The company that wishes to terminate its employees in Indonesia shall follow procedures pertaining prevailing laws and regulations.

The company shall obtain the approval from Industrial Relation Court (“PHI”) unless there is Mutual Termination Agreement (“MTA”) between the Company and the respective employee.

Both parties first, shall conduct bipartite negotiation. If there is agreement between both parties, then MTA is signed by both parties. Furthermore, the said MTA shall be registered to PHI. In the event, there is dispute or there is no agreement between the Company and Employee, then it shall be settled either Mediation or Conciliation. If there is still no consensus between both parties, then the dispute goes to PHI.

Based on explanation above, we can conclude that the termination process is quite long from the negotiation up to MTA and the registration.

Resignation Letter: Moreover, the Company sometimes thought that it will be much easier for them to talk to the Employees and ask the Employee to sign the resignation letter. Then, the said letter will be delivered to the Company. In this case, the said letter is only signed by one party. Often, there are no witnesses to the signature if the employee just renders the said letter to the Company. This condition could be used by the employee that he/she was forced under duress to sign the said letter.

MTA: On the other hand, MTA in a standard form often enables the Company to obtain further releases and additional wording stating that the Employee has, for example, no further financial claims against the Company and has received all relevant severance or other monies. Once the mutual agreement is registered, which should be undertaken immediately after execution, it is then much more difficult for the employee to raise a subsequent claim at the Industrial Relations Court or contest the termination.

We may conclude that the MTA is favorable to be used for termination employment agreement purposes.