This article is an English translation of Jika Karyawan di-PHK dan Dipindah ke Perusahaan Luar Negeri written by Renata Christha Auli, S.H. and published on Monday, 18 July 2023.

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.

In order to simplify your understanding, we will explain the regulations regarding the length of service and the calculation of severance pay based on Indonesian positive law. Then, because you did not specifically mention what type of employment agreement is binding on the employee in question, we will explain two types of employment agreements as follows.

Working Period Calculation

Before answering your question, it is important to know that in Indonesia, an employment agreement shall be drawn up temporarily (untuk waktu tertentu) or permanently (untuk waktu tidak tertentu).[1] According to Article 1 number 10 Government Regulation 35/2021, a Temporary Employment Agreement (Perjanjian Kerja Waktu Tertentu/ “PKWT”) is an employment agreement between workers/laborers and entrepreneurs to enter into an employment relationship within a specified period or for certain work, which cannot be entered into for permanent work.[2]

Meanwhile, Permanent Employment Agreement (Perjanjian Kerja Waktu Tidak Tertentu/ “ PKWTT”) is an employment agreement between workers/laborers and entrepreneurs to enter into a permanent employment relationship, as stipulated in Article 1 number 11 Government Regulation 35/2021.

Then, legally, the working period is calculated since the establishment of a working relationship between the worker and the employer or since the worker first started working based on a work agreement. This refers to the following Article 50 of the Manpower Law:

Employment relation exists because of the existence of a work agreement between the entrepreneur and the worker/laborer.

In this case, work agreements can be made either orally or in writing, made between a worker/laborer and an entrepreneur or an employer that specifies the work requirements, rights, and obligations of the parties.[3] However, specifically for Temporary Employment Agreement, the agreement shall be drawn up in writing as well as must use Indonesian language and Latin alphabets.[4]

One of the elements that must be stated in a written work agreement is the start and validity period of the work agreement.[5] Meanwhile, if a Permanent Employment Agreement is made orally, the employer is obliged to make a letter of appointment containing the date the worker starts to work.[6] Then, specifically for the Permanent Employment Agreement, a probationary period of at least 3 months is required,[7] so that the working period is calculated from the date of first starting work in the probationary period as stated in the employment agreement.

Thus, basically, the working period in Indonesia is calculated from the time the worker/laborer first works in the company (based on the date of start of work) which is determined in accordance with the agreement between the company and the worker as stated in the work agreement or letter of appointment.

Territorial Principle and Its Application

Based on your information, employee A who originally worked at LLC A was assigned to work at a group company of LLC A located in Singapore under the name of Company B. Therefore, when employee A worked at LLC A, he was subject to Indonesian positive law. Similarly, when employee A works in Company B, he is subject to the positive laws of Singapore. Answering your question, we are of the opinion that employee A's working period in Indonesia cannot be combined with the calculation of employee A's working period in Singapore because the two countries have different laws and employment agreements.

This is based on the principle of international law known as the territorial principle. Summarised from The Principles of International Law and Their Application, the territorial principle is a principle based on the sovereignty or power of the state over its territory. If elaborated, the state has the right to apply the laws that apply in its territory to its citizens or all people who are in its territory, without the pressure of power from other countries. In connection with this, every legal subject must comply with the established law. This is because basically, every independent state has the sovereignty to regulate everything in its territory or region.[8]

Severance Pay if Employee is Terminated

In relation to the previous discussion, since the termination of employment (Pemutusan Hubungan Kerja/ "PHK") of employee A was carried out by a Singapore company in the territory of Singapore, then based on the territorial principle, the rules for calculating severance pay use Singapore law.

However, in our opinion, LLC A should have terminated employee A first before he was assigned in Singapore to Company B which is still in the same group of companies. This has been explained in the article entitled Rights of Employees Transferred to Other Companies Abroad.

Also read: Termination Procedure and Dispute Resolution

In the event of termination of employment, in response to your question regarding the severance pay that must be paid by LLC A, the calculation is as follows:[9]

1. term of office is less than 1 year, 1 monthly Wage (in Bahasa Indonesia wage means upah);
2. term of office is 1 year or more, but less than 2 years, 2 monthly wage;
3. term of office is 2 years or more, but less than 3 years, 3 monthly wage;
4. term of office is 3 years or more, but less than 4 years, 4 monthly wage;
5. term of office is 4 years or more, but less than 5 years, 5 monthly wage;
6. term of office is 5 years or more, but less than 6 years, 6 monthly wage;
7. term of office is 6 years or more, but less than 7 years, 7 monthly wage;
8. term of office is 7 years or more, but less than 8 years, 8 monthly wage;
9. term of office is 8 years or more, 9 monthly wage.

These are the answers we can provide, we hope you will find them 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 35 of 2021 on Temporary Employment Agreement, Outsourcing, Working Hours and Breaks and Termination of Employment Relationships.

Reference:

Sefriani. Hukum Internasional: Suatu Pengantar. Jakarta: PT RajaGrafindo Persada, 2010.