Terminated Foreign Workers Entitled to Severance Pay?

PERTANYAAN

Based on GR 34/2021 and the Job Creation Law, it is stated that foreign workers can only be employed by foreign workers employers in an employment relationship for a certain position and a certain time. What is meant by a certain time? In accordance with Article 12 paragraph (3) of GR 34/2021, can the employment agreement be categorized as PKWT or PKWTT depending on the agreement between the foreign worker and the company?

Then, are the rights received by foreigners with foreign worker status the same as those of Indonesian workers? In the event of foreign workers laid off in Indonesia, is the severance pay received by the foreign worker the same as an Indonesian worker/laborer according to the laws and regulations?

INTISARI JAWABAN

In principle, Foreign Workers ("TKA") can only be employed in employment relationships for certain positions and certain times, so the applicable employment agreement is a Temporary Employment Agreement (Perjanjian Kerja untuk Waktu Tertentu/ “PKWT”). As for what is meant by "a certain time", the employment relationship between the employer and the foreign worker must be based on a PKWT and not a Permanent Employment Agreement (Perjanjian Kerja untuk Waktu Tidak Tertentu/ "PKWTT").

So, are the rights of foreign workers the same as Indonesian workers in the event of termination of employment? Are terminated foreign workers entitled to severance pay?

Please take a look at the review below for a further explanation.

ULASAN LENGKAP

This article is an English translation of TKA yang di-PHK Berhak Atas Pesangon?, written by Renata Christha Auli, S.H. and was published on Friday, 17 November 2023.

This article is an updated version of the article with the same title, written by Saufa Ata Taqiyya, S.H. and was published on Thursday, 18 March 2021.

All legal information available on Klinik hukumonline.com has been prepared for educational purposes only and is general in nature (read the complete Disclaimer). In order to obtain legal advice specific to your case, please consult with Justika Partner Consultant.

Foreign Workers Employment Agreement

Basically, Tenaga Kerja Asing (“TKA”) a.k.a. foreign workers may only be employed by foreign workers employers in an employment relationship for a certain position and for a certain period of time, and have competencies in accordance with the position to be occupied.[1] Therefore, the applicable employment agreement is a Temporary Employment Agreement (Perjanjian Kerja untuk Waktu Tertentu/ “PKWT”).[2]

Furthermore, regarding the meaning of "certain time", we refer to the Appendix of Circular Letter of the Supreme Court 1/2017 which explicitly states that foreign workers can be employed in Indonesia only for certain positions and certain times with PKWT (p. 13).

So to answer your question, what is meant by "a certain time" is that the employment relationship between the employer and the foreign worker must be based on a PKWT and not a Permanent Employment Agreement (Perjanjian Kerja untuk Waktu Tidak Tertentu/ "PKWTT").

As for Article 12 section (3) GR 34/2021 which you also asked about, it stipulates:

Application for the validation of RPTKA as referred to in paragraph (2) shall be submitted by the foreign workers employers (TKA employers) by at least enclosing the following documents:

1. application letter;
2. business identification number and/or business license of the TKA Employer;
3. deed and decree of establishment and/or amendment from the authorized institution;
4. proof of compulsory company manpower report (wajib lapor ketenagakerjaan) in the company;
5. draft employment agreement or other agreements;
6. chart of the company’s organizational structure;
7. statement letter for the appointment of TKA Understudy Workers;
8. statement letter to implement education and job training for Indonesian workers in accordance with the qualifications of the position occupied by TKA; and
9. statement letter to facilitate Indonesian language education and training to TKA.

Regarding the phrase "work agreement", this must also be interpreted the same as we have explained above, namely that the work agreement is a PKWT. Therefore, in our opinion, foreign workers can only be employed under PKWT and not under PKWTT.

Also read: Terms of Working Period for Foreigners in Indonesia

Rights of Terminated Foreign Workers

Answering your second question, the rights received by foreign workers are not the same as the rights of Indonesian workers/laborers. This is in accordance to Article 15 GR 35/2021 as follows:

1. Entrepreneurs must provide compensation to workers/laborers whose employment relationship is based on PKWT.
2. The provision of compensation shall be implemented upon the termination of the PKWT.
3. The compensation as referred to in paragraph (1) shall be provided to workers/laborers who have a term of office of at least 1 (one) month continuously.
4. If the PKWT is extended, the compensation shall be provided at the completion of the period of PKWT before extension and toward the extended PKWT period, the next compensation shall be provided after the extension of PKWT period expires or is completed.
5. The granting of compensation does not apply to foreign workers who are employed by employers in an employment relationship based on a PKWT.

Therefore, the provision of compensation money does not apply to foreign workers employed under PKWT.

Also read: Requirements for Foreign Workers to Work in Indonesia

Furthermore, with regard to the rights of foreign workers who are terminated, in principle, the right to severance pay is only owned by PKWTT workers, while for PKWT foreign workers Article 62 Manpower Law applies as follows:

If either party in a work agreement for a specified time shall terminate the employment relations prior to the expiration of the agreement, or if their work agreement has to be ended for reasons other than what is given under subsection (1) of Article 61, the party that terminates the relation is obliged to pay compensation to the other party in the amount of the worker's/labourer's wages until the expiration of the agreement.

For information, based on Article 81 number 16 Perppu Job Creation which amends Article 61 section (1) Manpower Law, an employment agreement can be terminated if:

1. workers/laborers pass away;
2. term of the employment agreement has expired;
3. completion of a certain work;
4. there is a court decision and/or decision of the industrial relations dispute settlement agency that has permanent legal force; or
5. there are certain circumstances or events that are stated in the employment agreement, company regulation, or collective employment agreement that may cause the termination of the employment relation.

Thus, if there is a layoff before the expiration of the period or the end of the employment relationship is not due to the above provisions, the company is obliged to pay compensation to the foreign worker concerned in the amount of his wages until the expiration of the period of his employment agreement.

The same thing is written in the Supreme Court Decision 129/PK/Pdt.Sus-PHI/2016, as explained in The Limits of Foreign Workers Protection, where the Supreme Court strengthened the decision of the Industrial Relations Court at the first level and the Supreme Court cassation decision by punishing the company to pay in cash and at once to the foreign worker for the rights or compensation for the remaining PKWT time that has not been served (p. 20).

On the other hand, if a foreign worker is employed on a PKWTT, the employment agreement is null and void because it contradicts the prevailing laws and regulations,[3] considering that foreign workers can only be employed under PKWT.

In addition, it should also be noted that the obligations of foreign worker employers are to return foreign workers to their home countries (country of origin) after their work agreements expire,[4] and to report to the Minister of Manpower or a designated official for foreign worker employment agreements that have expired or are terminated before the end of the employment agreement period.[5]

Also read: Criminal Penalty for Foreigners Working Illegally in Indonesia

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This is our answer, hopefully, you find it useful.

Legal Basis:

1. Law Number 13 of 2003 on Manpower;
2. Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation which has been enacted into law under Law Number 6 of 2023;
3. Regulation of the Government Number 34 of 2021 on the Recruitment of Foreign Workers;
4. Regulation of the Government Number 35 of 2021 on Temporary Employment Agreement, Outsourcing, Working Hours and Breaks and Termination of Employment Relationships;
5. Circular Letter of the Supreme Court Number 1 of 2017 on the Implementation of the Formulation of the Results of the Plenary Meeting of the Supreme Court Chamber in 2017 as Guidelines for the Implementation of Tasks for the Court.

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[1] Article 4 section (1) Regulation of the Government Number 34 of 2021 on the Recruitment of Foreign Workers (“GR 34/2021”) and Article 81 number 4 Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation (“Perppu Job Creation”) which amends Article 42 section (4) Law Number 13 of 2003 on Manpower (“Manpower Law”).

[2] Article 81 number 12 Perppu Job Creation which amends Article 56 section (2) Manpower Law.

[3] Article 52 section (3) Manpower Law.

[4] Article 7 section (1) letter c GR 34/2021.

[5] Article 32 section (3) GR 34/2021.