Terminating Employment in Indonesia

Employment in Indonesia – Terminations

Based on the PP No.35 Year 2021

There are 15 reason for termination based on the rules, here is the top five.

1. Companies are merging, consolidating, taking over, or separating the Company and the Workers/Laborers are not willing to continue the Employment Relationship or the Employer is not willing to accept the Workers/Labourers;
2. The company take a measure of efficiency, followed by the closure of the company to prevent further suffering from loss;
3. The company closes after suffering from a continuous loss for 2 (two) years;
4. The company closes due to force majeure;
5. Workers/Labourers violate the provisions stipulated in the Employment agreement, Company Regulation, or Collective Bargaining Agreement and have previously been given the first, second, and third reprimands, each of which valid for a maximum of 6 (six) months unless otherwise stipulated in the Employment agreement, Company Regulation, or Collective Bargaining Agreement.

Terminations of Indefinite Contract

In the event of termination of employment, the Employer shall be required to pay severance pay and/or long service pay, and compensation for rights that should have been received.

Severance Pay:

The severance pay as referred to in paragraph (1) shall be provided with the following provisions:

• for service period of less than 1 (one) year, 1 (one) month of Wage;
• for service period of 1 (one) year or more but less than 2 (two) years, 2 (two) months of Wage;
• for service period of 2 (two) years or more but less than 3 (three) years, 3 (three) months Wage;
• for service period of 3 (three) years or more but less than 4 (four) years, 4 (four) months of Wage;
• for service period of 4 (four) years or more but less than 5 (five) years, 5 (five) months of Wage;
• for service period of 5 (five) years or more, but less than 6 (six) years, 6 (six) months of Wage;
• for service period of 6 (six) years or more but less than 7 (seven) years, 7 (seven) months of Wage;
• for service period of 7 (seven) years or more but less than 8 (eight) years, 8 (eight) months of Wage; and
• for service period of 8 (eight) years or more, 9 (nine) months of Wage.

In the event of termination of employment, the Employer shall be required to pay severance pay and/or long service pay, and compensation for rights that should have been received.

Long Service Pay

The long services pay as referred to in paragraph (1) shall be provided with the following provisions:

• for service period of 3 (three) years or more but less than 6 (six) years, 2 (two) months of Wage;
• for service period of 6 (six) years or more but less than 9 (nine) years, 3 (three) months of Wage;
• for service period of 9 (nine) years or more but less than 12 (twelve) years, 4 (four) months of Wage;
• for service period of 12 (twelve) years or more but less than 15 (fifteen) years, 5 (five) months of Wage;
• for service period of 15 (fifteen) years or more but less than 18 (eighteen) years, 6 (six) months of Wage;
• for service period of 18 (eighteen) years or more but less than 21 (twenty one) years, 7 (seven) months of Wage;
• for service period of 21 (twenty one) years or more but less than 24 (twenty four) years, 8 (eight) months of Wage; and
• for service period of 24 (twenty four) years or more, 10 (ten) months of Wage.

In the event of termination of employment, the Employer shall be required to pay severance pay and/or long service pay, and compensation for rights that should have been received.

Compensation for rights

The compensation for rights that should have been received as referred to in paragraph (1) shall include:

• annual leave that has not been used and has not been expired;
• costs or fees to return home for Workers/Labourers and their families to the place where Workers/Labourers are employed; and
• other matters stipulated in the Employment agreement, Company Regulation, or Collective Bargaining Agreement.

Terminations of Definite Contract

Employers are required to provide compensation to Workers/Labourers whose working relationship based on definite contract. Compensation is given when the end of the definite contract.

Compensation for definite contract

Based on the PP no 35 article 16 (1);

• If the employee is work for 12 month continuously, the compensation is 1x salary.
• If the employee is work for 1 month or more but not exceed 12 month, the compensation is giving at the pro ration basis.
• If the employee is work for more than 12 month, the compensation will calculate based on the period of working.

Please note that all the information listed below are to be used as a general guideline. For more detailed accounts of Indonesia employment laws and regulations, please visit the official governmental websites.

Updated on: August 2025