Employment Release Agreement Template for Indonesia
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What is a Employment Release Agreement?
The Employment Release Agreement serves as a crucial document in Indonesian employment relationships when both parties agree to terminate employment by mutual consent. This document is essential when implementing a voluntary separation, redundancy, or negotiated exit in compliance with Indonesian labor laws. It must include specific elements required by Law No. 13 of 2003 on Manpower and its amendments, such as statutory severance calculations, service appreciation pay, and proper releases. The agreement is particularly important as it provides legal certainty for both parties, prevents future disputes, and ensures compliance with local regulatory requirements. It should be used when there is mutual agreement to end employment and both parties wish to document the terms of separation, including financial settlements, ongoing obligations, and releases of claims.
About the Employment Release Agreement
An Employment Release Agreement is a legally binding contract that formally terminates the employment relationship between you and your employer through mutual consent under Indonesian law. This document protects both parties by clearly outlining the terms of separation, including financial compensation, benefit transfers, and release of potential claims, ensuring compliance with Indonesia's comprehensive labor regulations.
When do you need this document?
You need this agreement when facing voluntary redundancy programs, company restructuring, mutual disagreement resolution, or negotiated early retirement. It's essential during organizational downsizing where you and your employer prefer to avoid formal dismissal procedures. The document is particularly valuable when you're seeking a clean break from employment with agreed-upon severance terms that exceed minimum statutory requirements. You should also use this agreement when transitioning to competitor employment requires careful handling of non-compete clauses and confidentiality obligations.
Key legal considerations
Your agreement must include accurate severance pay calculations based on your length of service and final salary, following the formulas specified in Government Regulation No. 35 of 2021. You need to ensure proper calculation of service appreciation pay (uang penghargaan masa kerja) and any outstanding leave entitlements. The document should contain comprehensive release clauses that protect both parties from future claims while preserving your rights to statutory benefits like BPJS healthcare continuation. Consider including post-employment restrictions such as non-disclosure agreements and non-compete clauses, ensuring they comply with Indonesian legal limits. The agreement should address the return of company property, final work handovers, and any ongoing obligations like client transition responsibilities.
Legal requirements in Indonesia
Under Law No. 13 of 2003 on Manpower (as amended by Job Creation Law No. 11 of 2020), your agreement must be witnessed by at least two parties and may require labor union representative involvement depending on your workplace. The document must clearly state that the termination is by mutual consent (pemutusan hubungan kerja secara musyarawah) to distinguish it from dismissal proceedings. You must ensure compliance with minimum severance payment requirements: one month's salary for each year of service for severance pay, plus 15% of severance pay as service appreciation pay for employees with over three years of service. The agreement should be registered with the local Manpower Office (Disnaker) within seven days of signing to ensure legal validity and prevent future disputes through the Industrial Relations Court system.
GOVERNING LAW
Applicable law
This Employment Release Agreement is drafted to comply with Indonesia law. Key legislation includes:
Minister of Manpower Regulation No. 2 of 2015: Regulations regarding procedures for negotiation and preparation of mutual termination agreements between employers and employees
Indonesian Civil Code (KUHPerdata): Provides basic contract law principles applicable to employment release agreements, including requirements for valid agreements and mutual consent
Government Regulation No. 35 of 2021: Implementing regulation for fixed-term employment, outsourcing, working hours, and termination procedures, including severance calculation formulas
Law No. 2 of 2004 on Industrial Relations Dispute Settlement: Governs dispute resolution procedures in employment matters and requirements for valid settlement agreements
Minister of Manpower Regulation No. 3 of 1996: Guidelines for settlement of employment termination and severance pay determination in private companies
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