When an employee commits a misconduct the employer must issue the warning letter(s) before initiating a dismissal of employment. The warning letter(s) can be issued in stages. The question is how does it work? This article will answer it.

Indonesian law gives some level of protection for employees from termination employment. Unlike in the United States where it is fairly easy to fire employee(s). The general principle for termination in Indonesia is that the employer, the employeer and/or the labour union, and the government must make all efforts to prevent termination of employment from taking place. Specifically, an employment contract can only be terminated for certain reasons and immediate termination is strictly prohibited. To dismiss an employee, an employer has to follow certain procedures subject to the ground of dismissal. In case of an employee violates the company's code of conduct or terms of employment, employer has to give the relevant employee with warning letters before initiating the termination.

Typically, an employer has a code of conduct that elaborate the "Do" and "Don'ts" that are applicable not only for employees but also for employer itself. Such code of conduct may be speficied in the employment agreement, Company Regulations (Peraturan Perusahaan), and/or Collective Labour Agreement (Perjanjian Kerja Bersama).

Note: When a company has a labour union, it is important to check whether Collective Labour Agreement is in place. It may contain further provisions on this. Otherwise, note that every employer that hires more than 10 employees must have a Company Regulation which needs to be legalised by the relevant manpower institution. Please check the relevant internal regulations in your company whether be Company Regulations or Collective Labor Agreement.

Most of the time an employment agreement does not give greater details on the code of conducts. We often see those are regulated either in Company Regulations or Collective Labour Agreement.

Warning Letters (1st, 2nd, 3rd)

The general rule is contained in Article 161 paragraph (1) of Indonesian Manpower Law. In summary it says that if an employee violates any of the code of conduct, the employer may terminate his/her employment after giving the employee with first, second and third (final) warning letters which ideally shall be given consecutively. Each warning letter must be effective for maximum of 6 months, unless regulated otherwise.

The main idea is that if after the third warning letter is given, the employee keeps violating the code of conduct within the period of the third warning letter, only then the employer can terminate the employment relationship.

The above statements may arise few questions either by employer or employees. Please see Q&A below for clarification.

Can the effective period of a warning letter be less than 6 months?

Yes, Indonesian Manpower Law only limits the maximum period (eg 6 months). If the employer wants to set the period differently it has to be written in either employment agreement, Company Regulations or Collective Labour Agreement.

Note that the period of warning letter cannot be more than 6 months. This serves as a protection. Please see the subsection below for more elaboration.

How to issue the consecutive warning letter(s) if the employee keep committing misconduct?

The elucidation of Article 161 paragraph (2) of Indonesian Manpower Law gives an example as below:

Suppose an employee commits a misconduct, then the first warning letter shall be effective for a period of 6 (six) months. If the employee commits a misconduct again within the period of 6 months of the first warning letter, the employer may issue the second warning letter. The second warning letter shall be also effective for 6 months. If the employee keeps committing a misconduct within the period of second warning letter, the third warning letter may be issued. If the employees doest not improve within the period of third warning letter, the employer may terminate the employment relationship.

As the rule of thumb, the warning letter can only be upgraded if the employee keeps committing a misconduct within the effective period of the current warning letter. If another misconduct happens outside the effective period, the employer must start again from first warning letter.

Given the above, you can see that the law gives employee more opportunities to improve his/her performance so that the termination of employment can be avoided.

Can employer immediately issue a third warning letter to employee?

Yes. It depends on the weight of misconduct, provided that it is stated in either employment agreement, Company Regulations or Collaborative Labour Agreement.

For example, in one of those employment documents states that if an employee uses the company's belonging or property for private interest, the employer may issue a third warning letter. Therefore it is important to clearly break down all type of misconducts that are applicable in either employment agreement, Company Regulations or Collaborative Labour Agreement.

Termination due to misconduct

The termination with the ground of misconduct can only be initiated if the third warning letter has been issued. This comes with two exception.

First when both employee and employer can mutually agree with the termination of employment in a bipartite meeting and conclude this into a written mutual agreement. Such mutual agreement needs to be registered at the relevant Industrial Court. I would not go deep into this as this will open more discussion point. I will elaborate this in my upcoming article. Second, the misconduct falls under scope of "gross misconduct" as specified in Article 158 (1) of Indonesian Manpower Law. Please see sub-section of Gross Misconduct

If it is not considered gross misconduct, the employee will be entitled to one time severance package (Uang Pesangon), one time service period recognition payment < i>(Uang Penghargaan Masa Kerja)</i>, and Compensation (Uang Penggantian Hak) due to termination with ground of minor mistake as stated in Article 161 paragraph (3) of Indonesian Manpower law.

Gross Misconduct / Serious Misconduct

Under Indonesian Manpower Law, the scope of gross misconduct are as follows:

swindling, theft and embezzlement of goods/cash owned by the Employer;
providing fake or falsified information, which inflicts losses on the company;
being drunk, drinking liquor, using or distributing narcotic, psychotropic and other addictive substances in the workplace;
committing an indecent act or gambling at the work place;
assaulting, intimidating, maltreating, or deceiving the Employer or his fellow Employees within the Company;
persuading the Employer or fellow Employees to be engaged in an act against the law and the prevailing laws;
recklessly or deliberately damaging goods belonging to the Employer, harming them or leaving them in dangerous and thereby causing a loss to the company;
recklessly or deliberately leaving the Employer or fellow Employees in danger in the work place;
divulging Company secrets, which should otherwise be kept confidential, except in the State’s interest; or
committing other crimes in the Company premises liable to a prison sentence of 5 years or more.

As consequence, the employer can terminate the employment relationship for the above grounds if it is supported with the following evidence:

the employee is caught red-handed;
the employee admits that he/she has committed a wrongdoing;
other evidence in form of reports of events made by the authorised person at the company and confirmed by no less than 2 (two) witnesses.

The employee who is dismissed due to this serious misconduct will be entitled to a compensation (Uang Penggantian Hak) as stated in Article 158 paragraph (3) of Indonesian Manpower Law. If the employee's duties and function do not directly represent the company's interest, she/he is also entitled to Separation Pay (Uang Pisah) as stated in Company Regulations or Collective Labour Agreement, if any.

Permanent Employee vs Fixed-Term Employee

The rules about warning letters should be applicable for all type of employees. We need to check the relevant provisions in the Company Regulations or Collective Labour Agreement.

Permanent employees have more termination benefits compared to fixed term employees. For termination of fixed term employee without any grounds, the company has to pay the salary of the employees for the remaining term of the contract. If the grounds of termination is a misconduct, we need to check whether Company Regulations or Collective Labour Agreement gives the same benefit as Permanent Employees as discussed above.

Covid-19 situation (potential case)

In the midst of quarantine period, most of the employers have been requiring its employees to work from home. In particular situation, it can be difficult to determine whether an employee commits a misconduct, especially a minor mistake.

As an example, being absence without any written statement explaining why he/she is absence for at least 5 (five) working days or more is one of valid grounds of termination. With a working from home regime, it may be difficult to accuse an employee has committed such misconduct. Ideally, the employer must have established relevant code of conduct or guideline for this working from home regime. For example, as a prove of attendance, the employee has to sign-in to relevant platfrom (eg microsoft team, skype etc).

In worst case scenario when the employee is completely unreachable, the employer can assume that the employee has resigned from the company provided the following requirements are fulfilled;

the employer has summoned the relevant employee with a written letter minimum 2 (two);
such summon letters are sent to the employee’s address; and
the period between each summon letter shall be at least 3 days.

As consequence, the employee is entitled to Separation Pay (Uang Pisah) and Compensation (Uang Penggantian Hak) as specified in Article 168 paragraph (3) of Indonesian Manpower Law.

Disclaimer

To get more clarity, it is important to check your employment contract, Company Regulations (Peraturan Perusahaan) or Collaborative Labour Agreement (Perjanjian Kerja Bersama), as appropriate. When in doubt, it is also advisable to contact your Human Resources staff in your office. The purpose of this article is to provide general information. This article does not constitute a legal advice or opinion whatsoever. I recommend seeking specific legal advice.