Termination of employment or layoff is not something pleasant. However, there are times when layoffs cannot be avoided and are forced to be carried out by employers due to various factors, such as reasons for company efficiency orforce majeure as happened during the Covid-19 pandemic. According to the Law, both Employers and Workers, as much as possible choose Termination of Employment as the last resort to resolve a labor problem. Law Number 13 of 2003 concerning Manpower (Manpower Law), Article 151 Paragraph 1 states that Employers, workers/laborers, trade unions/labor unions, and the government, with all efforts must try to avoid layoffs. If layoffs cannot be avoided, the reasons for layoffs must be notified by employers to workers or labor unions.
Prohibition Against Layoffs
However, there are several reasons justified by the Labor Law jo. Job Creation Law to carry out layoffs, namely apart from reasons of efficiency or force majeure, layoffs can be carried out in the event that the company has suffered continuous losses since the last 2 years, and so on. There are also several reasons that prohibit employers from laying off workers, namely:
- Unable to enter work due to illness according to a doctor’s certificate for a period not exceeding 12 (twelve) months continuously
- Unable to carry out their work because they fulfill their obligations to the state in accordance with the provisions of laws and regulations
- Practicing worship that is commanded by their religion
- Marry
- Pregnant, giving birth, miscarrying, or breastfeeding her baby
- Having blood ties and / or marital ties with other workers / laborers in one company
- Establishing, becoming a member and/or management of a trade union/labor union, workers/laborers conducting trade union/labor union activities outside working hours, or within working hours upon the agreement of the employer, or based on the provisions stipulated in work agreements, company regulations (PP), or collective labor agreements (PKB)
- Reporting employers to the authorities regarding the actions of employers who commit criminal offenses
- Different ideology, religion, political sect, ethnicity, skin color, class, gender, physical condition, or marital status
- In a state of permanent disability, illness due to work accident, or illness due to employment relationship which according to a doctor’s certificate whose recovery period cannot be ascertained.
Layoff Procedure
To avoid disputes and bad relations with workers, if workers have been notified and then refuse the layoff, the settlement of layoffs must be carried out through negotiations between employers and workers (bipartite). In these negotiations, employers can explain what rights workers will get if they are dismissed, such as severance pay, and/or long service pay, and/or compensation pay. In the event that the bipartite negotiations do not reach an agreement, the dismissal is carried out through the next stage in accordance with the mechanism for resolving industrial relations disputes. Industrial relations disputes can occur due to rights disputes, interest disputes, layoff disputes, and disputes between trade unions/labor unions in only one company. The following are layoff procedures that can be carried out by employers.
1. Bipartite Negotiation
This deliberation aims to obtain a consensus known as bipartite. Bipartite negotiations are negotiations between workers/laborers or trade unions/labor unions and employers to resolve industrial relations disputes as stated in Article 1 Point 10 of the Industrial Dispute Resolution Law (PPHI Law). Through this deliberation, both parties negotiate to find the best solution for the company and employees. Based on Article 3 Paragraph 2 of the PPHI Law, these negotiations must be completed no later than 30 working days from the date of commencement. If within this period one of the parties refuses to negotiate or negotiations have been conducted but no agreement has been reached, then the bipartite negotiations are considered a failure.
2. Tripartite Negotiations
If the bipartite negotiations fail or the employee refuses to negotiate, then the settlement that can be taken is through the tripartite route, namely registering the dispute with the agency responsible for the local manpower sector by attaching evidence that efforts to resolve through bipartite negotiations have been made (Article 4 Paragraph 1 PPHI Law). This is intended to avoid the accumulation of industrial relations dispute cases in court. Tripartite negotiations are conducted in the following manner:
- Mediation
Mediation is a settlement of disputes through deliberation mediated by a neutral mediator from the Ministry of Manpower. If the mediation is successful, a collective agreement is made that is signed by the parties and registered at the industrial relations court at the District Court in the jurisdiction of the parties entering into the collective agreement (Article 13 of the PPHI Law). In the event that no agreement is reached, the mediator shall issue a written recommendation no later than 10 working days after the first mediation session to the parties.
- Conciliation
Conciliation is a settlement of disputes through deliberation mediated by a neutral conciliator who is registered at the office of the agency responsible for labor in the Regency / City. Like a mediator, the conciliator tries to reconcile the parties, in order to create an agreement between the two. If an agreement is reached then a Collective Agreement is made, if not reached then the conciliator issues a written recommendation. The conciliator completes his/her duties within a maximum of 30 working days from receiving the request for dispute resolution.
3. Industrial Relations Court
If the tripartite negotiations are still deadlocked, the dispute settlement can be submitted to the Industrial Relations Court (PHI). As Article 5 of the UUPHI stipulates, in the event that the settlement through conciliation or mediation does not reach an agreement, then one of the parties may file a lawsuit with the PHI. PHI is a special court established within the district court that is authorized to examine, hear and give decisions on industrial relations disputes. It is at this stage that the Employer submits a written application for the determination of termination of employment to the Industrial Relations Dispute Settlement Institution along with the reasons on which it is based. Because without a stipulation, the termination is null and void.
Agreement or Mutual Agreement
If the deliberation process at the bipartite level has reached an agreement, it should be set out in a Collective Agreement. This also applies, if an agreement has only been reached at the mediation or conciliation level with the assistance of the Manpower Office. The Joint Agreement must be signed by both parties and registered with the local PHI. Joint Agreements that have been registered are given a certificate of proof of registration. This agreement is binding and becomes law and must be implemented by the parties. In the Collective Agreement, the Employer states the reasons for the dismissal and the rights to be received by employees. By making a Joint Agreement, it means that the parties, both the Employer and the Employee, have agreed to this PHK decision and are willing to carry out their obligations after the Joint Agreement is signed. The obligation that must be fulfilled from the employer’s side is to provide severance pay or long service pay, while the obligation from the employee’s side is to maintain the confidentiality and good name of the company.
KH Contact
In labor law, workers can be employed by companies based on a Fixed-Term Employment Agreement (PKWT) and an Indefinite-Term Employment Agreement (PKWTT). To fulfill and comply with these regulations, it is better to make a work agreement using the services of a third party who understands the ins and outs of PKWT and PKWTT. This is useful to ensure the protection of workers’ rights and minimize problems that will arise for your business. If you are confused in making PKWT and PKWTT, do not hesitate to contact Kontrak Hukum. We will assist in making work agreements and will provide the best service for your business. Visit and contact:
