Employment Law: New Reporting Procedure on Termination of Employment
On 11 March 2022, the Directorate General of Advocacy for Industrial Relations and Workers Social Security issued Letter No. 4/303/HI.00.03./III/2022 Tahun 2022 on Notification and Reporting Documents on Termination of Employee ("CL 4/2022”).
CL 4/2022 is a part of the implementing regulation in connection with the new legal framework on manpower law under Law No. 11 of 2020 on Job Creation Law (“Job Creation Law”); and Government Regulation No. 35 of 2021 on Fixed-Term Employment, Outsourcing, Working Hours and Rest Times, and Termination ("GR 35 2021”). The matters stipulated in CL 4/2022 include the procedure of reporting the termination of employment to the Manpower Office (Dinas Ketenagakerjaan), and the standard forms of various documents deemed mandatory under GR 35/2021 to effect the termination of employment.
In this article, we provide a brief overview of the standard reporting mechanism of termination of employees that has been majorly changed compared to the previous employment law regime.
A. Background on the New Reporting Procedure of Termination of Employment
Before the enactment of Job Creation Law and GR 35/2021, the termination of employment required various steps and procedures.
Under the previous regulatory regime, the relevant employers and employees had to initiate negotiations and/or mediation (bipartite) processes to reach the agreed terms of terminations that included lawful terminations due to the employers’ financial losses or closure. In practice, the negotiation process could be lengthy and tedious causing some concerns to the relevant employers and the affected employees.
When the negotiation reached the desired outcome and both parties agreed on the terms of the termination, the previous regulatory regime required the employer to obtain a stipulation (penetapan) from the Industrial Relations Court (“IRC”) on such termination settlement. The IRC stipulation would be the valid, effective proof of the termination of employment.
Upon the enactment of GR 35/2021, the employer is only required to report to the local Manpower Office on the termination of employment rather than obtaining the IRC stipulation ("Termination Report”). The reporting procedure is further stipulated under CL 4/2022.
B. Standard Procedure of Submission of the Termination Report
Through the issuance of CL 4/2022, the Directorate General has notified all Heads of Manpower Office in provinces throughout Indonesia regarding the implementation of Articles 37 and 38 of GR 35/2021 stipulating the standard procedure on the notification and submission of Termination Report.
Under these articles 37 and 38 of GR 35/2021, the employer must: (i) deliver the Letter of Termination to the affected employees (i.e., specifying the terms of termination) and, (ii) receive an executed Termination Acceptance Letter from the affected employees (i.e., stating the affected employees’ acceptance of the Termination) prior to submitting the Termination Report.
Upon completing the above process, the employer must follow the standard mechanism of Termination Report as described below:
- If an employer is unable to avoid the termination, the reasons and objectives of termination must be communicated to the affected employee and/or workers’ union (if the affected employee is a member of a work union).
- The announcement of the termination shall be made in a form of Letter of Termination and delivered to the affected employee and/or workers’ union no later than 14 (fourteen) working days before the effective date of the termination.
- If the employee has received the Letter of Termination and agreed on the terms of termination under that letter, the employer must submit the Termination Report to the Ministry of Manpower and/or the relevant local Manpower Office (in the regency or city). The Termination Report must be submitted together with the Letters of Termination and Termination Acceptance Letter.
- the Ministry of Manpower or the relevant local Manpower Office shall issue the Receipt of Termination Report to the employer, which means the termination is approved by the Ministry of Manpower.
- If the Termination Report is used to apply for the Employment Loss Guarantee (“JKP”) program, the Termination Report must be submitted to the local Manpower Office in accordance with:
- the workplace of the employee;
- the place where the employment agreement was signed; or
- the company’s domicile of the employer.
Furthermore, CL 4/2022 provides the standard formats of Letter of Termination, Termination Acceptance Letter, and Termination Report which stipulates the minimum requirement of the these documents.
Articles 37 and 38 of GR 35/2021 have clarified several outstanding matters of employment cluster in Job Creation Law. We note that the government tries to set balanced provisions for employment relations. We expect this regulation provides clarity between the employer and employee if a termination of employment takes place.
The article above was prepared by Marshall S. Situmorang (Partner) and Audria Putri (Senior Associate).