Transfer of undertakings in Indonesia

Employees’ Rights in Case of a Transfer of Undertaking

Generally, the transfer of employee is recognized by Manpower Law, based on Article 61 paragraph (3) of Manpower Law. In the event of a transfer of employee, the rights of the existing employees shall be assumed by the new employer unless otherwise determined by the employee’s transfer agreement without abridging the employee’s rights. This shall include employees that are employed under PKWTT and PKWT.

In executing the employee transfer, the existing employment relationship between the current employer and the employee must be terminated. Or, these employees can tender their resignation before they enter into a new employment agreement with the new employer.

Requirements for Predecessor and Successor Parties

The predecessor and successor need to enter into an employee transfer agreement as a basis for the transfer of the employee, and regulate the rights and obligations of both parties on the transferred employee. In many cases, the predecessor needs to terminate the employment of the employee to be transferred, and provide the compensation and/or severance package before such transferred employee enters into a new employment agreement with the new employer.