one company through an amicable
settlement facilitated by a mediator.
e. Once signed, the collective agreement must be registered with the Labor
Court; 46
f. If no consensus is reached, the mediator must issue a recommendation
within 10 working days of the first meeting;
g. The parties should submit their responses (accept or not) within 10 working
days of receipt of the recommendation;
j. If either party does not comply with the collective agreement, the other party
can file an application to the Labor Court for an order to do so.
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3. Conciliation (Articles 17-28)
Definition: the settlement of disputes over interests, termination of employment
or amongst labor unions in a company through an amicable settlement
facilitated by a conciliator.
e. Once signed, the collective agreement must be registered with the Labor
Court;
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f. If no consensus is reached, the conciliator must issue a recommendation
within 10 working days of the first meeting;
j. If either party does not comply with the collective agreement, the other
party can apply to the Labor Court for an order to do so.
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4. Arbitration (Articles 29-54)
Definition: settlement of disputes over interests and amongst labor unions in
a company outside the Labor Court under a written agreement among the
disputing parties to submit their disputes to the arbitrators. The arbitration
award is final and binding.
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f. There can be 1 (to be chosen within 3 working days) to 3 arbitrators (to be
chosen within 7 working days);
i. The arbitrators should start the arbitration within 3 working days as of the
signing of the appointment agreement;
j. If both parties agree, the arbitrators can extend the arbitration once for up to
14 working days;
k. Before the arbitration starts, the arbitrators should try for an amicable
settlement between the parties;
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l. If an amicable settlement is reached, the arbitrators must prepare a
settlement agreement and register it with the Labor Court in the domicile of
the arbitrators;
p. If either party does not comply with the arbitration award, the other party
can apply to the Labor Court in the domicile of the party who must conduct
the award;
q. The court order should be issued within 30 working days of receipt of the
application to the registrar not counting the date of the arbitration award;
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r. Either party may appeal to the supreme court within 30 working days of the
issuance of the arbitration award;
ii. An important document was held back by either party by either party;
iii. The arbitration award is issued due to a deception by one of the parties;
t. No later than 30 working days as of the receipt date of the objection, the
Supreme Court must issue its ruling;
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u. Any decision issued by the P4P which is appealed by either or both parties
can be settled by the Supreme Court if the duration for submission of the
decision is within 90 days;
v. Industrial disputes which are ongoing or have been settled through arbitration
cannot be appealed to the Labor Court.
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5. Industrial Disputes Settlement Court (Labour
Court) (Articles 55-80)
Definition: The Labour Court is a special court in the district court, under
the auspices of the Supreme Court. There is a Labour Court in every
regency or municipal district court.
iv. Disputes amongst labour unions in one company at the first and final
stages;
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b. The procedural law for the Labour Court is the Indonesian Civil Procedural
Law unless otherwise stipulated in this law;
c. Parties having cases that have nominal claims less than Rp.150,000,000
are not imposed any fee;
e. Any employee who submits a dispute to the Labour Court may apply for an
interlocutory ruling forcing the employer to continue paying the employees
salary until the dispute is settled.
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Thank you
lia.alizia@makarim.com
candace.limbong@makarim.com
www.makarim.com
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