Indonesia Legal Update: Termination of Employment During Probation Period

As background, the probation period in Indonesia is recognized by Article 60 of Law 13/2003 on Manpower as amended. A probation period can only be required for employees with an Indefinite Term Employment Agreement (Perjanjian Kerja Waktu Tidak Tertentu or “PKWTT”), with a maximum period of three months.

The elucidation of the article further states that the probation period must be included in the employment agreement. If the employment agreement is made verbally, the probation period must be made known to the employee concerned and included in the hiring letter.

Termination of Employment During Probation Period

Previously, Article 154 of Law 13/2003 on Manpower stated that a court ruling was not required if the termination of employment was carried out during the probation period. This article was abolished by Law No. 6 of 2023 concerning the Stipulation of Government Regulation in Lieu of Law No. 2 of 2022 concerning Job Creation into Law (“Job Creation Law”).

At present, Indonesian laws and regulations do not specifically regulate the termination of employment for employees on probation.

Formerly, Article 151 of Law 13/2003 on Manpower as amended by the Job Creation Law allowed all termination of employment without a decision from an industrial relations dispute settlement institution (i.e., the Industrial Relations Court) whose decision was legal and binding. This was accompanied by a note that the employee concerned could reject the termination of employment through the next stage in accordance with the mechanism for resolving industrial relations disputes.

Change to Termination of Employment Provisions

However, since Constitutional Court Decision No. 168/PUU-XXI/2023, the provisions regarding termination of employment have been amended as follows:

“Stating that the phrase ‘termination of employment is carried out through the next stage in accordance with the mechanism for resolving industrial relations disputes’ in Article 151 paragraph (4) in Article 81 number 40 of the Appendix to Law Number 6 of 2023 concerning the Stipulation of Government Regulation in Lieu of Law Number 2 of 2022 concerning Job Creation into Law (State Gazette of the Republic of Indonesia of 2023 Number 41, Supplement to the State Gazette of the Republic of Indonesia Number 6856) contradicts the 1945 Constitution of the Republic of Indonesia and has no binding legal force as long as it is not interpreted, ‘In the event that the bipartite negotiations as referred to in paragraph (3) do not reach an agreement, the termination of employment can only be carried out after obtaining a stipulation from an industrial relations dispute settlement institution whose decision has permanent legal force.’”

Conclusion

Based on research at the Ministry of Manpower and Transmigration, there has been no official statement regarding the application of the Constitutional Court decision to employees during the probation period.

The decision certainly makes possible the interpretation that employees who are terminated during the probation period are subject to the provisions of Article 151 of Law 13/2003 on Manpower as amended by the Job Creation Law, which has been amended based on Constitutional Court Decision No. 168/PUU-XXI/2023.

This would mean that termination of employment during the probation period can only be carried out if there has been a decision from an industrial relations dispute resolution institution whose decision has permanent legal force.

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