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Severance Pay Contract

Severance Pay Contract Template for Indonesia

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Key Requirements PROMPT example:

Severance Pay Contract

"I need a Severance Pay Contract template that can be used for multiple employees as part of our Jakarta office restructuring planned for March 2025, compliant with Indonesian law and including installment payment provisions."

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Document background
The Severance Pay Contract is a crucial document used in Indonesian employment relationships when formalizing the termination of employment and associated severance payments. It becomes necessary when an employment relationship is ending, whether due to company restructuring, retirement, resignation, or other circumstances as permitted under Indonesian law. The document must comply with Indonesia's Job Creation Law (Omnibus Law) and its implementing regulation GR 35/2021, which specify mandatory severance pay calculations and employee rights. This contract typically includes detailed calculations of severance pay, long-service pay, and compensation rights, along with payment terms, tax provisions, and mutual releases. It serves as a legally binding agreement that protects both employer and employee interests while ensuring compliance with Indonesian labor regulations.
Suggested Sections

1. Parties: Identification of the employer and employee, including their complete legal names, addresses, and positions

2. Background: Brief context of the employment relationship, reason for termination, and basis for the severance payment

3. Definitions: Key terms used in the agreement including 'Severance Pay', 'Long Service Pay', 'Compensation Rights', and other relevant terms

4. Basis of Termination: Clear statement of the grounds for employment termination in accordance with Indonesian labor laws

5. Severance Payment Calculation: Detailed breakdown of how the severance pay is calculated according to GR 35/2021, including basic salary and fixed allowances

6. Payment Terms: Timing, method, and currency of severance payment, including any installment arrangements if applicable

7. Tax Provisions: Treatment of taxation on the severance payment and responsibilities of each party regarding tax obligations

8. Release and Waiver: Employee's acknowledgment of receiving the severance payment and waiver of future claims related to employment

9. Confidentiality: Obligations regarding confidentiality of the agreement terms and company information

10. Governing Law: Specification of Indonesian law as the governing law and relevant jurisdiction

11. Execution: Signature blocks and execution requirements

Optional Sections

1. Non-Competition: Restrictions on employee's future employment activities, if applicable under Indonesian law and agreed between parties

2. Outstanding Benefits: Treatment of any unused leave, bonuses, or other benefits, if applicable

3. Company Property: Requirements for returning company property, if any items are still in employee's possession

4. Reference Letter: Terms regarding the provision of employment references, if agreed

5. Continuing Obligations: Any ongoing obligations that survive termination, such as intellectual property rights

6. Dispute Resolution: Alternative dispute resolution procedures, if parties wish to specify mediation before court proceedings

Suggested Schedules

1. Schedule A - Severance Payment Calculation: Detailed calculation worksheet showing base salary, tenure, multipliers, and final severance amount

2. Schedule B - Employment History: Summary of employee's tenure, positions held, and salary history

3. Schedule C - Outstanding Benefits Calculation: Calculation of any additional payments such as unused leave, prorated bonuses

4. Appendix 1 - Required Documents: List of documents required for processing severance payment

5. Appendix 2 - Payment Schedule: If payment is in installments, detailed schedule of payment dates and amounts

6. Appendix 3 - Handover Checklist: List of company property to be returned and handover procedures

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant Industries

Manufacturing

Technology

Financial Services

Retail

Construction

Mining

Energy

Telecommunications

Healthcare

Education

Hospitality

Professional Services

Logistics

Agriculture

Consumer Goods

Relevant Teams

Human Resources

Legal

Finance

Compliance

Executive Leadership

Payroll

Industrial Relations

Employee Relations

Relevant Roles

Human Resources Director

HR Manager

Legal Counsel

Chief Financial Officer

Finance Director

Compliance Officer

Employment Relations Manager

Compensation and Benefits Manager

HR Business Partner

Chief Executive Officer

Managing Director

Department Head

General Manager

Operations Director

Industries
Law No. 11 of 2020 (Job Creation Law/Omnibus Law): The overarching law that modified various aspects of labor regulations in Indonesia, including severance pay calculations and terms
Government Regulation No. 35 of 2021 (GR 35/2021): Implementing regulation of the Job Creation Law that specifically governs fixed-term employment, outsourcing, working hours, labor relations, and termination of employment including detailed severance pay calculations
Law No. 13 of 2003 (Manpower Law): The foundational labor law that establishes basic employee rights and employer obligations, including the basic framework for termination and severance pay (as amended by the Omnibus Law)
Government Regulation No. 78 of 2015: Regulation concerning wages and wage-related matters, which is relevant for calculating severance pay based on employee's wages
Law No. 36 of 2008 (Income Tax Law): Governs the taxation aspects of severance payments, including tax rates and exemptions applicable to severance pay
Minister of Manpower Regulation No. 19 of 2012: Provides additional guidelines on employment termination procedures and requirements that must be followed when implementing severance payments
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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