Indonesian Labor Law regulates its employment standard on Law no.13 of 2003 on Manpower. The law applies to three types of workers, distinguished by the length of service, the nature of the profession, and the type of work. Those three types are fixed-term employment, permanent employment, and expatriates (foreign employment). Each type of employment has different rules on how they can relinquish their position in the workplace and are affecting their rights to long service pay as reward money for the worker’s dedication.
It is advisable for the employer to know what to expect on the terms of employment to avoid any miscommunication about each party’s rules. The contracts of fixed-term workers and foreign workers are legally binding if they are in writing and stating necessaries information expected by the law. For permanent workers, it does not matter if it is written or verbally stated. However, it is strongly advisable to have a writing contract to prevent any difference of opinions in the future.
These contracts have to include the agreement between the employee and the employer on each right and obligation, including the long service pay on employee resignation or if the employer wishes to terminate the contract. Thus, according to the law, when the bonus policy is not stated in the employment contract, the employer has no obligation to pay any reward money.
In practice, however, it is uncommon to not giving any long service pay to the workers that at least already worked for the company for the minimum of three years. The money figure of the payment for each of employment term is stated in article 156, paragraph 3 of the Labor Law. For example, the workers with years of service between three to six years are entitled to twice of their monthly salary; those with years of service between six to nine years are entitled of three times of the monthly salary, and so forth.
This is to confirm that even though the employment contract does not state anything about the bonus policy, the employee is still entitled to long service pay as it is part of the labor rights. Although the amount of the money is also regulated in the article, in reality, not many of the workers are aware of this regulation.
There are many cases of the workers became conscious of their rights of the reward money after the end of the employment contracts and becoming a dispute between them and the employer. Those who wished to fight for their rights can bring their cases to The Industrial Relations Court to get a fair justification on these matters.
Nowadays there are many independent consultants on financial planning or lawyers willing to give free preliminary consultation on the employment contract. Before signing anything, the workers can use the advantages from the consultants to at least make sure that the contracts those are about to be signed are fair and lawful. Terms like long service pay might not seem important when ones excited about getting a new job, but might be a source of resentment later in the future when the contracts are breached or over.